Item 1. Financial Statements (Unaudited)

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Item 1. Financial Statements (Unaudited)

ARISTA NETWORKS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except par value)


	June 30, 2024		December 31, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,429,031	$	1,938,606
Marketable securities	3,844,923		3,069,362
Accounts receivable, net	1,226,795		1,024,569
Inventories	1,853,776		1,945,180
Prepaid expenses and other current assets	487,793		412,518
Total current assets	9,842,318		8,390,235
Property and equipment, net	96,282		101,580
Acquisition-related intangible assets, net	75,388		88,768
Goodwill	268,531		268,531


Deferred tax assets	1,177,172		945,792
Other assets	163,544		151,900
TOTAL ASSETS	$	11,623,235	$	9,946,806
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	297,832	$	435,059
Accrued liabilities	320,071		407,302

Deferred revenue	1,329,450		915,204
Other current liabilities	214,526		152,041
Total current liabilities	2,161,879		1,909,606
Income taxes payable	107,833		95,751


Deferred revenue, non-current	789,336		591,000

Other long-term liabilities	133,379		131,390
TOTAL LIABILITIES	3,192,427		2,727,747
Commitments and contingencies (Note 5)
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.0001 par value—100,000 shares authorized and no shares issued and outstanding as of June 30, 2024 and December 31, 2023	—		—
Common stock, $0.0001 par value—1,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 314,086 and 312,245 shares issued and outstanding as of June 30, 2024 and December 31, 2023	31		31
Additional paid-in capital	2,263,356		2,108,331
Retained earnings	6,182,479		5,114,025
Accumulated other comprehensive income (loss)	(15,058)		(3,328)
TOTAL STOCKHOLDERS’ EQUITY	8,430,808		7,219,059
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	11,623,235	$	9,946,806

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

ARISTA NETWORKS, INC.

Condensed Consolidated Income Statements

(Unaudited, in thousands, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue:
Product	$	1,423,271	$	1,261,537	$	2,752,116	$	2,433,631
Service	267,129		197,387		509,658		376,644
Total revenue	1,690,400		1,458,924		3,261,774		2,810,275
Cost of revenue:
Product	540,393		533,613		1,062,072		1,042,475
Service	52,794		41,182		101,110		79,164
Total cost of revenue	593,187		574,795		1,163,182		1,121,639
Gross profit	1,097,213		884,129		2,098,592		1,688,636
Operating expenses:
Research and development	267,482		229,676		475,877		431,084
Sales and marketing	104,403		97,971		209,483		191,463
General and administrative	25,755		26,420		53,518		51,449

Total operating expenses	397,640		354,067		738,878		673,996
Income from operations	699,573		530,062		1,359,714		1,014,640
Other income (expense), net	70,863		56,339		133,483		68,485
Income before income taxes	770,436		586,401		1,493,197		1,083,125
Provision for income taxes	105,008		94,516		190,077		154,767
Net income	$	665,428	$	491,885	$	1,303,120	$	928,358
Net income per share:
Basic	$	2.12	$	1.59	$	4.16	$	3.02
Diluted	$	2.08	$	1.55	$	4.07	$	2.94
Weighted-average shares used in computing net income per share:
Basic	313,711		308,636		313,372		307,810
Diluted	319,921		316,485		319,893		316,031

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

ARISTA NETWORKS, INC.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	665,428	$	491,885	$	1,303,120	$	928,358
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(973)		41		(2,377)		333
Available-for-sale investments:
Change in net unrealized gains (losses) on available-for-sale securities	(2,156)		(3,744)		(9,347)		4,509
Reclassification adjustment included in net income	—		—		(6)		3,858
Other comprehensive income (loss)	(3,129)		(3,703)		(11,730)		8,700
Comprehensive income	$	662,299	$	488,182	$	1,291,390	$	937,058

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

ARISTA NETWORKS, INC.

Condensed Consolidated Statements of Stockholders**’** Equity

(Unaudited, in thousands)


	Three Months Ended June 30, 2024													Six Months Ended June 30, 2024
	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount				Shares			Amount
Balance at beginning of period	313,601	$	31	$	2,185,149		$	5,689,064		$	(11,929)	$	7,862,315	312,245	$	31	$	2,108,331	$	5,114,025	$	(3,328)	$	7,219,059

Net income	—	—		—			665,428			—		665,428		—	—		—		1,303,120		—		1,303,120
Other comprehensive loss, net of tax	—	—		—			—			(3,129)		(3,129)		—	—		—		—		(11,730)		(11,730)
Stock-based compensation	—	—		79,292			—			—		79,292		—	—		156,507		—		—		156,507
Issuance of common stock in connection with employee equity incentive plans	1,132	—		9,373			—			—		9,373		2,814	—		34,517		—		—		34,517
Repurchase of common stock	(614)	—		—			(172,013)			—		(172,013)		(842)	—		—		(234,666)		—		(234,666)
Tax withholding paid for net share settlement of equity awards	(33)	—		(10,458)			—			—		(10,458)		(131)	—		(35,999)		—		—		(35,999)

