Arista Networks — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue for Q3 2026 was $3.66 billion, representing a 58.5% year-over-year increase from Q3 2025 and a 20.5% increase from Q2 2026.
• GAAP operating margin was 44.9% compared to 42.4% in Q3 2025; non-GAAP operating margin was 49.1% compared to 48.6% in Q3 2025.
• GAAP diluted earnings per share (EPS) were $1.22 versus $0.67 in Q3 2025; non-GAAP diluted EPS were $1.20 versus $0.77 in Q3 2025.
• Net income for the nine months ended September 30, 2026, was $3.796 billion, up from $2.556 billion in the prior year period.
• Deferred revenue increased to $5.102 billion (current) and $1.737 billion (non-current) as of September 30, 2026, from $4.003 billion (current) and $1.370 billion (non-current) as of December 31, 2025.
• Cash and cash equivalents were $2.288 billion as of September 30, 2026, compared to $1.964 billion at the end of 2025.
• Inventories rose to $3.210 billion as of September 30, 2026, from $2.247 billion at the end of 2025.
• Net cash provided by operating activities for the nine months ended September 30, 2026, was $3.977 billion, compared to $3.110 billion in the prior year period.
• Net cash used in investing activities was $3.659 billion for the nine months ended September 30, 2026, compared to $2.577 billion in the prior year period.
• No common stock repurchases were made in the nine months ended September 30, 2026, compared to $983.0 million in the prior year period.

Guidance and Future Outlook:

• For Q4 2026, the company expects revenue between $3.9 billion and $4.0 billion.
• Non-GAAP operating margin for Q4 2026 is projected to be between 48% and 49%.
• Non-GAAP diluted net income per share for Q4 2026 is projected to be between $1.26 and $1.30.
• Management noted that actual GAAP gross margin, operating margin, and diluted net income per share may be significantly impacted by stock-based compensation expense and tax benefits on stock-based awards, which are difficult to predict on a forward-looking basis.

Business Segments and Product Lines:

• Launched open standards-based rack-scale architectures for scale-up and scale-out AI networks in partnership with AMD, Arm, Broadcom, d-Matrix, Meta, Microsoft, and Qualcomm.
• Announced a new liquid-cooled portfolio leveraging Ethernet for Scale-Up Networks (ESUN) and introduced the Etherlink™ SU-144 architecture, supporting up to 144 accelerators per rack in a single hop and scaling up to 1,024 XPUs via cross-rack topologies.
• Detailed its scale-across networking strategy for distributed AI fabrics using the Arista 7800 AI Spine and unified Arista EOS® to enable lossless, high-radix AI fabrics across geographically distributed data centers up to one million XPUs.
• Expanded AI-driven software security by embedding domain-specific AI harnesses developed in collaboration with Anthropic, Google, and OpenAI to accelerate proactive vulnerability discovery.
• Product revenue for Q3 2026 was $3.190 billion, while service revenue was $467.6 million.

Market and Competitive Landscape:

• Arista was added to the S&P 100 index in September 2026, comprising 100 major blue-chip companies.
• The company highlighted its increased relevance for the generative and agentic AI era across customer sectors.
• The press release notes the company is an industry leader in data-driven networking for large AI, data center, campus, and routing environments.

Risks and Challenges:

• Risks include escalated U.S. tariffs, countermeasures by other countries, and import/export restrictions.
• Supply chain risks involve sole or limited sources of supply for key components, leading to potential shortages, extended lead times, or supply changes.
• The company relies on a predominant merchant silicon vendor.
• Revenue concentration risks exist due to large purchases by a limited number of customers representing a substantial portion of revenue.
• Potential risks include intense competition, industry consolidation, adverse economic conditions, and reduced IT spending.
• Risks also encompass rapid market evolution, failure to successfully launch new products, cybersecurity incidents, and intellectual property disputes.

Management Commentary and Tone:

• Jayshree Ullal, Chairperson and CEO, described the quarter as "momentous," citing the highest year-over-year revenue growth since the IPO and record profitability, stating it surpassed her high expectations.
• Ullal noted that strong momentum across customer sectors highlights the company's relevance for the generative and agentic AI era.
• Chantelle Breithaupt, CFO, characterized the quarter as a "true trifecta" with record highs in revenue growth, net income, and EPS, expressing pride in the team's performance for shareholders.

Other Key Points:

• Arista was recognized on the 2026 Fortune 500 list of the largest United States corporations by revenue.
• The company updated its methodology for calculating the income tax effect of non-GAAP adjustments effective Q4 fiscal year 2025, which resulted in retrospective adjustments to prior period non-GAAP results.
• A conference call was held on November 3, 2026, at 1:30 PM Pacific Time to discuss the results.
• No business combinations occurred in the nine months ended September 30, 2026, whereas $300.0 million was paid for business combinations in the prior year period.