Arista Networks Inc. (NYSE:ANET)

Inventory Turnover

The inventory turnover ratio shows a declining trend from 1.85 in early 2021 to a low of 1.11 in the first quarter of 2024, indicating slower inventory movement over this period. However, from mid-2024 onward, there is a modest recovery, with the ratio increasing gradually to 1.40 by the third quarter of 2025. This suggests some improvement in inventory management or sales velocity toward the end of the observed timeframe.

Receivables Turnover

The receivables turnover ratio fluctuates notably throughout the period. It begins relatively strong around 6.5 to 7.2 in early to mid-2021, then decreases to lower levels around 4.75 to 5.6 in 2022 and into 2023. There is intermittent recovery in some quarters, but the latter part of the period signals relatively weaker performance, with ratios mostly ranging between 4.9 and 6.1. This variability may reflect changes in credit policies or customer payment behavior.

Payables Turnover

Payables turnover exhibits wide variations over the course of the data. Early 2021 ratios range from 6.5 to 7.4, followed by declines and spikes, with a notable peak at 10.09 in the first quarter of 2024. However, this high is not sustained, and the ratio falls back to values mostly between 5.2 and 8.2 in later quarters. These fluctuations suggest shifting supplier payment practices, possibly balancing between extended payment terms and quicker settlements.

Working Capital Turnover

Working capital turnover improves from roughly 0.77 in early 2021 to a peak around 1.04 in late 2022 and early 2023, implying enhanced efficiency in utilizing working capital to generate sales. After this peak, the ratio declines gradually to about 0.76-0.85 in 2024 and maintains moderate levels near 0.8 into 2025, indicating some easing of efficiency but relatively stable performance overall during the latter periods.

Average Inventory Processing Period

There is a clear lengthening of the average inventory processing period over the observed timeframe. Starting near 197 days in early 2021, the period extends steadily to a high around 328 days by the first quarter of 2024. This indicates that inventory is being held longer before turnover, which could suggest slower sales, supply chain constraints, or strategic stockpiling. The trend reverses modestly afterward, shortening to 261 days by the third quarter of 2025.

Average Receivable Collection Period

The average receivable collection period shows significant volatility, initially decreasing from 56 days to around 51 days early in 2021, then increasing sharply to as high as 77 days in late 2021 and again in 2022. The metric oscillates around 60 to 70 days in the subsequent years, indicating challenges in accelerating collections consistently and reflecting varying customer payment patterns or credit policies.

Operating Cycle

The operating cycle lengthens notably from approximately 253 days in early 2021 to over 393 days in early 2024, reflecting the combined effects of longer inventory holding and extended receivable collection periods. This indicates a significant slowdown in the cash-to-cash cycle during this period. A partial reduction in the operating cycle occurs thereafter, dropping to around 325 days by the third quarter of 2025, although it remains elevated relative to earlier periods.

Average Payables Payment Period

The average payables payment period displays substantial variation, with values oscillating from around 49 to 77 days, and occasional sharp decreases to as low as 36 days. These swings imply inconsistent payment terms or cash flow management strategies concerning supplier settlements throughout the period. No clear long-term directional trend is evident.

Cash Conversion Cycle

The cash conversion cycle shows an overall increasing trend from 197 days in early 2021 to a peak around 357 days in the first quarter of 2024, mirroring the trends observed in inventory and receivables metrics. This increase underscores a growing amount of time capital is tied up in operating processes before conversion to cash inflows. Subsequently, the cycle shortens gradually to approximately 267 days by mid-2025, suggesting some improvement in managing the working capital cycle toward the end of the period studied.

The financial data indicates several notable trends across the presented periods, particularly in cost of revenue, inventories, and inventory turnover ratios.

Cost of Revenue

The cost of revenue demonstrates a consistent upward trend from March 2021 through September 2025. Starting at approximately $242 million in the first quarter of 2021, it escalates steadily across all periods, reaching around $818 million by the third quarter of 2025. There are periods of sharper increases, notably between March 2022 and December 2022, and again from March 2024 onward, suggestive of rising production or procurement costs, increased sales volume, or a combination of both factors.

Inventories

Inventories have also increased significantly over the same timeframe. Beginning at roughly $483 million in the first quarter of 2021, inventories rise notably to $2.16 billion by the third quarter of 2025. The growth appears more rapid from mid-2021 to early 2023, with some fluctuations thereafter including a slight decline around mid-2024 before resuming growth. This pattern may reflect strategic stockpiling, supply chain adjustments, or changes in demand forecasts.