Balance at end of period	314,086	$	31	$	2,263,356		$	6,182,479		$	(15,058)	$	8,430,808	314,086	$	31	$	2,263,356	$	6,182,479	$	(15,058)	$	8,430,808


	Three Months Ended June 30, 2023											Six Months Ended June 30, 2023
	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount		Shares		Amount
Balance at beginning of period	308,098	$	31	$	1,857,467	$	3,493,181	$	(21,505)	$	5,329,174	306,890	$	31	$	1,780,714	$	3,138,983	$	(33,908)	$	4,885,820

Net income	—	—		—		491,885		—		491,885		—	—		—		928,358		—		928,358
Other comprehensive income (loss), net of tax	—	—		—		—		(3,703)		(3,703)		—	—		—		—		8,700		8,700
Stock-based compensation	—	—		67,127		—		—		67,127		—	—		130,008		—		—		130,008
Issuance of common stock in connection with employee equity incentive plans	1,488	—		7,314		—		—		7,314		3,500	—		30,410		—		—		30,410
Repurchase of common stock	(219)	—		—		(30,004)		—		(30,004)		(954)	—		—		(112,279)		—		(112,279)
Tax withholding paid for net share settlement of equity awards	(44)	—		(6,542)		—		—		(6,542)		(113)	—		(15,766)		—		—		(15,766)
Common stock issued for business acquisition	32	$	—	$	2,331	$	—	$	—	2,331		32	$	—	$	2,331	$	—	$	—	2,331
Balance at end of period	309,355	$	31	$	1,927,697	$	3,955,062	$	(25,208)	$	5,857,582	309,355	$	31	$	1,927,697	$	3,955,062	$	(25,208)	$	5,857,582

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

ARISTA NETWORKS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)


	Six Months Ended June 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,303,120	$	928,358
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other	31,112		39,227
Stock-based compensation	156,507		130,008
Noncash lease expense	9,292		9,154
Deferred income taxes	(228,460)		(130,287)
Gain on strategic investments	—		(19,172)
Amortization (accretion) of investment premiums (discounts)	(27,843)		(11,998)
Changes in operating assets and liabilities:
Accounts receivable, net	(202,226)		143,370
Inventories	91,404		(574,628)
Other assets	(92,577)		(120,864)
Accounts payable	(136,236)		114,905
Accrued liabilities	(87,063)		70,418
Deferred revenue	612,582		43,658
Income taxes, net	74,067		198,100
Other liabilities	(863)		(11,676)
Net cash provided by operating activities	1,502,816		808,573
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of marketable securities	952,572		1,265,305
Proceeds from sale of marketable securities	36,750		21,725
Purchases of marketable securities	(1,749,308)		(1,392,020)
Purchases of property and equipment	(12,555)		(17,212)
Cash paid for business combinations, net of cash acquired	—		1,799
Investments in notes and privately-held companies	(1,000)		(4,250)
Net cash used in investing activities	(773,541)		(124,653)
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock under equity plans	34,517		30,410
Tax withholding paid on behalf of employees for net share settlement	(35,999)		(15,766)
Repurchases of common stock	(234,666)		(112,279)
Net cash used in financing activities	(236,148)		(97,635)
Effect of exchange rate changes	(2,692)		429
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	490,435		586,714
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —Beginning of period	1,939,464		675,978
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period	$	2,429,899	$	1,262,692

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
Right-of-use assets obtained in exchange for lease obligations	$	1,665	$	17,010
Property and equipment included in accounts payable and accrued liabilities	4,391		5,653
Common stock issued for business acquisition	—		2,331

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

ARISTA NETWORKS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Summary of Significant Accounting Policies

Organization

Arista Networks, Inc. (together with our subsidiaries, “we,” “our,” "Arista," "Company" or “us”) is a supplier of cloud networking solutions that use software innovations to address the needs of next generation data center, campus and routing environments. Our cloud networking solutions consist of our Extensible Operating System ("EOS"), a set of network applications and our Ethernet switching and routing platforms. We are incorporated in the state of Delaware. Our corporate headquarters are located in Santa Clara, California, and we have wholly-owned subsidiaries throughout the world, including North America, Europe, Asia and Australia.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Arista Networks, Inc. and its wholly-owned subsidiaries and have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted. In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our financial information. The results for the three and six months ended June 30, 2024, are not necessarily indicative of the results expected for the full fiscal year. The condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by GAAP for complete financial statements. All significant inter-company accounts and transactions have been eliminated.

Our condensed consolidated financial statements and related financial information in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 12, 2024.

