Arista Networks, Inc.

Q3 total revenue was approximately $3.66 billion, up 58.5% year over year and above guidance of $3.3 billion. Gross margin was 64%, down from 65.2% in the prior year but up from 63.4% in the prior quarter. Operating income was $1.8 billion, or 49.1% of revenue; net income was $1.53 billion; diluted EPS was $1.20, up 55.8% from $0.77 a year ago. For Q4 2026, Arista guided revenue to $3.9 billion to $4 billion, gross margin to 63% to 64%, operating margin to 48% to 49%, and diluted EPS to $1.26 to $1.30. For FY2026, the company raised revenue guidance to $13.3 billion, representing 48% annual growth, and for FY2027 it guided revenue growth of 38% to 40% to approximately $18.5 billion, with gross margin at 62% to 64% and operating margin around 49%.

Jayshree Ullal said Arista is seeing a major shift from compute-centric to network-centric AI infrastructure, and framed the company’s “Arista 2.0” strategy as a multi-year transformation across data center, campus, cloud and AI. She emphasized standards-based Ethernet, open networking, and new AI fabrics, including scale-up, scale-out and scale-across, while saying scale-up is still in early trials and likely becomes meaningful later. Her tone was highly confident and expansive, repeatedly citing record growth, a broader customer base and a large market opportunity ahead.

Chantelle Breithaupt focused on the quarter’s financial strength and margin profile, noting 58.5% revenue growth, 64% gross margin, and operating margin above 49%. She highlighted cash and marketable securities of about $14.4 billion, $1.2 billion of cash from operations, inventory of $3.2 billion, and purchase commitments of $11.4 billion, explaining that the company is intentionally building inventory and supply commitments to support AI demand. She also said R&D stepped up to $408.5 million and that the company still views R&D as roughly 9% to 11% of revenue, while reiterating confidence in the supply chain and the FY2027 outlook.

Analysts focused heavily on what is driving the unusually strong 2027 outlook, especially whether it depends on deferred revenue, component supply, or specific AI deployments. Management repeatedly said the guide is based on two quarters of visibility plus extensive customer and supplier discussions, and emphasized that purchase commitments are rising to support demand rather than to offset any deferred-revenue weakness. Questions also probed scale-up, customer concentration, R&D spending, and AVA monetization; management said scale-up should matter more in 2028 than 2027, R&D is being lifted by AI and liquid cooling work, and AVA is still in alpha with pricing models not yet set.