Inventory Turnover Ratio

The inventory turnover ratio reveals a declining trend initially, dropping from 1.85 in March 2021 to a low near 1.11 during the first quarter of 2024. This decrease suggests that inventory is being sold or used more slowly relative to its size, potentially pointing to slower sales or overstocking. However, from early 2024 through to the third quarter of 2025, the turnover ratio shows a moderate recovery increasing to around 1.40. This indicates an improvement in inventory management efficiency or acceleration in sales velocity following the period of decline.

Overall, the data portrays increasing scale in operations as reflected by rising cost of revenue and inventories, coupled with fluctuating inventory efficiency. The initial slowdown in turnover ratio might signal challenges in inventory management or demand adjustments, while the subsequent improvement towards the latter periods is a positive sign of operational response.

Revenue Trend

The revenue exhibits a consistent upward trajectory over the examined periods. Starting at approximately $668 million in March 2021, it progressively increases quarter over quarter, reaching around $2.3 billion by September 2025. Notably, there is a substantial acceleration in revenue growth between 2022 and 2025, with significant quarterly gains especially toward the latter part of the timeline.

Accounts Receivable, Net Trend

The net accounts receivable figures show a general increasing trend alongside revenue growth, beginning at roughly $380 million in the first quarter of 2021 and rising to about $1.49 billion by September 2025. However, the trend is somewhat volatile, with occasional decreases interspersed within the upward movement. For example, between March 2023 and June 2023, a sharp decline occurs before a subsequent increase resumes.

Receivables Turnover Ratio Analysis

The receivables turnover ratio reflects the efficiency with which the company collects its receivables relative to revenue. Initially, it starts at a moderate 6.47 in March 2021, exhibiting fluctuations throughout the periods. The ratio generally oscillates between approximately 4.75 and 7.22, without a clear upward or downward long-term trend. This volatility suggests varying efficiency in collection practices or changing credit terms over time. Lower ratios coincide with periods of increased accounts receivable balances, indicating slower collections relative to sales, whereas higher ratios suggest improved turnover.

Overall Insights

The data portrays a company experiencing robust revenue growth complemented by a rising level of accounts receivable, consistent with expanding sales. The accounts receivable turnover ratio's variability highlights challenges in maintaining collection efficiency amidst rapid growth phases. Managing receivables effectively appears critical to balancing liquidity and supporting continued expansion.

The cost of revenue exhibits a consistent upward trajectory over the observed periods, beginning at approximately 242 million USD and escalating to over 818 million USD by the latest quarter. This steady increase suggests expanding business operations or rising expenses associated with producing goods or services. Notably, the growth rate accelerates in certain intervals, indicating possible scaling or inflationary pressures impacting production costs.

Accounts payable values display significant variability, with an initial moderate increase followed by pronounced fluctuations in subsequent quarters. Starting from approximately 137 million USD, the figures reach peaks surpassing 543 million USD in certain periods, interspersed with intervals of decline. This volatility could reflect changes in payment terms, vendor relations, or seasonal procurement patterns affecting outstanding liabilities.

The payables turnover ratio, which measures the frequency of settling accounts payable within a period, fluctuates considerably over time. Initial values around 6.5 decline to lower mid-single digits in some quarters and rise sharply above 10 in others. These oscillations indicate inconsistency in payment efficiency or varying credit terms granted by suppliers. Higher turnover ratios suggest a faster payment cycle, whereas lower ratios indicate delayed settlements. The irregular pattern points to dynamic working capital management or external factors influencing payment behavior.

In synthesis, the data reveal growing operational scale alongside fluctuating payment cycles and liabilities. The increasing cost of revenue aligns with expanding business activities, while the instability in accounts payable and turnover ratios highlights potential challenges or strategic adjustments in managing supplier payments. These findings underscore the importance of closely monitoring working capital components to sustain financial stability amid growth.

Working Capital

The working capital has shown a generally upward trend over the periods observed, increasing from approximately 3.22 billion USD in Q1 2021 to over 10.5 billion USD by Q3 2025. Notably, there was a dip around mid-2022, with working capital decreasing from about 3.74 billion USD in Q1 2022 to approximately 3.45 billion USD in Q2 2022. After this decline, working capital resumed its growth trajectory, reaching a peak near 9.18 billion USD in Q4 2024, followed by a slight decline before rising again towards Q3 2025.

Revenue

The revenue figures present a clear and steady increase across all periods, rising from roughly 668 million USD in Q1 2021 to approximately 2.31 billion USD in Q3 2025. The growth appears consistent with occasional acceleration, particularly between Q2 2022 and Q4 2023, where revenue increased significantly from about 1.05 billion USD to nearly 1.54 billion USD. The upward trend continues consistently throughout the entire time frame.

