TLDR
- Arista Networks delivered Q1 2026 revenue of $2.71 billion, representing 35% year-over-year growth and surpassing the $2.61 billion consensus estimate
- The company posted adjusted EPS of $0.87, compared to $0.66 in the same quarter last year
- Shares tumbled nearly 14% in after-hours trading despite exceeding expectations, driven by margin compression and full-year outlook concerns
- While Q2 projections of $2.8 billion revenue and $0.88 EPS exceeded forecasts, the company’s 27.7% full-year growth guidance fell short of the 28–30% analyst expectations
- Morgan Stanley maintained its Overweight rating, describing ANET as “one of the cleanest ways to own the AI networking cycle”
Arista Networks delivered solid first-quarter results, yet investors responded with a sharp selloff. Shares plummeted nearly 14% during after-hours trading on Tuesday, sliding below $148 after ending the regular session at $170.22, which was already down 1.4%.
The dramatic decline occurred despite Arista surpassing expectations on key metrics. The company’s Q1 revenue reached $2.71 billion, exceeding the consensus estimate of $2.61 billion. Adjusted earnings per share of $0.87 outperformed the prior year’s $0.66. Billings growth momentum strengthened to 54% year-over-year, compared to 43% in the previous quarter.
Looking ahead to Q2, Arista projected approximately $2.8 billion in revenue and $0.88 in adjusted EPS — both figures surpassing analyst forecasts. So what triggered the selloff?
The answer lies in margins. The company forecasted an adjusted operating margin between 46% and 47% for Q2, representing a decline from Q1’s 47.8% and falling below the 48.8% achieved in Q2 of the previous year. This margin compression raised red flags.
The primary catalyst for the decline, however, was the company’s full-year outlook. While Arista elevated its 2026 revenue growth projection to 27.7% from a previous 25% estimate, Morgan Stanley analyst Meta Marshall observed that the Street had been anticipating growth in the 28–30% range, and this shortfall triggered the after-hours retreat.
New Products in Focus
On the innovation front, Arista unveiled XPO high-density liquid-cooled pluggable optics, engineered specifically for next-generation AI data centers. According to the company, XPO reduces networking rack space by as much as 75% and conserves up to 44% of floor space compared to conventional pluggable optics.
The company also rolled out what it describes as a “universal AI spine” built on its 7800 platform. This system is engineered to support large-scale AI workloads, incorporating features like Virtual Output Queuing to eliminate bottlenecks during periods of intense AI traffic.
CEO Jayshree Ullal highlighted the company’s Net Promoter Score of 89, with 94% of customers providing positive ratings, as validation of the company’s strong operational performance.
Wall Street Still Bullish
Despite the sharp post-earnings decline, analyst outlook remains predominantly upbeat. Morgan Stanley’s Marshall retained his Overweight rating, stating that he views Arista as among the premier options for capturing AI networking growth. While he recognized supply chain headwinds, Marshall noted Arista’s superior track record in navigating these challenges compared to competitors.
Additional firms preserved Buy or Strong Buy recommendations, with several increasing their price targets following the quarterly report.
Evercore ISI analysts had previously identified Arista as a key beneficiary of Alphabet’s new Virgo Network platform prior to the earnings release, observing that Virgo’s design specifications align particularly well with Arista’s high-radix, high-bandwidth switching solutions.
Despite Tuesday’s selloff, ANET shares had still climbed nearly 30% year-to-date and more than 87% over the trailing 12 months entering the earnings announcement.
Marshall’s analysis captured the current investment thesis succinctly: the conversation surrounding Arista has shifted away from demand concerns — it’s now centered on the company’s ability to secure adequate supply.
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