Arista Networks, Inc. (ANET), Financial Analysis

1 Revenue & Business Model

• Storyline: AI cluster networking for the largest cloud customers lifts revenue growth from 28.6% in FY2025 to 58.5% in Q3 2026, two end customers supply 42% of revenue, and purchase commitments reach $9.7bn at 30 Jun 2026 (Q2 2026 Form 10-Q; $11.4bn at 30 Sep 2026 stated on the earnings call) ahead of an FY2027 outlook of about $18.5bn given on the call. Chapters 2 to 4 cover the three revenue drivers: AI and data center networking, the two largest cloud customers, and campus and enterprise.
• Business: Arista sells Ethernet switches and routers with its EOS software, plus support and software subscriptions; one reportable segment. Products are built by Jabil, Sanmina and Foxconn in Malaysia, Vietnam and Mexico; Broadcom is the predominant merchant silicon vendor (10-K FY2025).
• Revenue FY2021 $2.95bn to FY2025 $9.01bn, a 32.2% CAGR; TTM Q3 2026 $11.89bn. Product revenue $7.58bn in FY2025 (+28.8%), service $1.43bn (+27.7%).
• FY2025 mix (10-K Item 7): Core 65%, cognitive adjacencies (campus and routing) 18%, software and services 17%; by customer, Cloud and AI Titans 48%, Enterprise 32%, AI and specialty providers 20%.
• Regions FY2025 (ship to location): Americas $7.12bn (79.1%), EMEA $1.07bn (11.9%), Asia Pacific $813.3m (9.0%). In Q2 2026, the latest filed quarter, revenue outside the Americas was 23.0%; Q3 2026 regions await the 10-Q.
• Scale: 5,115 employees at 31 Dec 2025; top two resellers held 52% of receivables at 31 Dec 2025.

2 AI and Data Center Networking: Product Revenue Up 66.9%

• Product revenue $3.19bn in Q3 2026, +66.9%, 87.2% of revenue; growth rose from 25.5% in Q3 2025 to 36.6% in Q1 2026, 38.8% in Q2 and 66.9% in Q3 2026.
• Core products (AI, cloud and data center networking) were 65% of FY2025 revenue, about $5.85bn (10-K Item 7). AI networking revenue appears in filings without a figure; the FY2025 release states the AI networking goal was exceeded (8-K Ex 99.1, 12 Feb 2026).
• Targets (earnings calls): AI networking revenue about $3.25bn for 2026 in Feb 2026, at least $3.5bn in Aug and about $3.5bn in Nov; about $7bn for 2027. More than 100 Ethernet AI customers, against four to five in 2024.
• Order and supply indicators: deferred revenue $6.84bn at 30 Sep 2026 against $4.69bn a year earlier, tied to product contracts with customer acceptance terms; purchase commitments $11.4bn (call).

How data center networking is changing

• Accelerator spending: NVIDIA Data Center revenue $89.0bn in its Jul 2026 quarter, +117%, within a Compute & Networking segment of $88.3bn (+114%); NVIDIA total revenue outlook $108.0bn for the Oct 2026 quarter (8-K Ex 99.2, 26 Aug 2026).
• Ethernet silicon: Broadcom, Arista's predominant merchant silicon vendor, reported AI semiconductor revenue of $16.7bn, +221%, for the quarter to 2 Aug 2026, which the CEO links to custom AI accelerators and networking, with $21.7bn guided for the next quarter (8-K, 2 Sep 2026).
• Incumbents: Cisco took $9.3bn of AI infrastructure orders from hyperscalers in FY2026 and expects $7.5bn of such revenue in FY2027 against about $4bn in FY2026 (8-K, 12 Aug 2026); HPE expects Data Center Networking revenue to grow at a CAGR in the low to high 50s % through FY2029 (8-K, 30 Sep 2026).
• Open scale up Ethernet: Arista launched open standards based rack scale architectures in partnership with AMD, Arm, Broadcom, Meta, Microsoft, Qualcomm and one further partner named in the release, built on the Ethernet for Scale Up Networks (ESUN) workstream unveiled in Oct 2025 (8-K Ex 99.1, 3 Nov 2026 and 4 Nov 2025).
• Periods differ: peer quarters end between 25 Jul and 30 Sep 2026; Arista's Q3 2026 ends 30 Sep 2026.

