Arista Networks (ANET) — Earnings Preview Memo
Key Points Table
| Topic | Details |
|---|---|
| Next Reported Quarter | Q3 2026 (Consensus: Revenue $3,326M, EPS $0.99) |
| Most Recent Actuals | Q2 2026: Revenue $3,000M (+37.7% YoY), Gross Margin 63.4%, EPS $1.02 |
| FY 2026 Guidance (Latest) | Revenue $12,600M (+40% YoY), Gross Margin 62–64%, Op Margin 48–49%, AI $3,500M+, Campus $1,250M+ |
| Supply Chain Dynamics | Improving; purchase commitments up to $9.7B, memory and silicon secured for 2026/27 |
| Deferred Revenue | Q2 2026: $6.9B (product-related), up $600M QoQ; expected to end 2026 higher than 2025 |
| Key Watch Items Next Print | Supply chain execution, AI/campus/core growth mix, scale-across traction, margin stability, deferred revenue trend |
Summary and Conclusions
- Arista is coming off a record Q2 2026, with revenue of $3.0B (+37.7% YoY), gross margin of 63.4%, and EPS of $1.02.
- FY 2026 guidance was raised sharply to $12.6B revenue (+40% YoY), with gross margin held at 62–64% and operating margin at 48–49%.
- AI networking remains the primary growth engine, with scale-across now ~30% of AI revenue and campus also contributing strongly.
- Supply chain constraints are easing, but management continues to flag a “whack-a-mole” environment; purchase commitments have tripled YoY to $9.7B.
- Deferred revenue is at all-time highs ($6.9B), reflecting long acceptance cycles for large AI projects; management expects this to continue rising through year-end.
- Key focus for the next print: ability to deliver on the raised guide, further supply chain normalization, margin resilience, and continued broadening of customer base (including neoclouds and enterprise).
Forward-Looking Consensus and Guidance
FY 2026 Guidance (as of Q2 2026)
| Metric | Guidance / Target | Notes |
|---|---|---|
| Revenue ($M) | $12,600 | +40% YoY; raised from $11,500M in Q1 |
| Gross Margin (%) | 62–64 | Maintained despite cost inflation, mix shifts |
| Operating Margin (%) | 48–49 | Raised from 46% prior; leverage from scale |
| AI Revenue ($M) | $3,500+ | At least $3.5B; scale-across ~30% of AI revenue |
| Campus Revenue ($M) | $1,250+ | At least $1.25B; ~5% market share, strong share gains |
| Deferred Revenue ($M) | Expected to end 2026 higher than 2025 | |
| Purchase Commitments ($B) | $9.7 | Up from $3.6B three quarters ago; 52-week lead times |
Quarterly Consensus Estimates
| Quarter | Revenue ($M) | Gross Margin (%) | EPS ($) |
|---|---|---|---|
| Q3 2026E | 3,326 | 63.1 | 0.99 |
| Q4 2026E | 3,587 | 63.1 | 1.06 |
Consensus figures are not actuals; actuals will be reported at the next earnings.
Prior-Year Actuals and Comparables
Q3 2025 and Q4 2025 Actuals
| Quarter | Revenue ($M) | Gross Margin (%) | EPS ($) | YoY Revenue Growth |
|---|---|---|---|---|
| Q3 2025 | 2,267 | 64.1 | 0.66 | +27.5% |
| Q4 2025 | 2,388 | 62.9 | 0.69 | +28.9% |
FY 2025 Actuals
| Fiscal Year | Revenue ($M) | Gross Margin (%) | Operating Margin (%) | EPS ($) | YoY Revenue Growth |
|---|---|---|---|---|---|
| 2025 | 8,901 | 64.3 | 48.2 | 2.68 | +28.6% |
Conclusion: Arista is coming off a very strong FY 2025 and Q4 2025, with high double-digit growth and robust margins. The YoY comparable for Q3 2026 is tough, but the company has already delivered +37.7% YoY in Q2 2026 and is guiding for an acceleration to +40% for the full year.
