TLDR
- Arista Networks (ANET) shares surged 10% after reporting Q4 EPS of $0.82, beating analyst estimates of $0.76, with revenue reaching $2.49 billion versus $2.38 billion expected.
- The networking company achieved over $1 billion in quarterly net income for the first time and reported full-year 2025 revenue of $9 billion, up 28.9% year-over-year.
- Management doubled its 2026 AI networking revenue target to $3.25 billion and issued Q1 2026 revenue guidance of $2.6 billion, above consensus of $2.46 billion.
- Arista raised full-year 2026 revenue outlook to approximately $11.25 billion, representing 25% growth, with operating margin expected around 46%.
- The company flagged worsening memory supply constraints and may implement a one-time price increase on memory-intensive products to offset rising costs.
Arista Networks delivered a knockout fourth quarter that sent shares soaring in after-hours trading. The company posted adjusted earnings of $0.82 per share, easily beating Wall Street’s estimate of $0.76.
Revenue came in at $2.49 billion for the quarter. That crushed analyst expectations of $2.38 billion and represented 28.9% year-over-year growth.
The stock jumped roughly 10% in extended trading. Investors clearly appreciated the strong results and optimistic outlook.
CEO Jayshree Ullal described 2025 as a year of validation for Arista’s strategy. Full-year revenue hit $9 billion, marking 28.6% growth from the prior year.
The company crossed a major milestone in Q4. Arista recorded over $1 billion in quarterly net income for the first time in its history.
Non-GAAP net income reached $1.05 billion, or $0.82 per diluted share. That’s up from $801 million a year earlier.
Gross margins held steady at 63.4% on a non-GAAP basis. CFO Chantelle Breithaupt noted the slight decline from 64.2% a year ago reflected higher sales to large cloud and AI customers.
Operating margin came in at 47.5% for the quarter. The company generated nearly 29% revenue growth while exceeding $1 billion in net income.
AI Business Accelerates Faster Than Expected
Arista’s AI networking business is growing at an impressive clip. The company now plans to double its AI networking revenue from 2025 to 2026.
Management raised its 2026 AI networking revenue target to $3.25 billion. That’s a substantial increase from the previous goal of $2.75 billion.
Ullal said Arista has gained more than 100 customers for its Etherlink AI products. The company is working on AI rack system designs where 1.6T switching should launch during 2026.
International growth showed particular strength. Asia and Europe markets grew over 40% annually.
For Q1 2026, Arista guided revenue to about $2.6 billion. That’s well ahead of the $2.46 billion analyst consensus.
The company expects non-GAAP gross margin of 62% to 63% for the first quarter. Operating margin should come in around 46%.
Strong Guidance Despite Supply Challenges
Arista raised its full-year 2026 revenue outlook to approximately $11.25 billion. That represents 25% growth over 2025 results.
The company expects non-GAAP gross margin of 62% to 64% for the year. Operating margin is projected at roughly 46%.
Customer diversification continued in 2025. Cloud and AI titans made up 48% of revenue, while enterprise and financials contributed 32%.
AI and specialty providers, including Apple and Oracle, accounted for 20% of revenue. Two customers each represented more than 10% of total revenue.
Ullal expects the customer base to diversify further in 2026. One or two additional customers may cross the 10% threshold.
Campus and routing business contributed about 18% of revenue. Software and services made up 17% of quarterly revenue.
The company added roughly 350 CloudVision customers during the quarter. Arista has now deployed 3,000 CloudVision customers total.
Memory Constraints Present Near-Term Headwind
Supply chain pressures emerged as a concern for 2026. Arista warned that memory pricing has worsened entering the new year.
Ullal said the company can’t continue absorbing cost increases indefinitely. Arista may implement a one-time price increase on selected memory-intensive products.
Purchase commitments jumped to $6.8 billion from $4.8 billion in Q3. Ullal stated current commitments aren’t sufficient and more memory supply is needed.
Total deferred revenue increased to $5.4 billion from $4.7 billion. Product deferred revenue grew by approximately $469 million quarter-over-quarter.
Management emphasized deferred revenue remains lumpy due to customer acceptance timing. Acceptance periods can range from six months to 18 months for large AI deployments, with Q1 2026 operating margin guided to about 46% and an effective tax rate of roughly 21.5%.
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