Use of Estimates

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. Those estimates and assumptions include, but are not limited to, valuation of inventory and contract manufacturer/supplier liabilities, accounting for income taxes, including the recognition of deferred tax assets and liabilities, valuation allowance on deferred tax assets and reserves for uncertain tax positions, revenue recognition and deferred revenue, allowance for doubtful accounts, sales rebates and return reserves, valuation of goodwill and acquisition-related intangible assets, estimate of useful lives of long-lived assets including intangible assets, and the recognition and measurement of contingent liabilities. We evaluate our estimates and assumptions based on historical experience and other factors and adjust these estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from these estimates.

Risks and Uncertainties

Global economic and business activities continue to face widespread macroeconomic uncertainties, including inflation, monetary policy shifts, recession risks, and potential supply chain and other disruptions such as the Russia-Ukraine and Israel-Hamas conflicts, the Houthi attacks on marine vessels in the Red Sea, the U.S. trade war with China and the outcome of the upcoming U.S. presidential election.

Our business is emerging from a period of unprecedented global supply chain disruptions. Throughout this period, we made significant supply chain investments, including funding additional working capital and incremental purchase commitments in response to extended visibility to deployment plans from our customers. We have worked closely with our contract manufacturers and supply chain partners to ramp production following a period of delayed component sourcing and workforce disruptions. Increased capacity has allowed us to ship products against previously committed demand/deployment plans and accelerate some deployments where needed, while trying to limit building customer inventory, and to some extent balancing customer lead times with those currently experienced from our key suppliers. As a result, some shipments against these previously committed demand/deployment plans have extended into 2024.

As the global supply chain has experienced some improvements and as customer lead times have been reduced from their peak, we have seen and expect to continue to see a commensurate reduction in visibility to customer demand and a gradual

return to shorter demand-planning horizons. Given these shipment and order patterns, near term revenue trends may not be solely reflective of current demand levels, but as discussed above will benefit from demand/deployment plans that had been previously committed. We expect that inventory and purchase commitments will begin to stabilize in the near term, but will remain volatile as we ramp new product introductions. The magnitude of these balances, combined with a reduction in customer demand-planning horizons and shifting customer product priorities, has resulted in increased risk that we may not be able to sell all of this inventory, which in turn has resulted in additional excess and obsolete inventory and supplier liability charges.

In addition, inflation pressure in our supply chain and scarcity of some materials needed to build our products have increased our cost of revenue and have impacted, and may continue to negatively impact our gross margin. While we have seen improvements in our supply chain and manufacturing operations, any remaining or new supply chain and manufacturing related constraints could negatively impact our business in future periods. In addition, although our business has experienced limited disruption as a result of the Russia-Ukraine conflict, continued escalation of this conflict as well as the Israeli-Hamas conflict and Houthi movement in the Red Sea may negatively impact the global economy and our future operating results and financial condition.

Management continues to actively monitor the impact of macroeconomic factors on the Company's financial condition, liquidity, operations, suppliers, industry, and workforce. The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, the impact on our customers, partners, employees, contract manufacturers and supply chain, all of which continue to evolve and are unpredictable. In addition, any continued or renewed disruption in manufacturing and supply resulting from these factors could negatively impact our business. We also believe that some of our customers must now consider changing technology roadmaps and priorities, including the need for the deployment of AI and related technologies, resulting in some uncertainty as to future investment plans and a more constrained approach to some forecasts and orders in the near term. In addition, any prolonged economic disruptions or further deterioration in the global economy could have a negative impact on demand from our customers in future periods, particularly in the enterprise market where we are continuing to expand our penetration. Accordingly, current results and financial conditions discussed herein may not be indicative of future operating results and trends.

Recent Accounting Pronouncements Not Yet Effective

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740)-Improvements to Income Tax Disclosures. The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold. Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued. The amendments should be applied on a prospective basis although retrospective application is permitted. As of June 30, 2024, we have not early adopted ASU 2023-09 and we are currently evaluating the impact of future adoption on our financial disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280)-Improvements to Reportable Segment Disclosures. The ASU requires that an entity disclose significant segment expenses impacting profit and loss that are regularly provided to the chief operating decision maker. The update is required to be applied retrospectively to prior periods presented, based on the significant segment expense categories identified and disclosed in the period of adoption. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. As of June 30, 2024, we have not early adopted ASU 2023-07 and we are currently evaluating the impact of future adoption on our financial disclosures.

