Earnings

🖧 Arista Networks (ANET) Q3 2025 Earnings — Core Brief Edition

Core-Brief

05 Nov 2025 — 2 min read

Headline: Record Q3 on AI demand; FY25 guide intact and FY26 revenue target set at $10.65B, with near-term gross margin pressure from AI/Cloud mix and tariffs.

Key Metrics

Non-GAAP revenue: $2.30B (+27.5% YoY).
Non-GAAP gross margin: 65.2% (mix and inventory benefits).
Operating income: $1.12B (48.6% margin).
Net income: $962.3M (41.7% margin); EPS: $0.75 (+25% YoY).
Software & services mix: 18.7% of revenue.
Geography: Americas ~80%, International ~20%.
Operating cash flow: $1.3B.
Cash & investments: $10.1B.
Inventory: $2.2B; turns 1.4×; DSO 59 (from 67).
Purchase commitments: $7.0B (up from prior); Deferred revenue: $4.7B.
OpEx: $383.3M (16.6% of revenue); R&D $251.4M (~10%); S&M $109.5M (~4.7%).

Segment & Strategy Highlights

Cloud & AI Titans: Continued strength; front-end and back-end networking both shipping. Management says share is stable versus bundled and white-box rivals.
Campus/Enterprise: Solid traction; on track for $750–$800M in FY25; channel and geographic expansion (notably Asia).
Blue-box vs. branded EOS: “Good/Better/Best” approach; blue-box (lower margin) reserved for a small set of highly capable operators; economics reflected in FY26 margin framework.
AI scale types: Active across scale-out (today), moving into scale-across, with scale-up to contribute more from 2027 as open standards mature.

Product, Tech, AI 🤖

Etherlink distributed switch fabric powering large AI fabrics; line rates moving from 800G to 1.6T.
EOS + NetDL telemetry and diagnostics underpin reliability at scale.
Ava (autonomous virtual assistant) for proactive network design/ops.
SWAG (switch aggregation) brings campus stacking-like benefits with fault containment and in-service upgrades.
Ultra Ethernet Consortium (UEC) 1.0 spec published; Arista’s portfolio is UEC-compatible. New EAN (Ethernet for scale-up) spec work highlighted at OCP.

Credit & Risk (Ops)

Supply/ship timing is the main source of quarterly lumpiness; component lead times 38–52 weeks.
Acceptance clauses for large AI deals can swing deferred revenue quarter-to-quarter.
Tariffs embedded in Q4/FY25 gross-margin outlook.

Balance Sheet & Capital

Capex: $330.1M in Q3; Santa Clara facilities expansion underway (FY25 project capex ~$100M).
Buyback: $1.5B authorization (May 2025); future executions dependent on conditions.

Guidance / Outlook 📅

Q4 2025: Revenue $2.30–$2.40B; GM 62–63% (incl. tariff scenarios); Op margin ~47–48%; ETR ~21.5%; diluted shares ~1.281B.
FY2025: Revenue growth ~26–27% (~$8.87B midpoint); GM ~64%; Op margin ~48%; AI Centers ≥$1.5B; Campus $750–$800M.
FY2026 (unchanged growth rate, higher dollars): Revenue ~$10.65B (~+20%); GM 62–64%; Op margin ~43–45%; AI Centers $2.75B; Campus $1.25B.

Bottom Line

Arista delivered another record quarter with broad-based AI demand and expanding engagement across Cloud Titans, “neo-clouds,” and Enterprise. Mix will skew to AI/Cloud (pressuring GM near term), but the model still supports high operating margins and strong cash generation. 2026 targets emphasize an AI-led growth engine, with campus and enterprise providing durable balance.