Working Capital Turnover Ratio

The working capital turnover ratio exhibits some fluctuation but remains within a range of 0.76 to 1.04 over the periods. Initially, the ratio declined slightly from 0.77 in Q1 2021 to 0.76 in Q2 2021 and Q3 2021 before rising to a peak of about 1.04 in Q3 2022 and Q1 2023. Thereafter, the ratio shows a gradual decline to around 0.76 by Q4 2024, with a modest recovery towards the later periods, ending at approximately 0.80 in Q3 2025. This pattern suggests variability in the efficiency with which working capital is utilized to generate revenue, with peaks indicating improved efficiency and declines indicating reduced turnover.

Overall Analysis

The company demonstrates strong revenue growth alongside a substantial increase in working capital, indicating expanding operations and potentially higher asset investment. The working capital turnover ratio indicates some fluctuations in operational efficiency relative to working capital; despite the increase in working capital, turnover does not consistently rise, suggesting that the additional capital investment may not always be matched by proportional revenue increases. The peak turnover ratios in late 2021 and early 2022 suggest periods of more effective capital utilization, while subsequent declines imply some challenges in maintaining that efficiency. Overall, the trends reflect growth accompanied by varying levels of working capital management efficiency.

The analysis of the inventory turnover ratio and the average inventory processing period over the observed quarters reveals notable shifts in inventory management efficiency.

Inventory Turnover Ratio

The inventory turnover ratio shows a general declining trend from March 2021 through early 2024, decreasing from 1.85 to a low near 1.11. This suggests that inventory was being sold and replaced less frequently over this period, indicating a potential slowdown in sales or an increase in inventory levels relative to sales.

However, starting from the second quarter of 2024, the ratio exhibits a gradual recovery, increasing steadily up to 1.40 by the third quarter of 2025. This improvement may reflect efforts to enhance inventory management or an increase in sales velocity, leading to more efficient turnover of stock.

Average Inventory Processing Period

The average inventory processing period, expressed as the number of days inventory remains before sale, moves inversely to the turnover ratio as expected. It increased steadily from 197 days in March 2021 to a peak of 328 days in the first quarter of 2024. This indicates a lengthening duration of holding inventory, potentially reflecting slower sales or overstocking.

Following this peak, there is a noticeable reduction in the processing period, decreasing to 261 days by the third quarter of 2025. This decline corresponds with the improvement seen in the turnover ratio, suggesting that inventory is being processed and sold more rapidly again.

Overall, the data indicates a period of declining inventory efficiency lasting roughly three years, culminating in early 2024, followed by a trend towards recovery in inventory management performance from mid-2024 onward. This may reflect operational adjustments or improvements in demand conditions enabling quicker inventory turnover and reducing holding durations.

The receivables turnover ratio and the average receivable collection period exhibit notable fluctuations over the analyzed quarters, reflecting changes in the company's efficiency in collecting receivables.

Receivables Turnover Ratio

The receivables turnover ratio demonstrates variability throughout the periods, with values ranging from a high of approximately 7.22 in the second quarter of 2021 to lows near 4.75 in the fourth quarter of 2022. This ratio generally declined from early 2021 through mid-2022, then experienced intermittent recoveries and declines thereafter. Periods such as the second quarter of 2023 show relatively stronger turnover figures, indicating improved collection efficiency during these quarters. However, the overall trend suggests some challenges in maintaining consistently high turnover rates over time.

Average Receivable Collection Period

The average collection period inversely mirrors the turnover ratio, fluctuating between 51 days at its shortest in mid-2021 and reaching up to 77 days in late 2021 and again in the fourth quarter of 2022. The collection period lengthened notably around the end of 2021 and late 2022, indicating slower receivables collection during these times. Subsequently, it showed some improvement but remained elevated relative to early 2021 levels. The pattern indicates intermittent delays in cash collection, potentially affecting cash flow consistency.

Overall Insights

The inverse relationship between the receivables turnover ratio and the average collection period is evident, reflecting the typical dynamic between these measures. The fluctuations suggest variability in the company’s credit policies or customer payment behaviors that impacted its accounts receivable management. Periods of declining turnover accompanied by increasing collection days may point to challenges in receivables management or changing market conditions. Conversely, periods of improved turnover and shorter collection intervals may reflect enhanced credit control or more favorable market dynamics.

The analysis of the quarterly financial data reveals notable trends in the company's inventory management, receivables collection, and overall operating cycle over the observed periods.

