Arista Networks, Inc. (ANET) Earnings & Analysis

Latest quarter

Arista reported Q2 FY2026 revenue of $3.0 billion, compared with the consensus of $2.8 billion; revenue as the consensus counts it was 7.14% above that estimate. The company reported adjusted EPS, as the consensus counts it, of $1.02, compared with the consensus of $0.89; adjusted EPS was 14.6% above the consensus.

The 10-Q shows revenue rose 37.7% from $2.2 billion in Q2 FY2025, as product revenue increased on higher shipments of switching and routing platforms and service revenue increased with initial and renewal support contracts. Diluted EPS was $0.95, up 35.7% from $0.70 a year earlier. The filing shows gross margin was 62.9%, down from 65.2%, primarily because a greater share of sales went to large end customers receiving higher discounts. Operating margin was 45.4%, compared with 44.7% a year earlier. Free cash flow was $1.1 billion, compared with $1.2 billion in Q2 FY2025.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Chief Executive Officer Jayshree Ullal said the company reached its first $3 billion revenue quarter amid demand from AI and enterprise customers. She said Arista’s AI-fabrics customer count exceeded 100 cumulatively and described demand across back-end AI fabrics, core data-center front end, campus and routing. Ullal said the company expected its renewed ability to fulfill demand in the second half of 2026 to apply across those product sectors.

Ullal said industry supply tightness and rising component costs persisted. She said Arista was working with suppliers on prioritized forecasts and had increased multiyear purchase commitments to $9.7 billion by the end of Q2 FY2026. Chief Financial Officer Chantelle Breithaupt said inventory balances could remain elevated as the company balanced component timing and availability, affecting the timing of cash flow from operations before deployments.

Breithaupt said Q2 gross margin reflected end-customer mix, while tariff refunds and customer mix benefited gross margin sequentially. In response to a question on pricing, Ullal said price increases would affect the company toward the end of the year or more likely next year because it was working through backlog. Breithaupt said the FY2026 gross-margin range included anticipated memory and silicon supply-chain cost increases.

The CFO said operating expenses included investments in liquid cooling, high-radix switching and AI-optimizing software. Ullal said Arista continued to invest in product capabilities and expanded use cases, while the filing says research and development expenses are expected to increase in absolute dollars as the company develops products and features.

Analysts asked about the outlook for AI and campus revenue. Ullal said both numbers could rise but did not quantify a revised amount, saying the outcome depended on what the company shipped across front-end AI, Wi-Fi, wired, EtherLink switches and routing. Analysts also asked about white-box alternatives; Ullal said customers valued EOS for operational requirements, AI features, reliability and diagnostics, while acknowledging that some customers could choose lower-priced commodity hardware. Breithaupt said the company continued to have approximately two quarters of visibility and based guidance on supply it was confident it could obtain.

Guidance

Ullal said Arista raised its FY2026 revenue outlook to $12.6 billion from its recent projection of $11.5 billion. Breithaupt said the company increased its FY2026 operating-margin target to 48.0%–49.0% and maintained a FY2026 gross-margin range of 62.0%–64.0% and an expected tax rate of 21.5%.