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Just two days after posting my first 10%, another counter’s share price plunged by 10%! Arista Networks reported their 2019 Q1 results after trading on Thursday and its price dropped by 10.4% the next day. During trading, its price plunged 15% for a while.

So what happened? Did they report a poor quarter? Nope, Q1 revenue grew by 26% and non-GAAP diluted EPS grew from US$1.66 to US$2.31 (+39%) Y-O-Y. So a pretty robust quarter but market is spooked by the lower Q2 guidance of its revenue. The company projected US$600 million to US$610 million, compared to consensus forecasts among investors for around $640 million. Yes, a difference of US$30 million and market thinks its bad!

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What it meant was if the guidance was correct, top line would grew by between 15% – 17%, as compared to the 23% growth. In the earning call, CEO Jayshree Ullal shared that there was a sudden halt in ordering from one of the cloud titans in March. When probed by analysts if the halt in order will resume in second half, the leaders said that they did not have the visibility and did not commit to that.

I have gotten used to the more volatile share price movement on the US market and so was not entire surprise by the drop, especially when Arista Networks is trading at such a high PE, so expectation is high. However, there is still no change in my reason to invest in the group. I believe the group is led by a talented group of leaders and they will continue to grow the group to greater height. So I will continue to hold on to what I have.