Overview
Since the Report + 12.7%
Revenue grew 58.5% year over year, EPS beat the estimate by 11.1%; the stock rose 12.7% in its first reaction.
- RevenueQ3
- $3.66B
- ▲ 58.5% Year Over Year · 9.8% Beat
- EPSAdjusted
- $1.20
- Estimate $1.08 · Beat by 11.1%
Verdict
BUYArista posted $3.66B in third-quarter revenue, its fastest annual growth since the IPO at 58.5%. Both revenue and earnings beat market expectations by about 10%. The stock rose 12.7% after the close on fourth-quarter guidance 9.7% above estimates and a $18.5B target for 2027. The line to watch next is whether adjusted gross margin holds above 63%.
Close on Report DayNov 3
$169.91▲ 12.7%Report-Day Move
- Market Cap(Today)
- ≈ $242 B
- 1Y Return(At Report)
- + 8%
- P/E(At Today's Price · $3.91 · Trailing 12M)
- 49.0
- PEG(Next Year Estimate)
- 1.92
- Net Margin(Trailing 12M)
- 38.4%
Earnings Summary
In 30 Seconds- Revenue of $3.66B beat expectations by 9.8%, and adjusted EPS of $1.20 beat by 11.1%.
- Fourth-quarter revenue guidance is $3.9B-$4.0B; the midpoint is 9.7% above expectations.
- The stock rose 12.7% after the close on a $18.5B revenue target for 2027.
The Numbers
Gross Margin (Adjusted)
64.0%
65.2% a Year Ago · Guidance Was 63%
Operating Margin (Adjusted)
49.1%
48.6% a Year Ago · Up 0.5 Points
Q4 Revenue Guidance
$3.9–4.0B
Estimate $3.60B · 9.7% Above
Stock Reaction
▲ 12.7%
After Hours · Post-Call 6:37 PM ET
Quarterly Revenue ($ Billion)
2.31
Q3 25 · $2.31 B
2.49
Q4 25 · $2.49 B · QoQ + 7.8%
2.71
Q1 26 · $2.71 B · QoQ + 8.9%
3.04
Q2 26 · $3.04 B · QoQ + 12.1%
3.66
Q3 26 · $3.66 B · QoQ + 20.5% · YoY + 58.5%
3.9–4.0
Q4 26E · 3.9–4.0 · QoQ + 8.0% · YoY + 58.8%
- Q3 25
- Q4 25
- Q1 26
- Q2 26
- Q3 26
- Q4 26E
Q4 2026 Company Guidance
- Revenue3.9 – 4.0 billion3.9 billion4.0 billion3.9 – 4.0 billion
Midpoint 3.95 · Market Expectation 3.609.7% Above Estimate ▲
- Earnings per Share (Adjusted)1.26 – 1.30 $1.26 $1.30 $1.26 – 1.30 $
Midpoint 1.28 · Market Expectation 1.1511.3% Above Estimate ▲
- Operating Margin (Adjusted)48% – 49%48%49%48% – 49%
Q3 Actual 49.1% · Q4 2025 47.5%1.0 Point Annual Expansion ▲
- 2027 Revenue Growth38% – 40%38%40%
Midpoint ~$18.5B · Earnings Call
- 2027 AI Networking Revenue7 billion
2026 Base ~$3.5B · Earnings Call~100% Annual Increase ▲
How to Read the Chart
The blue band is the company's low-high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. When the company gave a single number rather than a range and no market expectation is known, that row gets no band at all: there is no length to measure and no position to compare. Axis is ±12% around the midpoint.
Company-Specific Metrics
Product Revenue
$3.19 B
▲ 66.9% YoYPress Release
Service Revenue
$468 M
▲ 17.9% YoYPress Release
Nine-Month Operating Cash Flow
$3.98 B
▲ 27.9% YoYPress Release
Inventory
$3.21 B
Press Release
Cash and Marketable Securities
$14.4 B
Press Release
Metrics come only from the company's own filings; each one names the document it was taken from.
“Arista registered another momentous quarter with the highest year-over-year revenue growth since our IPO and record profitability, surpassing even my high expectations. This strong momentum across customer sectors highlights our increased relevance for the generative and agentic AI era.”
- $18.5B Target for 2027
- AI Networking Doubling
- Confidence in Supply Chain
Summary and Review
Summary
Arista reported third-quarter revenue of $3.66B. That is 9.8% above the market expectation of $3.33B. Annual growth of 58.5% is the highest since the company went public. Adjusted earnings per share came in at $1.20, beating the $1.08 estimate by 11.1%. The midpoint of fourth-quarter revenue guidance is also 9.7% above expectations. All three gates are open: revenue, earnings and guidance.
The stock rose 3.5% in the regular session to close at $169.91. After the earnings call it traded at $191.49 as of 6:37 PM ET, up 12.7%. The market read this report as a growth story, not a margin story. Adjusted gross margin was 64.0%, 1.2 points below 65.2% a year ago. Still, it beat the company's 63% guidance by 1.0 point. On the call, the company targeted about $18.5B in 2027 revenue, implying 38-40% growth.