3 Two Largest Customers: 26% and 16% of FY2025 Revenue

• The two largest end customers were 26% and 16% of FY2025 revenue, 42% together and about $3.78bn; 20% and 15% in FY2024, 18% and 21% in FY2023 (10-K FY2025).
• Names: the FY2024 Form 10-K named Microsoft (20% of FY2024 revenue) and Meta Platforms (15%); the FY2025 Form 10-K gives the two customers without names, with prior year shares of 20% and 15%. In this report they are the two largest customers.
• Cloud and AI Titans 48% of FY2025 revenue (10-K Item 7). Management expects at least three and possibly four customers above 10% of 2026 revenue (call); Q3 2026 concentration awaits the 10-Q.
• Price and terms: the Q2 2026 10-Q attributes the fall in gross margin to 62.9% from 65.2% to a higher share of sales to large end customers with higher discounts, and adds extended payment terms for certain large customers.

How spending by the largest cloud customers is changing

• Hyperscale demand: NVIDIA Hyperscale revenue $48.7bn in its Jul 2026 quarter, +102% (8-K Ex 99.2, 26 Aug 2026).
• Orders beyond hyperscalers: Cisco product orders rose 35% in its quarter to 25 Jul 2026 and 25% excluding hyperscalers; networking product orders rose 40% (8-K, 12 Aug 2026).
• White box suppliers: Celestica Hardware Platform Solutions revenue about $2.3bn in Q3 2026, +70%, with an 8.5% adjusted operating margin for the group; it cites customer demand forecasts higher for 2028 (8-K, 26 Oct 2026). Arista's 10-K names white box networking vendors among its competitors in data center and campus networking.
• Margin trade off: Arista non GAAP gross margin 64.0% in Q3 2026 against 65.2% a year earlier; FY2027 outlook 62% to 64% (call).

4 Campus and Enterprise: Adjacencies at 18% of FY2025 Revenue

• Cognitive adjacencies (campus and routing) were 18% of FY2025 revenue, about $1.62bn; Enterprise customers 32%; software and services 17% (10-K Item 7).
• Campus targets (earnings calls): at least $1.25bn for 2026 and about $2bn for 2027, about 60% growth; the FY2025 release states the campus goal was exceeded (8-K Ex 99.1, 12 Feb 2026). Campus revenue figures come from the calls only.
• Service revenue $467.6m in Q3 2026, +17.9%, against +31.3% in Q2 2026; FY2025 service $1.43bn, +27.7%.
• Portfolio: VeloCloud SD WAN bought from Broadcom for $300.0m in 2025 (10-K FY2025).
• International: EMEA revenue +55.6% in Q2 2026 to $438.2m and +50.1% in FY2025; Q3 2026 regions await the 10-Q, and the call put international revenue at 18.6% of Q3 2026 revenue.

How campus and enterprise networking is changing

• Refresh cycle: HPE expects a multiyear campus and branch modernisation tied to a WiFi 7 refresh, with Campus and Branch revenue growing at a high single digit % CAGR through FY2029 (8-K, 30 Sep 2026).
• Consolidation: HPE Networking segment revenue $2.89bn in its quarter to 31 Jul 2026, +74.9% after the Juniper acquisition, with a 22.0% segment margin; HPE raised its Juniper cost synergy target to $800m a year by FY2028 (8-K, 30 Sep 2026).
• Cisco: FY2026 networking product revenue $34.67bn, +22%; FY2027 revenue outlook $72.2bn to $73.4bn against $63.3bn in FY2026 (8-K, 12 Aug 2026).
• Periods differ: HPE quarter to 31 Jul 2026, Cisco to 25 Jul 2026, Ciena to 1 Aug 2026; peer growth in the peer table is year to date.