2. Fair Value Measurements

Assets measured at fair values on a recurring basis

We measure and report our cash equivalents, restricted cash, and available-for-sale marketable securities at fair value on a recurring basis. The following tables summarize the fair value of these financial assets by significant investment category and their levels within the fair value hierarchy (in thousands):


	June 30, 2024								December 31, 2023
	Level I		Level II		Level III		Total		Level I		Level II		Level III		Total
Financial Assets:
Cash Equivalents:
Money market funds	$	1,309,104	$	—	$	—	$	1,309,104	$	1,015,705	$	—	$	—	$	1,015,705
Commercial paper	—		16,413		—		16,413		—		1,999		—		1,999
Corporate bonds	—		2,132		—		2,132		—		—		—		—

U.S. government notes	390,148		—		—		390,148		—		—		—		—
Agency securities	—		4,953		—		4,953		—		—		—		—
	1,699,252		23,498		—		1,722,750		1,015,705		1,999		—		1,017,704
Marketable Securities:
Commercial paper	—		25,680		—		25,680		—		—		—		—
Certificates of deposits(1)	—		—		—		—		—		5,000		—		5,000
U.S. government notes	1,367,612		—		—		1,367,612		1,044,859		—		—		1,044,859
Corporate bonds	—		1,796,961		—		1,796,961		—		1,362,124		—		1,362,124
Agency securities	—		654,670		—		654,670		—		657,379		—		657,379

	1,367,612		2,477,311		—		3,844,923		1,044,859		2,024,503		—		3,069,362
Other Assets:
Money market funds - restricted	868		—		—		868		858		—		—		858
Total Financial Assets	$	3,067,732	$	2,500,809	$	—	$	5,568,541	$	2,061,422	$	2,026,502	$	—	$	4,087,924

(1) As of December 31, 2023, all of our certificates of deposits were domestic deposits.

During the three and six months ended June 30, 2024, the Company did not make any transfers between the levels of the fair value hierarchy.

The following table summarizes the amortized cost, unrealized gains and losses, and fair value of our debt securities measured at fair value on a recurring basis (in thousands):


	June 30, 2024								December 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Commercial paper	$	42,093	$	—	$	—	$	42,093	$	1,999	$	—	$	—	$	1,999
U.S. government	1,761,003		141		(3,384)		1,757,760		1,043,445		2,874		(1,460)		1,044,859
Corporate bonds	1,804,507		365		(5,779)		1,799,093		1,361,132		2,810		(1,818)		1,362,124
Agency securities	660,572		130		(1,079)		659,623		657,118		1,143		(882)		657,379

Total	$	4,268,175	$	636	$	(10,242)	$	4,258,569	$	3,063,694	$	6,827	$	(4,160)	$	3,066,361

For debt securities in unrealized loss positions, it is not likely that we will be required to sell such securities before recovery of their amortized cost basis nor do we have the intent to sell such securities before maturity. We invest in debt securities that have maximum maturities of two years and are generally deemed to be low risk based on their credit ratings from the major rating agencies. The longer the duration of these marketable securities, the more susceptible they are to changes in market interest rates and bond yields. Given the short-term and conservative nature of our portfolio, our debt securities are generally not subject to credit risk; therefore, we did not recognize any credit losses or non-credit-related impairments related to

such securities for the three and six months ended June 30, 2024. All unrealized losses were recognized in other comprehensive income (loss). Realized gains or losses were immaterial for the three and six months ended June 30, 2024.

The following table is an analysis of our debt securities in unrealized loss positions (in thousands):


	June 30, 2024
	Unrealized Losses within 12 months				Unrealized Losses 12 months or greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government notes	$	1,445,689	$	(2,660)	$	161,063	$	(724)	$	1,606,752	$	(3,384)
Corporate bonds	1,408,050		(5,076)		184,252		(703)		1,592,302		(5,779)
Agency securities	339,109		(508)		179,258		(571)		518,367		(1,079)
Total	$	3,192,848	$	(8,244)	$	524,573	$	(1,998)	$	3,717,421	$	(10,242)

As of June 30, 2024, we had no marketable securities with contractual maturities that exceeded 24 months. The fair values of marketable securities by remaining contractual maturities, are as follows (in thousands):


	June 30, 2024
	Fair Value
Due in 1 year or less	$	2,196,729
Due in 1 to 2 years	1,648,194
Total debt securities	$	3,844,923

The weighted-average remaining duration of our marketable securities is approximately 0.9 years as of June 30, 2024. As we view these marketable securities as available to support current operations, we classify marketable securities with maturities beyond 12 months as current assets under the caption "Marketable securities" on the condensed consolidated balance sheets.

Assets measured at fair value on a non-recurring basis

Non-Marketable Equity Securities

We have non-marketable equity securities in privately-held companies that do not have readily-determinable fair values. These equity securities are included in Investments on the condensed consolidated balance sheets. Their initial cost is adjusted to fair value on a non-recurring basis based on observable price changes from orderly transactions of identical or similar securities of the same issuer, or for impairment. These investments are classified within Level III of the fair value hierarchy as we estimate the value based on valuation methods using the observable transaction price at the transaction date and other significant unobservable inputs, such as volatility, rights, and obligations related to these securities. In addition, the valuation requires management judgment due to the absence of market price and lack of liquidity.

