What happened

Arista Networks (ANET -0.41%) stock was off to the races on Tuesday morning, rising by 5.5% through 10:25 a.m. ET after delivering a big earnings beat Monday night.

Ahead of the publication of its fourth-quarter results, analysts had predicted that the cloud computing company would report earnings of $0.73 per share (non-GAAP) on sales of $789.1 million. Instead, Arista earned $0.82 per share on sales of $824.5 million.  

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Image source: Getty Images.

So what

Sales grew 10% year over year in Q4, though Arista's gross profit margin on those sales slimmed down by about half a percentage point to 63.4%. Nevertheless, the company grew its non-GAAP income by 32% for the quarter, and its earnings when calculated according to generally accepted accounting principles (GAAP) increased 29% to $0.75 per share.  

For the full year, sales jumped 27% to $2.95 billion, and its gross profit margin held more or less steady, ticking down just 10 basis points to 63.8%. Non-GAAP profits for 2021 rose 27% to $2.87 per share, and GAAP earnings increased 32% to $2.63 per share.

Now what

Looking ahead, Arista management is forecasting that its sales will continue to grow in Q1 2022, albeit at a slower pace. It is guiding for revenue in the range of $840 million to $860 million, which would amount to a year-over-year increase of only 2% to 4%.

Management did not provide specific guidance for earnings, but did say that it expects gross profit margins to remain in the 63% to 64% range in Q1. That would seem to bode well for the company's chances of at least meeting analysts' consensus target for $0.76 per share in earnings in the quarter -- a 22.5% year-over-year increase. Arista's top-line prediction, meanwhile, suggests it is positioned to easily beat Wall Street's consensus forecast for revenue of $832 million in the quarter.