5 Financial Analysis & Ratios

• GAAP operating margin 44.9% in Q3 2026 against 42.4% a year earlier and 45.4% in Q2 2026; FY2025 42.8%, FY2021 31.4%; TTM 43.8%. Non GAAP operating margin 49.1%.
• Net income Q3 2026 $1.56bn, +82.9%, ahead of operating income (+67.9%) because other income rose to $273.1m from $98.9m, incl. the $134.5m investment gain; effective tax rate 18.5%.
• Free cash flow TTM $5.02bn, 42.2% of revenue; Q3 2026 operating cash flow $1.20bn against net income $1.56bn, as inventory used $962.8m of cash in 9M 2026.
• Balance sheet at 30 Sep 2026: cash and marketable securities $14.36bn, no debt; equity $16.45bn; deferred revenue $6.84bn, of which $5.10bn current.
• Capital returns: no dividends; buybacks $1.60bn in FY2025 and none in 2026 to date; $817.9m left under the $1.5bn program of May 2025.

Cost structure and profitability

• Cost of revenue 36.4% of Q3 2026 revenue against 35.4% a year earlier and 38.1% in Q1 2026; cost of revenue rose 62.8% against revenue growth of 58.5%.
• Operating expenses 18.7% of revenue against 22.2%: R&D 13.3% (Q2 2026: 11.5%), sales and marketing 4.3%, general and administrative 1.1%.
• Costs (revenue less operating income) $2.02bn, +51.5%, slower than revenue; operating margin up 2.5 points.
• Stock based compensation $138.1m, 3.8% of revenue; depreciation and amortization $23.6m.
• Capex $100.7m in Q3 2026, 2.8% of revenue, against $30.1m a year earlier, incl. the Santa Clara building.

6 MD&A & Management Commentary

Q3 2026 results release and earnings call

• Q3 2026 (8-K Ex 99.1 of 3 Nov 2026): revenue $3.66bn against the outlook of about $3.3bn; product $3.19bn (+66.9%), service $467.6m (+17.9%); GAAP net income $1.56bn, EPS $1.22; non GAAP EPS $1.20, +55.8%.
• Margins: GAAP gross margin 63.6% against 64.6%; non GAAP 64.0% against 65.2% and 63.4% in Q2 2026. GAAP operating margin 44.9%, non GAAP 49.1% against the 48% to 49% outlook.
• Operating expenses: GAAP R&D $486.9m, +49.4% and +39.8% on Q2 2026, 13.3% of revenue; sales and marketing $156.6m; general and administrative $39.8m. Management cites an R&D range of 9% to 11% of revenue on a non GAAP basis (call).
• Working capital (release and call): inventory $3.21bn against $2.54bn; product deferred revenue fell $86m; days sales outstanding 59 against 68; purchase commitments $11.4bn against $9.7bn, which management expects to rise entering Q4.
• Earlier 2026 quarters against outlook: Q1 2026 $2.71bn against about $2.6bn; Q2 2026 $3.04bn against about $2.8bn; Q3 2026 $3.66bn against about $3.3bn. Q4 2025 was $2.49bn against $2.3bn to $2.4bn.
• Call statements: more than 100 Ethernet AI customers; 2026 AI demand about 70% scale out and 30% scale across; scale up trials in 2027 with revenue from 2028; a multiyear memory supply agreement plus silicon and circuit board capacity agreements, amounts not given; visibility of about two quarters of direct demand.

Management and CFO commentary

• CEO Jayshree Ullal, 8-K Ex 99.1 of 3 Nov 2026: highest year on year growth since the IPO and record profitability in Q3 2026, linked to generative and agentic AI.
• CFO Chantelle Breithaupt, 8-K Ex 99.1 of 3 Nov 2026: record revenue growth, net income and EPS. The release balance sheet shows total deferred revenue of $6.84bn at 30 Sep 2026 against $5.37bn at 31 Dec 2025.
• CFO, 8-K Ex 99.1 of 4 Aug 2026: revenue up 37.7% and EPS up 39.7%. The Q2 2026 Form 10-Q adds purchase obligations of $9.7bn, gross margin of 62.9% on a higher share of sales to large end customers, and share repurchases of $0 in H1 2026.
• CFO, 8-K Ex 99.1 of 5 May 2026: 35% revenue growth with $0.87 non GAAP EPS; macro and supply chain conditions described as dynamic.
• CEO and CFO, 8-K Ex 99.1 of 12 Feb 2026: FY2025 revenue of $9.01bn; AI networking and campus goals for 2025 exceeded; quarterly net income above $1bn for the first time.
• Earnings call of 3 Nov 2026: President and COO Todd Nightingale stated high confidence in supply against the forecast; the CEO expects at least three and possibly four customers above 10% of 2026 revenue.