We did not record any realized gains or losses for our non-marketable equity securities during the three and six months ended June 30, 2024 and June 30, 2023, and we recorded nil and immaterial amounts of unrealized gains or losses for the three and six months ended June 30, 2024 and June 30, 2023, respectively.

We evaluate our non-marketable equity securities for impairment at each reporting period via a qualitative assessment with various potential impairment indicators, including, but not limited to, an assessment of a significant adverse change in the economic environment, significant adverse changes in the general market condition of the geographies and industries in which our investees operate, and other publicly-available information that affected the value of the non-marketable equity securities.

The following table summarizes the activity related to our non-marketable equity securities as of June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024		December 31, 2023
Cost of investments	$	32,656	$	31,656
Cumulative impairment and downward adjustment	—		—
Cumulative upward adjustment	30,632		30,632
Carrying amount of investments	$	63,288	$	62,288

3. Financial Statements Details

Cash, Cash Equivalents and Restricted Cash

The reconciliation of cash, cash equivalents and restricted cash reported on the unaudited condensed consolidated balance sheets to the total of the same such amounts in the unaudited condensed consolidated statements of cash flows is as follows (in thousands):


	June 30, 2024		December 31, 2023
Cash and cash equivalents	$	2,429,031	$	1,938,606
Restricted cash included in other assets	868		858
Total cash, cash equivalents and restricted cash	$	2,429,899	$	1,939,464

Accounts Receivable, net

Accounts receivable, net consists of the following (in thousands):


	June 30, 2024		December 31, 2023
Accounts receivable	$	1,237,629	$	1,034,480
Product sales rebate and returns reserve	(10,834)		(9,911)
Accounts receivable, net	$	1,226,795	$	1,024,569

Inventories

Inventories consist of the following (in thousands):


	June 30, 2024		December 31, 2023
Raw materials	$	771,354	$	930,777
Finished goods	1,082,422		1,014,403
Total inventories	$	1,853,776	$	1,945,180

Property and Equipment, net

Property and equipment, net consists of the following (in thousands):


	June 30, 2024		December 31, 2023
Land	$	45,883	$	44,645
Equipment and machinery	153,755		144,850
Computer hardware and software	59,248		57,761
Leasehold improvements	34,686		34,584
Furniture and fixtures	3,557		3,576
Construction-in-process	3,391		4,242
Property and equipment, gross	300,520		289,658
Less: accumulated depreciation	(204,238)		(188,078)
Property and equipment, net	$	96,282	$	101,580

Depreciation expense was $8.5 million and $7.8 million for the three months ended June 30, 2024 and 2023, respectively, and $17.1 million and $14.9 million for the six months ended June 30, 2024 and 2023, respectively.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):


	June 30, 2024		December 31, 2023
Accrued compensation-related costs	$	103,312	$	134,225
Accrued supplier liability	80,350		167,878
Accrued manufacturing costs	56,693		61,491
Accrued product development costs	36,802		1,041

Other	42,914		42,667
Total accrued liabilities	$	320,071	$	407,302

Contract Liabilities, Deferred Revenue and Other Performance Obligations

Contract Liabilities

A contract liability is recognized when we have received customer payments in advance of our satisfaction of a performance obligation under a cancellable contract. The following table summarizes the activity related to our contract liabilities (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Contract liabilities, beginning balance	$	139,618	$	105,047	$	133,239	$	103,448
Less: Revenue recognized from beginning balance	(12,412)		(9,941)		(29,171)		(22,105)
Less: Beginning balance reclassified to deferred revenue	(6,917)		(4,962)		(6,012)		(4,145)
Add: Contract liabilities recognized	23,841		19,953		46,074		32,899
Contract liabilities, ending balance	$	144,130	$	110,097	$	144,130	$	110,097

As of June 30, 2024 and December 31, 2023, contract liabilities included in "Other current liabilities" were $59.2 million for each period, with the remaining balances included in "Other long-term liabilities" on the condensed consolidated balance sheets.

Deferred Revenue

Deferred revenue is comprised mainly of unearned revenue related to multi-year post-contract support ("PCS") contracts, services and product deferrals related to contracts with acceptance clauses. The following table summarizes the activity related to our deferred revenue (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Deferred revenue, beginning balance	$	1,663,242	$	1,092,274	$	1,506,204	$	1,041,246
Less: Revenue recognized from beginning balance	(249,938)		(263,353)		(467,516)		(395,056)
Add: Deferral of revenue in current period, excluding amounts recognized during the period	705,482		255,983		1,080,098		438,714
Deferred revenue, ending balance	$	2,118,786	$	1,084,904	$	2,118,786	$	1,084,904

Other Performance Obligations

Other performance obligations totaling $688.1 million as of June 30, 2024 include unbilled multi-year PCS and service contract amounts of $513.0 million and $175.1 million of binding contractual agreements with certain customers that are primarily related to future product shipments.