Key Factors to Watch Next Earnings
| Factor | Why It Matters |
|---|---|
| Supply Chain Execution | Management flagged improved supply chain, but still calls out industry-wide tightness; ability to deliver on $12.6B guide depends on continued improvement and execution on $9.7B purchase commitments. |
| AI Revenue Mix & Scale-Across | AI remains the main growth driver; scale-across now ~30% of AI revenue and growing. Watch for further traction, especially as TAM expands toward $15–20B by 2030. |
| Deferred Revenue Trend | Product deferred revenue at $6.9B, up $600M QoQ; reflects long acceptance cycles for AI projects. Management expects further increases through year-end. |
| Margin Stability | Gross margin held at 63.4% in Q2 2026, within 62–64% guide. Watch for impact of mix, price increases, and any further cost inflation. |
| Customer Diversification | Management expects at least two 10% customers in 2026, possibly three or four. Neoclouds and enterprise are becoming more material; watch for further broadening. |
| Campus & Enterprise Growth | Campus revenue target at $1.25B+; strong share gains, new logo wins, and international expansion. Enterprise data center and routing also contributing to incremental $1.1B raise. |
| Product/Tech Roadmap | 1.6T trials underway, volume in 2027; XPO/NPO/CPO ecosystem development; ESUN (Ethernet scale-up) pilots expected late 2027/2028. |
Recent Management Commentary
- On Supply Chain:
“Our capacity has been increased in both manufacturing and distribution, and we've negotiated better component delivery terms... Our memory supply has been secured for 2026, and we have extended visibility well into 2027 across DDR4, DDR5 and NAND memory.”
“The industry is going to have a 2-year problem. I don't think we get out of it as an industry until 2028. But Arista is taking individually and specifically steps in the first half of this year that we believe will have results in the back half of this year.” - On AI/Scale-Across:
“This scale-across use case is expected to be approximately 30% of our overall AI target of at least $3.6 billion in 2026.”
“We are capable of providing near instantaneous recovery in the event of transient congestion, packet loss or a physical failure of AI clusters independent of their geographical location.” - On Deferred Revenue:
“I anticipate deferred to end at a higher balance in Q4 this year than it did Q4 last year. So generally on the year going up is kind of what I can tell you. But I don't guide and there will be ebbs and flows every quarter.” - On Margins and Pricing:
“Our philosophy is to only pass the price increase along that we're experiencing to hold margin. So if it was 65% before and the price increase, we're going to try to keep it at 65%. We're not going to say, hey, we have a price increase. We're going to give you the price increase and plus something to make our margin accretive. That's just our philosophy.”
What Changed vs. Last Year
- Revenue Growth Accelerated: FY 2026 revenue guidance raised to $12.6B (+40% YoY), up from $8.9B in FY 2025 (+28.6% YoY).
- AI Revenue Mix Shift: Scale-across now ~30% of AI revenue, with TAM expanding rapidly; scale-up (ESUN) opportunity expected to materialize in 2028.
- Supply Chain Normalization: Purchase commitments tripled YoY; memory and silicon secured for 2026/27, but management still flags industry-wide tightness.
- Deferred Revenue at Record Highs: Product deferred revenue up $600M QoQ to $6.9B; expected to continue rising.
- Margin Guidance Maintained: Despite cost inflation and mix shifts, gross margin guide held at 62–64%, with operating margin raised to 48–49%.
- Customer Base Broadening: At least two 10% customers expected in 2026, possibly three or four; neoclouds and enterprise becoming more material.
Quarterly Financials — Actuals and Consensus
Quarterly Results and Estimates ($M)
| Quarter | Revenue | Gross Margin (%) | EPS ($) | YoY Revenue Growth |
|---|---|---|---|---|
| Q2 2026A | 3,000 | 63.4 | 1.02 | +37.7% |
| Q3 2026E | 3,326 | 63.1 | 0.99 | |
| Q4 2026E | 3,587 | 63.1 | 1.06 |
Annual Results and Guidance ($M)
| Fiscal Year | Revenue | Gross Margin (%) | Operating Margin (%) | EPS ($) | YoY Revenue Growth |
|---|---|---|---|---|---|
| 2025A | 8,901 | 64.3 | 48.2 | 2.68 | +28.6% |
| 2026G | 12,600 | 62–64 | 48–49 | +40% |
Conclusion
Arista enters its next earnings report with strong momentum, having raised FY 2026 guidance to $12.6B (+40% YoY) and delivered a record Q2. The company is coming off a tough YoY comp but is executing well, with AI and campus as key growth engines, supply chain constraints easing, and margin guidance holding. The most important factors to watch are supply chain execution, AI/campus/core mix, scale-across traction, margin stability, deferred revenue trend, and continued customer diversification.