7 Peer Valuation & Sector Summary

• Sector: data center and campus Ethernet switching and AI networking. Arista TTM revenue $11.89bn against Cisco $63.33bn (FY2026), HPE $41.87bn incl. Juniper, Celestica $18.23bn and Ciena $6.02bn; NVIDIA $302.97bn as a total company.
• Growth (year to date): ANET +44.3% in 9M 2026 against Celestica +66.8%, Ciena +36.6%, HPE +30.8% incl. Juniper (9M FY2026), Cisco +11.8% (FY2026) and NVIDIA +95.8% (H1 FY2027).
• Margins: ANET TTM operating margin 43.8% against Cisco 24.3%, Ciena 12.3%, Celestica 8.3% and HPE 6.2%; NVIDIA 65.2%. Gross margin 62.9% against Cisco 64.5% and NVIDIA 74.7%.
• Valuation: ANET 45.7x P/E and 16.8x EV/Sales at the 3 Nov 2026 close, against NVIDIA 26.0x and 16.5x, Cisco 30.8x and 6.7x, Ciena 65.9x and 7.2x, Celestica 26.6x and 1.6x, HPE 25.6x and 2.0x.
• Balance sheets: ANET net cash $14.36bn; NVIDIA $23.22bn, Celestica $3.14bn; net debt at HPE $14.03bn, Cisco $13.62bn and Ciena $0.39bn.

8 Material Events & Contracts

• Six Forms 8-K in twelve months: five earnings releases (Ex 99.1) and the annual meeting vote results of 2 Jun 2026 (Item 5.07).Supply agreements: the Q3 2026 call cites a multiyear memory supply agreement and capacity agreements for silicon and circuit boards; amounts and terms were given on the call only.

9 Ownership, Voting Power & Annual Meeting

• One class of common stock with one vote per share; largest holder 14.6%. The Bechtolsheim Family Trust holds 14.6% and BlackRock reported 5.9% (Schedule 13G/A as of 31 Dec 2023); directors and executive officers held 2.7% (proxy, 2 Apr 2026). The board is classified in three classes.
• 2026 annual meeting (29 May 2026): say on pay approved with 60.4% of votes cast (for 624.9m, against 410.2m). Support was 94% in 2023, 93% in 2024 and about 62% in 2025 (proxy). Director Mark Templeton received 63.3%, Lewis Chew 78.3%, Greg Lavender 79.1%; Ernst & Young ratified with 97.2%.
• Insiders, Nov 2025 to Oct 2026: no open market purchases; open market sales about $1.56bn, nearly all under prearranged trading plans. CEO Jayshree Ullal sold 4.27m shares for about $820.0m at $123.20 to $217.14 and gifted 935,000 shares; Andreas Bechtolsheim (10% owner) sold 3.52m shares for about $625.2m between 22 May and 30 Oct 2026.
• Other sellers: President and CTO Kenneth Duda about $94.4m; director Charles Giancarlo about $12.1m; CFO Chantelle Breithaupt about $2.1m. Tax withholding, option exercises, gifts and transfers are excluded from the open market totals.

2026 annual meeting and board

• Meeting of 29 May 2026: results filed under Item 5.07; the ballot held three management proposals: election of three directors, say on pay and ratification of Ernst & Young.
• Board: three Class III directors elected to 2029 (Lewis Chew, Greg Lavender, Mark Templeton); after the 2025 say on pay vote the proxy reports invitations to 22 institutional holders with over 35% of shares and meetings or written feedback from holders of over 15%.
• Officers: Kenneth Duda named President and CTO (Q3 2025 release); Todd Nightingale President and COO (Q4 2025 release).