Revenue from Total Remaining Performance Obligations

Total revenue from our contract liabilities, deferred revenue and other performance obligations that is expected to be recognized in future periods was $3.0 billion as of June 30, 2024. Approximately 81% of this future revenue is expected to be recognized over the next two years and the remaining 19% is expected to be recognized during the third to the fifth year.

Other Income (Expense), net

Other income (expense), net consists of the following (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Interest income	$	71,448	$	32,206	$	135,271	$	54,715
Gain (loss) on strategic investments	—		24,743		—		19,172
Other income (expense), net	(585)		(610)		(1,788)		(5,402)
Total	$	70,863	$	56,339	$	133,483	$	68,485

4. Goodwill and Acquisition-Related Intangible Assets

Acquisition-Related Intangible Assets

Acquisition-related intangible assets, excluding those that are fully amortized, were as follows (in thousands, except years):


	Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount				Weighted Average Remaining Useful Life (in years)
	December 31, 2023		Additions		June 30, 2024		December 31, 2023		Amortization		June 30, 2024		December 31, 2023		June 30, 2024
Developed technology	$	154,930	$	—	$	154,930	$	(102,493)	$	(8,390)	$	(110,883)	$	52,437	$	44,047	3.7
Customer relationships	54,620		—		54,620		(21,797)		(3,851)		(25,648)		32,823		28,972		4.3
Trade name	12,390		—		12,390		(8,882)		(1,139)		(10,021)		3,508		2,369		1.1
Total	$	221,940	$	—	$	221,940	$	(133,172)	$	(13,380)	$	(146,552)	$	88,768	$	75,388	3.8

Amortization expense related to acquisition-related intangible assets was $6.7 million and $9.3 million for the three months ended June 30, 2024 and 2023, respectively, and $13.4 million and $18.6 million for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, future estimated amortization expense related to the acquisition-related intangible assets is as follows (in thousands):


	Future Amortization Expense
Remainder of 2024	$	13,379
2025	19,642
2026	17,260
2027	13,436
2028	10,037
Thereafter	1,634
Total	$	75,388

5. Commitments and Contingencies

Leases

We have operating lease arrangements for office space, data center, equipment and other corporate assets. As of June 30, 2024, we had lease payment obligations, net of immaterial sublease income, of $61.6 million, with $23.5 million payable within one year.

Purchase Commitments

We outsource most of our manufacturing and supply chain management operations to third-party contract manufacturers, who procure components and assemble products on our behalf. A significant portion of our purchase orders to our contract manufacturers for finished products consists of non-cancellable purchase commitments. In addition, we purchase strategic component inventory from certain suppliers under non-cancellable purchase commitments, including integrated circuits, which are consigned to our contract manufacturers. As of June 30, 2024, we had non-cancellable purchase commitments not recorded on our balance sheet of $2.1 billion, of which $1.7 billion have expected receipt dates within 12 months, and $0.4 billion have expected receipt dates greater than 12 months. These open purchase orders are considered enforceable and legally binding, and while we may have some limited ability to reschedule, and adjust our requirements based on our business needs prior to the delivery of goods or performance of services, this can only occur with the agreement of the related supplier.

We also had deposits to our contract manufacturers to secure our purchase commitments in the amount of $128.0 million and $133.3 million as of June 30, 2024 and December 31, 2023, respectively, which were recorded within prepaid expenses and other current assets, as well as other assets in the condensed consolidated balance sheets.

Guarantees

We have entered into agreements with some of our direct customers and channel partners that contain indemnification provisions relating to potential situations where claims could be alleged that our products infringe the intellectual property rights of a third party. We have, at our option and expense, the ability to repair any infringement, replace product with a non-infringing equivalent-in-function product or refund our customers all or a portion of the value of the product. Other guarantees or indemnification agreements include guarantees of product and service performance and standby letters of credit for leased facilities and corporate credit cards. We have not recorded a liability related to these indemnification and guarantee provisions and our guarantee and indemnification arrangements have not had a significant impact on our consolidated financial statements to date.

Legal Proceedings

WSOU Investments, LLC

On November 25, 2020, WSOU Investments LLC ("WSOU") filed a lawsuit against us in the Western District of Texas asserting that certain of our products infringe three WSOU patents. WSOU's allegations are directed to certain features of our wireless and switching products. WSOU seeks remedies including monetary damages, attorney's fees and costs. On February 4, 2021, we filed an answer denying WSOU's allegations. On November 5, 2021, the case was transferred to the Northern District of California. On March 30, 2022, WSOU dismissed one of the patents with prejudice, removing Arista wireless products from those accused of infringement. On July 1, 2022, the court stayed the case pending the resolution of an inter partes review of one of the patents-in-suit. On May 30, 2023, the US Patent Trial and Appeal Board (“PTAB”) ruled all challenged claims in the inter partes review unpatentable. The district court case remains stayed pending appeal and/or final resolution of the PTAB ruling.