The score is 90 with a buy view; it rates the quarter, not the stock. All three gates cleared expectations by more than 2%. The 2027 target from the call lifted the score from 88 to 90. Two caveats pull the score down within its band. Inventory rose 26.6% from the end of June to $3.21B. The company also bought back no shares in the first nine months of 2026.
Full Review
Growth is accelerating, not slowing.
Revenue over the last five quarters was $2.31B, $2.49B, $2.71B, $3.04B and $3.66B. The latest quarter grew 20.5% from the prior one. Annual growth was 28.9% in the fourth quarter of 2025; this quarter it reached 58.5%. In August the company guided to about $3.3B for this quarter. The actual figure beat that guidance by 10.8%. Product sales are the engine. Product revenue rose 66.9% year over year to $3.19B. Service revenue grew 17.9% to $468M. Product's share of total revenue rose from 82.8% a year ago to 87.2%. Nine-month revenue is $9.40B. Adding fourth-quarter guidance puts the year in a $13.3B-$13.4B range. That is about 6% above the roughly $12.6B annual target given in August.
Margin trails last year but beats guidance.
Adjusted gross margin was 64.0%. A year ago it was 65.2%, a 1.2-point contraction year over year. Against the prior quarter's 63.4%, it recovered 0.6 points. The company had guided to 63% for this quarter. A rising product share usually pushes margin down, because the service business is more profitable. The operating line looks stronger. Adjusted operating margin of 49.1% was 0.5 points above 48.6% a year ago. Research and development spending rose 49.4% to $487M. Sales and marketing expense rose only 3.6%. Because revenue grew faster than costs, the gross margin loss did not reach operating profit. Adjusted operating income was $1.80B, up 60.1% year over year.
Balance sheet: inventory and deferred revenue grow together.
Inventory rose to $3.21B. It was $2.25B at the end of December and $2.54B at the end of June. Deferred revenue, short and long term combined, is $6.84B. That is up 27.3% from $5.37B at the end of December. This line shows work that has been invoiced but not yet booked as revenue. Cash and marketable securities total $14.36B. The balance sheet carries no financial debt line, and equity rose to $16.45B. Nine-month operating cash flow was $3.98B, up 27.9% year over year. The company bought back no shares in this period, versus $983M a year earlier. Purchase commitments rose from $9.7B at the end of June to $11.4B. On the call, CFO Chantelle Breithaupt tied the increase to preparing for the 2027 target.
Product side: rack-scale AI networks.
The release also lists the quarter's product news. Arista launched open, standards-based rack-scale architectures with AMD, Arm, Broadcom, d-Matrix, Meta, Microsoft and Qualcomm. The new liquid-cooled portfolio uses Ethernet for scale-up networks. The Etherlink SU-144 architecture connects 144 accelerators in a single rack in one hop. Cross-rack topologies can take that to 1,024 processors. The company also described its strategy for linking geographically distributed data centers. The 7800 series AI spine switch sits at the center of that design. The goal is to run up to one million processors on the same network. Arista was also added to the S&P 100 in September. According to the earnings call, scale-up product trials begin in 2027. Revenue from these products is expected in 2028.
Guidance and the one line to watch next quarter.
Fourth-quarter revenue guidance is $3.9B-$4.0B. The $3.95B midpoint is 9.7% above expectations. Year over year, that midpoint implies 58.8% growth. Adjusted EPS guidance is $1.26-$1.30, and the midpoint beats the estimate by 11.3%. Adjusted operating margin guidance is 48-49%. On the call, the 2026 revenue target was raised for the fourth time, to about $13.3B. The first 2027 target is about $18.5B. AI networking revenue is expected to rise from about $3.5B to $7B. The campus business is targeted to grow 60% to about $2B. Next quarter, watch one line: adjusted gross margin. If it stays above 63%, growth keeps turning into profit. If it falls below, margin is paying the price for growth.
Looking Ahead
Strengths and Risks
6 Strengths · 6 RisksStrengths
6- Revenue grew 58.5% year over year, the fastest annual growth since the IPO.
- The midpoint of fourth-quarter revenue guidance is 9.7% above market expectations.
- Adjusted operating margin of 49.1% was 0.5 points higher than a year ago.
- Deferred revenue rose 27.3% since the start of the year to $6.84B.
- Arista launched open Ethernet rack-scale AI architectures with partners including AMD, Meta and Microsoft.
- The company targets about $18.5B in 2027 revenue, implying 38-40% growth.
Risks
6- Adjusted gross margin of 64.0% was 1.2 points below 65.2% a year ago.
- Inventory rose 26.6% from the end of June to $3.21B.
- The company bought back no shares in the first nine months of 2026, versus $983M a year earlier.
- The release lists reliance on a small number of large customers for a substantial share of revenue as a risk.
- Dependence on sole or limited sources for key components carries a risk of extended lead times.
- Purchase commitments rose from $9.7B to $11.4B in one quarter, a burden if demand slows.
What to Watch
3- End of 2026The annual revenue target, raised for the fourth time, stands at about $13.3B.
- February 2027Q4 2026 earnings should bring the first update to the $18.5B 2027 target.
- 2027Customer trials of scale-up Ethernet products begin, with revenue expected in 2028.
Upcoming Earnings
To Understand This