Average Inventory Processing Period

This metric has shown a general upward trend from March 2021 to March 2024, increasing from 197 days to a peak of 328 days. After this peak, there is a gradual decrease to 261 days by September 2025. This indicates that the company initially experienced lengthening times to process inventory, potentially reflecting slower inventory turnover, before improving inventory management efficiency in the later periods.

Average Receivable Collection Period

The receivable collection period exhibits variability without a clear consistent trend throughout the periods. It fluctuates between lows near 51 days and highs around 77 days. The data suggest periods of both improved and deteriorated collection efficiency. Notably, there is a tendency for increases in the collection period around the end of certain years, which may indicate seasonal influences or changing credit policies.

Operating Cycle

The operating cycle, which combines the inventory processing and receivable collection periods, generally increases over the reporting timeframe, rising from 253 days in March 2021 to a peak of 393 days in March 2024. Following this peak, the cycle shortens to 325 days by September 2025. The overall extended operating cycle during the early to mid-periods reflects longer durations to convert inventory and receivables into cash, which could impact liquidity. The subsequent reduction suggests operational improvements aimed at enhancing working capital management.

In summary, the company faced lengthening cycles in inventory processing and operating activities up to early 2024, likely exerting pressure on cash flows. However, improvements post-2024 imply a strategic focus on reducing cycle times, enhancing operational effectiveness, and potentially improving overall financial flexibility. Receivable collection times remain somewhat inconsistent, warranting further attention to stabilize and potentially shorten this period to complement inventory and operating cycle improvements.

The analysis of the quarterly trends in payables management reveals fluctuations in both the payables turnover ratio and the average payables payment period over the examined periods.

Payables Turnover Ratio

The payables turnover ratio exhibits variability across the quarters. It starts at 6.52 in March 2021, increasing slightly to peaks such as 7.39 in September 2021 and 8.16 in September 2023. However, there are notable downturns observed, with the ratio declining to 4.74 in June 2022 and to 5.13 in December 2023. The ratio reaches a significant high of 10.09 in March 2024 before stabilizing to a range between approximately 5.23 and 8.14 in the subsequent quarters.

Average Payables Payment Period

The average payables payment period generally moves inversely to the payables turnover ratio, as expected. It begins at 56 days in March 2021, dropping to a low of 36 days in March 2024, which corresponds to the peak in turnover ratio during the same quarter. Periods of higher payment days, such as 77 days in June 2022 and 71 days in December 2023, coincide with lower turnover ratios. The payment period fluctuates between a low of 36 days and a high of 77 days across the data, indicating variability in the company's payment policies or timing with suppliers.

Overall, the data suggests that the company adjusts its supplier payment timing strategically or in response to operational conditions, resulting in fluctuating payables turnover ratios and payment periods. The peak of 10.09 in payables turnover ratio alongside the shortest payment period indicates a phase where the company accelerated its payments, while other periods show more extended payment durations possibly to optimize cash flow management. The variability highlights an active management of payables but also suggests potential inconsistencies in supplier payment schedules over the analyzed quarters.

Average Inventory Processing Period

The average inventory processing period exhibits a generally increasing trend from 197 days in March 2021 to a peak of 328 days in March 2024. After this peak, the period decreases somewhat, reaching 261 days by September 2025. This reflects a lengthening in the time inventory is held, which could indicate slowing inventory turnover or potential inefficiencies in inventory management during the earlier periods, followed by some improvement in recent quarters.

Average Receivable Collection Period

The average receivable collection period shows notable fluctuations over the observed timeframe. It initially declines from 56 days in March 2021 to a low of 51-52 days during mid-2021, then increases to highs around 75-77 days in late 2021 and late 2022. In 2023 and 2024, the period oscillates between the mid-50s and low 70s, ending near 64 days by September 2025. This indicates variability in how quickly receivables are collected, with occasional lengthening that may affect liquidity.

Average Payables Payment Period

The average payables payment period demonstrates variability without a consistent trend. It starts near 56 days in early 2021, rises to peaks such as 77 days in June 2022, and sees several troughs including 36 days in March 2024. The period fluctuates frequently throughout the timeline, ending at 58 days in September 2025. This inconsistent pattern suggests active management of payment terms, potentially in response to cash flow considerations or supplier negotiations.

Cash Conversion Cycle

The cash conversion cycle generally increases from 197 days in March 2021 to a peak of 357 days in March 2024, indicating a lengthening of the time between cash outflows and inflows. Post-peak, the cycle decreases substantially, settling around 267 days by September 2025. This pattern aligns with the inventory processing period trends, reflecting a slower overall cash turnover in the earlier periods with subsequent effectiveness in reducing the cycle time in later quarters.