We intend to vigorously defend against the claims brought against us by WSOU; however, we cannot be certain that any of WSOU's claims will be resolved in our favor, regardless of the merits of those claims. Any adverse litigation ruling could result in a significant damages award against us and injunctive relief.

With respect to the legal proceedings described above, it is our belief that while a loss is not probable, it may be reasonably possible. Further, at this stage in the litigation, any possible loss or range of loss cannot be estimated; however, the outcome of litigation is inherently uncertain. Therefore, if this legal matter were resolved against us in a reporting period for a material amount, our consolidated financial statements for that reporting period could be materially adversely affected.

Other matters

In the ordinary course of business, we are a party to other claims and legal proceedings including matters relating to commercial, employee relations, business practices and intellectual property.

We record a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. As of June 30, 2024, provisions recorded for contingent losses related to other claims

and matters have not been significant. Based on currently-available information, management does not believe that any additional liabilities relating to other unresolved matters are probable or that the amount of any resulting loss is estimable, and believes these other matters are not likely, individually and in the aggregate, to have a material adverse effect on our financial position, results of operations or cash flows; however, litigation is subject to inherent uncertainties and our view of these matters may change in the future. Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on our financial position, results of operations or cash flows for the period in which the unfavorable outcome occurs, and potentially in future periods.

6. Stockholders’ Equity and Stock-Based Compensation

Stock Repurchase Program

In April 2024 we completed repurchases under our previous $1.0 billion stock repurchase program (the “Prior Repurchase Program”). In May 2024, our board of directors authorized a new $1.2 billion stock repurchase program (the “New Repurchase Program” and together with the Prior Repurchase Program, the "Repurchase Programs"), which commenced in May 2024 and expires in May 2027. This authorization allows us to repurchase shares of our common stock that will be funded from working capital. Repurchases may be made at management's discretion from time to time on the open market, through privately negotiated transactions, transactions structured through investment banking institutions, block purchases, trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or a combination of the foregoing. The New Repurchase Program does not obligate us to acquire any of our common stock, and may be suspended or discontinued by the company at any time without prior notice. During the three months ended June 30, 2024, we repurchased a total of $82.0 million of our common stock under our Prior Repurchase Program and $90.0 million of our common stock under our New Repurchase Program. As of June 30, 2024, the remaining authorized amount for stock repurchases under the New Repurchase Program was approximately $1.1 billion.

A summary of the stock repurchase activity under the Repurchase Programs for the three and six months ended June 30, 2024 is as follows (in thousands, except per share amounts):


	Three Months Ended		Six Months Ended
	June 30, 2024		June 30, 2024
Aggregate purchase price	$	172,013	$	234,666
Shares repurchased	614		842
Average price paid per share	$	280.23	$	278.77

The aggregate purchase price of repurchased shares of our common stock is recorded as a reduction to retained earnings in our unaudited condensed consolidated statements of stockholders' equity. All shares repurchased have been retired.

Equity Award Plan Activities

2014 Equity Incentive Plan

On April 16, 2024, our board of directors adopted an amended and restated Arista Networks, Inc. 2014 Equity Plan (the "Restated Plan"), effective April 17, 2024 (the "Effective Date") subject to the approval of our stockholders, which was approved at the 2024 Annual Meeting of Stockholders on June 7, 2024.

The Restated Plan provides for the grant of equity-based awards, including stock options, restricted stock units, restricted stock, stock appreciation rights, and performance awards. The share pool available under the prior version of the Company's 2014 Equity Incentive Plan (the "Prior Plan") was extinguished, and the Restated Plan provides for a new share pool not to exceed (i) 13,200,000 shares of our Common Stock (“Shares”), plus (ii) any Shares subject to awards under the Prior Plan that, on or after the Effective Date, expired or otherwise terminated without having been exercised in full, or that were forfeited to or repurchased by us, including net settlement of Shares subject to restricted stock units, with the maximum number of Shares to be added to the Restated Plan as a result of clause (ii) equal to 10,039,657 Shares. The Restated Plan’s terms are substantially similar to the Prior Plan’s terms, including with respect to treatment of equity awards in the event of a “change in control” as defined under the Restated Plan, but with certain modifications, including the elimination of the automatic “evergreen” share reserve increase provided for under the Prior Plan. As of June 30, 2024, there remained approximately 13.1 million shares available for grant under the Restated Plan.

