Arista Networks, Inc. Q3 FY2025 earnings call

• Arista achieved its 19th consecutive record quarter of growth, with revenue of nearly $2.31 billion. Software and services made up approximately 18.7% of total revenue.
• Non-GAAP gross margin was 65.2% due to favorable mix and inventory benefits.
• At the Analyst Day, Arista showcased networking for AI and AI for networking, highlighting the Etherlink portfolio for zero-touch automation, trusted security, etc.
• The company has partnerships with various companies including NVIDIA, AMD, Anthropic, etc. Ken Duda was promoted to President and Chief Technology Officer, and Tyson Lamoreaux was welcomed to lead the cloud and AI mission.
• There was collaboration with Oracle Acceleron, and progress in cloud and AI initiatives with momentum across cloud, AI titans, neo cloud providers, and the campus enterprise.

Total revenues for Arista Networks in the third quarter of 2025 were $2.3 billion, up 27.5% year-over-year. Software and services contributed approximately 18.7% of revenue. The non-GAAP gross margin was 65.2%. Americas accounted for almost 80% of revenue, while international revenue was approximately 20% of total revenue.

• Q4 2025: Revenue expected to be between $2.3 billion and $2.4 billion, gross margin in the range of 62% to 63%, operating margin approximately 47% to 48%.
• FY 2025: Full year revenue growth of approximately 26% to 27% (midpoint $8.87 billion), campus segment expected to be $750 million to $800 million, AI center target at least $1.5 billion, gross margin ~64%, operating margin ~48%.
• FY 2026: Full year revenue growth of approximately 20% ($10.65 billion), campus target $1.25 billion, AI center target $2.75 billion, gross margin 62% to 64%, operating margin 43% to 45%.

• Supply chain constraints, component costs, manufacturing output, and inventory management issues.
• Inflationary pressures, lead times, and product innovation challenges.
• Risks associated with forward-looking statements as actual results may differ materially from anticipated ones.

Q: Tal Liani asks about sequential growth deceleration and if there's concern about future growth.

A: Jayshree Ullal responds that there's no concern about demand, but some variation in shipments due to supply constraints.

Q: Aaron Rakers inquires about gross margin guidance and drivers.

A: Jayshree Ullal explains that product margin is below 60% with cloud and AI titans driving volume, and mix plays a role in gross margin.

Q: Aaron Rakers further asks about tariff related impacts on gross margin.

A: Jayshree Ullal mentions that mix and manufacturing discipline manage gross margin, and it's within prior performance guides.

Q: Michael Ng asks about Arista's positioning in full rack solutions.

A: Jayshree Ullal states Arista is involved in early designs for full rack solutions, with UEC and ESUN specs, and may use blue box JDM model.

Q: Atif Malik asks about decision-making on networking hardware with large language model providers.

A: Jayshree Ullal says share is stable, decision-making is joint between software/LLM players and cloud titans.

Q: Samik Chatterjee asks about variability in shipments and supply-driven factors.

A: Jayshree Ullal states variability is largely supply-driven due to long lead times on components.

Q: Amit Daryanani asks about deceleration in growth outlook.

A: Jayshree Ullal says it's variability across quarters, not deceleration, with strong demand.

Q: David Vogt asks about '26 outlook and growth in core business outside AI and campus.

A: Chantelle Breithaupt and Jayshree Ullal mention AI and campus are large TAMs with growth, but core business mix is uncertain.

Q: Benjamin Reitzes asks about confidence in participating in builds with private companies.

A: Jayshree Ullal states Arista is a relevant participant in scale-out and scale across, with participation in scale up to come.

Q: Tim Long asks about blue box economic model and deployment use cases.

A: Jayshree Ullal says blue box is for customers with operational skill, lower margin in blue box, but mix helps overall business.

Q: Meta Marshall asks about front-end network upgrades vs expectations.

A: Jayshree Ullal mentions sea change in front-end networks with more invitations to construct, converging front-end and back-end.

Q: Karl Ackerman asks about disaggregated vs nonscheduled fabrics.

A: Kenneth Duda explains Arista offers both architectures with same software, giving customers choice.

Q: Simon Leopold asks about blue box trends in 2026.

A: Jayshree Ullal says blue box is for few customers with operational excellence, lower margin, factored into 2026 guide.

Q: James Fish asks about blue box adoption curve and convergence impact.

A: Kenneth Duda states convergence is advantageous, Arista's ability to tackle front-end and back-end is a differentiator.

Q: Antoine Chkaiban asks about UEC progress.

A: Jayshree Ullal mentions UEC published first specification, Arista's portfolio is UEC capable, and ESUN spec is being developed.

Q: George Notter asks about neo cloud momentum.

A: Jayshree Ullal says neo clouds are seeking Arista's help for network design and software, taking down neo clouds and smaller enterprises.

Q: Sebastien Naji asks about enterprise go-to-market investments.

A: Jayshree Ullal and Todd Nightingale mention focus on campus expansion, geographic expansion, and channel investment.

Q: Jeff Hopson asks about Arista's opportunity with new network builds vs refreshing existing networks.

A: Jayshree Ullal states focus is on new AI build-outs rather than traditional cloud build-outs.

Q: Benjamin Bollin asks about lead times and confidence in delivering customer needs.

A: Jayshree Ullal says relies on early previews from large customers, reflected in purchase commitments, and working on campus lead times.