Arista Networks earnings: third quarter 2026

The quarter in brief

Arista Networks makes network switches, the boxes that pass data between thousands of computers in large data centres, increasingly those built for artificial intelligence. In the third quarter of 2026 it had its biggest growth spurt since it went public. Sales rose 58.5% on a year earlier to about $3.66 billion, and 20.5% on the quarter before.¹ That was roughly a tenth more than the $3.3 billion the company had said to expect three months earlier.³

Net income, the profit after everything, rose to $1,560.4 million from $853.0 million, helped in part by a gain on investments the company holds.¹ The company expects sales to rise again in the final quarter.¹ Two softer spots sit under the headline: a slightly thinner gross margin and a large build-up of stock.

The figures, as the company printed them

Against what analysts expected

Analysts had expected, on average, earnings per share of $0.99.² Earnings per share is net income divided by the number of shares. On the company's adjusted measure, which removes the investment gain and some other items and is the figure analysts forecast, Arista earned $1.20, about 21% more than they expected.¹ On the reported measure, which keeps the gain in, it earned $1.22, about 23% above.¹ Either way, the quarter came in well above what analysts had pencilled in.

What the company expects

For the fourth quarter of 2026 Arista expects sales of $3.9 billion to $4.0 billion.¹ Its previous results gave no forecast for this quarter, so this is a first figure rather than a raise or a cut.³ Even the low end is about 6.6% above the roughly $3.66 billion just reported, so the company is pointing to another quarter of rising sales.¹

It expects an adjusted operating margin of 48% to 49%.¹ That is the same range it gave three months ago for the third quarter.³ It reached 49.1% in that quarter.¹ Because the earlier range covered a different quarter, repeating it is not a change of forecast. Holding it would mean costs growing no faster than sales.

It expects adjusted earnings per share of $1.26 to $1.30, up from the latest quarter's adjusted figure.¹ Three months ago it had said to expect $1.06 to $1.08 for the third quarter, and the low end of the new range is about 18.9% above that.³

Getting there means another quarter of rising sales, while holding the adjusted operating margin where it is and lifting adjusted profit per share again, from $1.20 to between $1.26 and $1.30.¹

The strong points

Growth of 58.5%, the fastest since Arista went public, is most likely a sign that the largest cloud and AI operators, whose building plans drive Arista's sales, were still speeding up their spending on networks rather than levelling off; their own spending plans would confirm it. The chief executive describes the strength as spread across types of customer. Our figures do not show how much came from AI customers versus others.¹

Adjusted earnings per share rose about 56% from $0.77 a year ago.¹ This is the cleaner view of the business, because it leaves out the $134.5 million gain on investments the company holds. It still shows strong growth, so most of the rise in profit came from selling equipment, not from a one-off.

Operating profit, the profit from running the business before interest and tax, rose to $1,642.4 million from $978.2 million.¹ Operating margin, that profit as a share of sales, rose to 44.9% from 42.4% a year ago.¹ Costs grew more slowly than sales, even though research and development, the fastest-growing cost, rose to $486.9 million from $326.0 million. Sales, marketing and administrative costs grew much less.¹ So the growth was not bought by giving up profit, and the company is still spending heavily on new products. Among them are designs for networking inside AI computer racks, launched with partners including AMD, Broadcom, Meta and Microsoft.¹

The weak points

Gross margin, what is left of each sales dollar after the direct cost of making what was sold, slipped about a point to 63.6% from 64.6% a year ago; on the adjusted measure it fell to 64.0% from 65.2%.¹ The figure for the first nine months of the year also fell.¹ Our figures do not show why. It matters because it means the rise in operating profit came from holding down other costs relative to sales, not from earning more on each product sold. For a company whose high gross margin has long set it apart, a sustained slide would be worth noticing.

Stock on the shelves rose to $3,209.8 million from $2,247.1 million at the end of 2025.¹ Building it took $962.8 million of cash over the first nine months, against $321.1 million a year earlier, making it the biggest drag on cash flow this year.¹ Stock turns back into cash only when it is sold. The business can carry it: cash from running the business still rose to $3,977.4 million over nine months from $3,110.0 million, and marketable securities climbed to $12,070.9 million with no borrowing shown.¹ But that cash grew more slowly than profit, and the stock build is a large part of why.¹

What to watch

The most telling signal is what Arista's biggest customers, the large cloud and AI companies, say they plan to spend on data centres. Those plans are set before equipment is ordered and delivered, so they move ahead of Arista's sales. If they keep rising, the growth has room to run. If they flatten, Arista would feel it months later.

For the build-up of stock, the signal is how long customers are waiting for Arista's equipment, and whether orders are being cancelled. Long waits and few cancellations would mean the stock was laid in for orders the company could see coming. Shorter waits while the pile keeps growing would point to demand that is less certain than the headline suggests.

For the margin slip, watch the prices of the chips and components Arista buys. If those prices are rising, the slip may reflect costs not yet passed on to customers. If they are steady and the margin keeps slipping, the pressure more likely comes from customers bargaining harder or from a shift towards lower-margin products. The fourth-quarter results will be the next check on which is happening.

Our verdict on the quarter

In all, a strong report.

Arista grew sales faster than at any time since it went public. It came in well above both its own forecast and what analysts expected for profit per share, and it expects more growth next quarter, with operating profit outpacing sales along the way. The thinner gross margin and the stock build are what keep it from being better.

Notes

1. Arista Networks's results release, 3 November 2026: sec.gov. ↩
2. Nasdaq's earnings calendar, 3 November 2026. ↩
3. Arista Networks's previous results release, 4 August 2026: sec.gov. ↩