10 Risk Factors

• Scope: the comparison covers Item 1A of the FY2025 Form 10-K against the FY2024 Form 10-K (57 against 58 factors): 3 added, 4 removed, 20 materially reworded. The FY2024 Form 10-K named Microsoft and Meta Platforms in the customer concentration factor at 20% and 15% of FY2024 revenue; the FY2025 filing gives the two largest end customers at 26% and 16%. The 2026 Forms 10-Q restate Item 1A in full.

How risk factors changed

• Comparison: 10-K FY2025 filed 13 Feb 2026 acc 0001596532-26-000013 against 10-K FY2024 filed 18 Feb 2025 acc 0001596532-25-000028.
• Microsoft and Meta Platforms are no longer named in the FY2025 10-K; the two unnamed end customers were 26% and 16% of FY2025 revenue against 20% and 15% in FY2024
• Trade and regulation content was reorganised: one 2,122 word trade factor and three compliance factors became a tariff factor, a China trade restriction factor, a standards factor and one 2,407 word compliance factor
• Memory appears 5 times across 4 factors in the FY2025 10-K against none a year earlier, and 7 times across 6 factors by the Q1 2026 10-Q, alongside silicon (14 to 20 mentions)
• AI is named 59 times across 16 factors against 55 across 15; the Q1 2026 10-Q expands the AI factor to cover Arista's own AI products and investment
• Item 1A shortened 6% to 27,193 words in the FY2025 10-K; the 2026 Forms 10-Q add the IEEPA ruling, the war in Iran and extended payment terms for large customers

11 Stock Price, Scenarios & Sensitivity

• ANET closed at $169.91 on 3 Nov 2026, the last close before the Q3 2026 release after the close; a premarket trade on 4 Nov 2026 printed $185.01 (+8.9%). The close is 21.8% below the 52 week high of $217.30 and 48.4% above the low of $114.52.
• Price path in 2026: month end close $122.78 in March, $203.59 in September (+65.8%), $168.86 in October; prices are adjusted for the Dec 2024 split.
• Valuation at the 3 Nov 2026 close: 45.7x TTM GAAP EPS of $3.72; market value $214.3bn on 1.26bn shares; EV/Sales 16.8x TTM; free cash flow yield 2.3%.
• Scenario model: revenue grows from the FY2026 outlook of $13.3bn for three years to FY2029; operating margin as stated; other income $483.0m a year (TTM excluding the $134.5m investment gain); 21% tax rate; 1.28bn diluted shares; price equals FY2029 EPS times exit P/E.

Critical factors and core assumptions

• Revenue base FY2026 outlook $13.3bn (9M 2026 actual $9.40bn plus the Q4 range); TTM Q3 2026 revenue $11.89bn and GAAP operating margin 43.8%.
• Best case: 30% revenue CAGR, 46% GAAP operating margin, 40x P/E; FY2027 near the $18.5bn outlook.
• Base case: 21% revenue CAGR, 43% margin, 30x P/E.
• Worst case: 6% revenue CAGR after a pause in large customer spending, 36% margin, 20x P/E.
• Tax rate 21% (FY2027 outlook); diluted shares 1.28bn, flat; no debt; GAAP operating margin about 4 points below non GAAP (Q3 2026: 44.9% against 49.1%).

Scenarios, three years forward

Sensitivity analysis

Disclaimer

This analysis is for information only and is not financial advice. It is derived from public SEC filings retrieved via sec-api.io and is not a publication of the U.S. Securities and Exchange Commission. Scenario values are model outputs under stated assumptions and are not forecasts. Data as of 4 November 2026.

Sources

All company figures are read from SEC filings retrieved through the sec-api.io MCP server. Management statements come from the earnings releases filed as Ex 99.1 to the Forms 8-K. Statements marked as earnings call statements (incl. the FY2026 and FY2027 outlooks, the AI and campus targets and purchase commitments at 30 Sep 2026) come from the earnings calls and are labelled where used.