Rich Duprey
4 min read
Quick Read
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ANET raised FY2026 guidance to $12.6B after its first-ever $3B quarter, yet the stock trades 20% below its highs heading into Q3 earnings.
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Management expects Microsoft and Meta to anchor Arista as its only 10% customers while warning the industry won’t escape component shortages until 2028.
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At 45x FY2026 EPS, ANET dropped 13.61% after Q1 despite a 7.73% earnings beat, signaling the premium valuation leaves little room for disappointment.
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Arista Networks (NYSE:ANET) is expected to report third-quarter results on November 3 after the close. Shares have fallen 9.8% over the past month. This report will show whether AI networking demand still supports a premium valuation.
A Record Quarter, Then a Pullback
Last quarter, Arista posted its first $3 billion quarter. Revenue of $3.04 billion grew 37.7% year over year and beat the $2.83 billion estimate. Non-GAAP EPS of $1.02 exceeded the $0.89 consensus, extending the EPS beat run to 6 consecutive quarters.
Fiscal 2026 revenue guidance was raised to $12.6 billion, or 40% growth, up from $11.5 billion in May. Deferred revenue rose to $6.9 billion from $6.2 billion, and purchase commitments reached $9.7 billion.
The stock remains up 42.18% year to date at $186.30, though it traded at $206.55 a month ago. For Q3, management guided to about $3.3 billion in revenue, roughly 63% gross margin and EPS of $1.06 to $1.08.
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Consensus Calls for Growth Above 40%
Gross Margin and Another Guidance Raise Will Set the Tone
Gross margin is the first number to watch. It dropped to 63.4% in Q2 from 65.6% a year earlier on customer mix, with tariff refunds adding 20 to 30 basis points. CEO Jayshree Ullal said price increases will help “only towards the end of the year or more like next year” as memory and silicon costs rise.