2014 Employee Stock Purchase Plan

In April 2014, our board of directors and stockholders approved the 2014 Employee Stock Purchase Plan (the “ESPP”). The ESPP became effective on the first day that our common stock was publicly traded. The number of shares reserved for issuance under the ESPP increases automatically on January 1 of each year by the number of shares equal to 1% of our shares outstanding on the immediately preceding December 31, but not to exceed 10 million shares, unless our board of

directors, in its discretion, determines to make a smaller increase. Effective January 1, 2024, our board of directors authorized an increase of 3.1 million shares to the shares available for issuance under the ESPP. During the six months ended June 30, 2024, we issued 140,162 shares at a weighted-average purchase price of $114.40 per share under the ESPP. As of June 30, 2024, there remained approximately 26.4 million shares available for issuance under the ESPP.

Stock Option Activities

The following table summarizes the option activity under our stock plans and related information (in thousands, except years and per share amounts):


	Number of Shares Underlying Outstanding Options	Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Balance—December 31, 2023	2,457	$	19.83	1.7	$	529,931
Options granted	—	—
Options exercised	(1,152)	16.04
Options canceled	(24)	20.07
Balance—June 30, 2024	1,281	$	23.24	1.6	$	419,222
Vested and exercisable—June 30, 2024	1,202	$	22.04	1.5	$	394,687

Restricted Stock Unit (RSU) Activities

A summary of the RSU activity is presented below (in thousands, except years and per share amounts):


	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
Unvested balance—December 31, 2023	7,900	$	112.76
RSUs and PRSUs granted	2,151	271.01
RSUs and PRSUs vested	(1,507)	93.33
RSUs and PRSUs forfeited/canceled	(295)	124.10
Unvested balance—June 30, 2024	8,249	$	157.18

Stock-Based Compensation Expense

The following table summarizes the stock-based compensation expense related to our equity awards (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Cost of revenue	$	3,983	$	2,824	$	7,433	$	5,799
Research and development	50,769		41,137		94,557		77,706
Sales and marketing	16,769		15,833		35,670		30,971
General and administrative	7,771		7,333		18,847		15,532
Total stock-based compensation	$	79,292	$	67,127	$	156,507	$	130,008

As of June 30, 2024, there were $1,083.3 million of unamortized compensation costs related to all unvested awards. The unamortized compensation costs are expected to be recognized over a weighted-average period of approximately 4.9 years.

7. Net Income Per Share

Basic net income per share is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed using the weighted-average number of shares of common stock outstanding during the period, including potential common shares assuming the dilutive effect of outstanding stock options, restricted stock units, and the employee stock purchase plan using the treasury stock method. Potential common shares whose

effect would have been antidilutive are excluded from the computation of diluted net income per share. The following table sets forth the computation of our basic and diluted net income per share (in thousands, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2022
Numerator:
Net income	$	665,428	$	491,885	$	1,303,120	$	928,358
Denominator:
Basic weighted-average shares outstanding	313,711		308,636		313,372		307,810
Add weighted-average effect of dilutive securities:
Employee equity awards	6,210		7,849		6,521		8,221
Diluted weighted-average shares outstanding	319,921		316,485		319,893		316,031
Net income per share:
Basic	$	2.12	$	1.59	$	4.16	$	3.02
Diluted	$	2.08	$	1.55	$	4.07	$	2.94

The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net income per share for the periods presented because their effect would have been anti-dilutive for the periods presented (in thousands):


	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2022


Employee equity awards	26	625	96	498

8. Income Taxes (in thousands, except percentages)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Income before income taxes	$	770,436		$	586,401		$	1,493,197		$	1,083,125
Provision for income taxes	105,008			94,516			$	190,077		154,767
Effective tax rate	13.6		%	16.1		%	12.7		%	14.3		%

The decrease in the effective tax rates in the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to an increase in tax benefits attributable to stock-based compensation.

9. Geographical Information

We operate in one reportable segment. The following table represents revenue based on customers’ shipping addresses (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Americas(1)	$	1,374,257	$	1,154,509	$	2,629,648	$	2,269,520
Europe, Middle East and Africa	178,800		167,623		320,354		295,939
Asia-Pacific	137,343		136,792		311,772		244,816
Total revenue	$	1,690,400	$	1,458,924	$	3,261,774	$	2,810,275

(1) Includes $1,362.7 million and $1,121.7 million revenue generated from the U.S. for the three months ended June 30, 2024 and June 30, 2023, respectively, and $2,595.5 million and $2,216.3 million for the six months ended June 30, 2024 and June 30, 2023, respectively.

Long-lived assets, net, excluding intercompany receivables, investments in subsidiaries, privately-held equity investments and deferred tax assets, by location are summarized as follows (in thousands):


	June 30, 2024		December 31, 2023
United States	$	77,935	$	79,728
International	18,347		21,852
Total	$	96,282	$	101,580

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