Arista Networks NYSE: ANET reported fiscal second-quarter revenue of just over $3 billion, up 37.7% from a year earlier and above its prior guidance of $2.8 billion, as demand from AI and enterprise customers supported the company’s first $3 billion quarterly revenue milestone.
Chief Executive Officer Jayshree Ullal said the company has raised its full-year 2026 revenue outlook for the third time this year, now expecting approximately $12.6 billion in revenue, representing 40% annual growth. The revised forecast is $2.1 billion above the company’s prior Analyst Day goal of $10.5 billion and $1.1 billion above its May projection of $11.5 billion.
“Our renewed enthusiasm in fulfilling demand in the second half of 2026 is expected to apply across all our product sectors,” Ullal said, citing backend AI fabrics, core data-center networking, campus products and routing adjacencies.
Profitability and balance sheet
Chief Financial Officer Chantelle Breithaupt said second-quarter non-GAAP gross margin was 63.4%, compared with 65.6% a year earlier and 62.4% in the first quarter. The year-over-year decline reflected end-customer mix, while the sequential improvement benefited from tariff refunds and customer mix.
Operating expenses totaled $411 million, or 13.5% of revenue, as Arista increased investments in liquid cooling, high-radix switching and AI-optimized software. Research and development spending was $278.1 million, or 9.2% of revenue.
Operating income reached $1.5 billion, equal to 49.9% of revenue. Net income was $1.3 billion, or 42.9% of revenue, while diluted earnings per share increased 39.7% year over year to $1.02.
- Cash, cash equivalents and marketable securities ended the quarter at approximately $13.3 billion, up from $12.4 billion at the end of the first quarter.
- Operating cash flow was approximately $1.1 billion.
- Inventory rose to $2.5 billion from $2.4 billion sequentially, with inventory turns holding at 1.7.
- Deferred revenue increased to approximately $6.9 billion from $6.2 billion in the prior quarter, including a roughly $600 million sequential increase in product deferred revenue.
- Purchase commitments rose to $9.7 billion from $8.9 billion at the end of the first quarter, largely related to chips for new products and AI deployments.
The company did not repurchase stock during the quarter. About $817.9 million remained available under the $1.5 billion repurchase program approved in May 2025.
AI fabric expansion and product roadmap
Ullal said Arista’s AI fabrics momentum with Etherlink switches has expanded to more than 100 cumulative customers, up from the four or five initial customers the company discussed in 2024. She said the company introduced the 7060X-E7 platform, featuring 100-terabit capacity and 1.6-terabit throughput, along with its first liquid-cooling options.
Arista expects 1.6-terabit products to remain in trials during the second half of 2026, with production deployment expected in 2027. Ullal said the initial customer base for those trials would be single-digit but consist of very large customers.
President and Chief Technology Officer Ken Duda highlighted three capabilities intended to improve AI-network performance and reliability: Smart System Upgrade, or SSU; Multipath Reliable Connection, or MRC; and Segment Routing over IPv6, or SRv6.
Duda said SSU enables software upgrades without disrupting switch operations, while MRC allows traffic from a single XPU-to-XPU flow to use multiple network paths and be reassembled at the receiving end. SRv6, he said, enables senders to specify packet paths and use congestion information to shift traffic away from hotspots.
Ullal said scale-across AI networking—connecting distributed infrastructure across locations—could represent roughly 30% of Arista’s AI target of at least $3.6 billion for 2026. She cited market research indicating that the scale-across switching and routing market could reach roughly $15 billion to $20 billion by 2030. Arista estimates that market is currently about $3 billion to $4 billion, with its own scale-across revenue estimated at about $1.2 billion in 2026.
Supply-chain actions support higher outlook
Management said supply constraints and rising component costs remain industrywide concerns, but Arista has taken steps to improve availability and delivery flexibility. Ullal said the company’s multiyear purchase commitments have nearly tripled from a year earlier to approximately $9.7 billion.
Chief Operating Officer and President Todd Nightingale said Arista secured multiyear agreements with strategic component suppliers, qualified additional vendors, increased manufacturing and distribution capacity, and improved component-delivery terms. The company said it has secured memory supply for 2026 and extended visibility into 2027 for DDR4, DDR5 and NAND memory.
Arista now has three contract manufacturers and three distribution facilities across the U.S., Asia and Mexico, according to Nightingale. The company also established a liquid-cooling supply chain that includes vendors for cold plates, quick disconnects and tubing.
Ullal cautioned that the broader industry’s supply pressures may persist for two years and may not resolve until 2028. Breithaupt said Arista continues to have roughly two quarters of customer-demand visibility and based its forecast on supply it is confident it can obtain.
Updated outlook
For fiscal 2026, Arista maintained its gross-margin target of 62% to 64%, including expected increases in memory and silicon costs, and raised its operating-margin target to 48% to 49%. It continues to expect a 21.5% tax rate. The company’s 2026 targets include at least $1.25 billion in campus revenue and at least $3.5 billion in AI fabrics revenue.
For the third quarter, Arista forecast revenue of approximately $3.3 billion, gross margin of approximately 63%, operating margin of 48% to 49%, and diluted earnings per share of $1.06 to $1.08 based on approximately 1.279 billion diluted shares.
About Arista Networks (NYSE:ANET)
Arista Networks, Inc is a technology company that designs and sells cloud networking solutions for large-scale data centers and enterprise environments. The company is best known for its high-performance switching and routing platforms, which are used to build scalable, low-latency networks for cloud service providers, internet companies, financial services, telecommunications, and enterprise IT. Arista's offerings emphasize programmability, automation and telemetry to support modern, software-driven network architectures.
Central to Arista's product portfolio is its Extensible Operating System (EOS), a modular network operating system that provides consistent programmability, stateful control and advanced visibility across the company's hardware platforms.
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