Details on supply chain improvements, specifically regarding a previously mentioned decommitted supplier, vendor qualification expansion in memory, and commitments from key suppliers (capacity, pricing, customer advocacy).

Jayshree Ullal clarified that supply chain issues are industry-wide until 2028, but Arista's proactive steps are yielding results. Todd Nightingale elaborated on strong relationships with silicon vendors, adding optionality and qualifying new memory/PCB/optics vendors, and improving terms for shorter lead times and nimbleness. “On the silicon side, we have very, very tight relationships with our silicon vendors, and that goes to both how we work through all the supply chain and how we've improved the delivery on those components, but also the technical engagements for new platforms that are super exciting to get into the field.”

How does the mix of technologies like CPO, NPO, XPO change going forward, and how does it benefit or hurt Arista longer term?

Jayshree Ullal explained that for scale-up, copper and pluggable optics will remain dominant. Arista is focused on open CPO (Co-Packaged Optics) with socketed optical engines and pigtail fibers, expecting trials in 2027 and production in 2028-2029. She noted that proprietary CPO implementations are not favored by Arista. “Arista is not a fan of 5 different proprietary implementations. They're going to have and we're going to commit and Andy and the team have been working hard at this to really solve one, which is an open CPO.”

Given supply chain improvements and updated guidance, can Jayshree revisit thoughts on adding 10%+ customers, and will Microsoft and Meta remain 10%+ customers for FY26?

Jayshree Ullal confirmed that Arista remains committed to Microsoft and Meta as its longest partners and fully expects there to be one, possibly two, 10% customers for FY26, allowing flexibility based on product shipments. “I fully expect there to be 1, maybe 2 10% customers. I'll leave it at that just because we want all the flexibility on what's in the product sectors and who are the 10% customers as we ship.”

ANET

Arista Networks (ANET) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 4, 2026

Source: earnings call transcript

Executive summary

Arista Networks Q2 FY26 — Record Revenue and Strong AI Momentum

Arista Networks delivered a record Q2 FY26, surpassing $3 billion in revenue, driven by strong AI and enterprise demand. The company significantly raised its full-year 2026 revenue guidance to $12.6 billion, reflecting improved supply chain execution and broad-based strength across product sectors. While industry-wide supply challenges are expected to continue, Arista's proactive measures and innovative AI fabric solutions position it for sustained growth in the AI super cycle.

Highlights

Achieved first $3 billion revenue quarter, up 37.7% year-over-year.
Increased FY26 revenue guidance to $12.6 billion, representing 40% annual growth, an incremental $2.1 billion over prior Analyst Day goal.
AI fabrics momentum with Etherlink switches now exceeds 100 cumulative customers.
Improved supply chain resilience, tripling multiyear purchase commitments to $9.7 billion.
Operating income reached $1.5 billion or 49.9% of revenue, with diluted EPS of $1.02, up 39.7% year-over-year.

Concerns

Industry-wide supply tightness and rising component costs persist, expected to last until 2028.
Inventory levels remained elevated at $2.5 billion, up from $2.4 billion quarter-over-quarter, affecting cash flow timing.
DSOs increased to 68 days from 64 days in Q1 due due to timing of customer shipments and invoicing.

Guidance & targets

Category	Target	Timeline	Confidence
FY26 Revenue	$12.6 billion high materiality	FY26	High
FY26 Campus Revenue	at least $1.25 billion medium materiality	FY26	High
FY26 AI Fabrics Revenue	at least $3.5 billion high materiality	FY26	High
FY26 Gross Margin	62% to 64% medium materiality	FY26	High
FY26 Operating Margin	48% to 49% high materiality	FY26	High
FY26 Effective Tax Rate	21.5% low materiality	FY26	High
Q3 FY26 Revenue	approximately $3.3 billion high materiality	Q3 · FY26	High
Q3 FY26 Gross Margin	approximately 63% medium materiality	Q3 · FY26	High
Q3 FY26 Operating Margin	between 48% and 49% high materiality	Q3 · FY26	High
Q3 FY26 Diluted EPS	between $1.06 and $1.08 high materiality	Q3 · FY26	High
Q3 FY26 Effective Tax Rate	approximately 21.5% low materiality	Q3 · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
International Increased quarter-over-quarter primarily due to strong organic growth and a shift in geographic mix of sales to large global customers. Percentage of total revenue: 23%Prior quarter percentage of total revenue: 15.5%	$697.8 million	—	—	—

Orderbook & backlog

Purchase Commitments $9.7 billion Q2 FY26

up from $8.9 billion at Q1 FY26

Almost tripling from $3.6 billion a year ago; mostly represents purchases for chips related to new products and AI deployments.

Total Deferred Revenue $6.9 billion Q2 FY26

up from $6.2 billion in Q1 FY26

Majority is product related; product deferred revenue increased approximately $600 million sequentially. Volatility expected due to customer-specific acceptance clauses.

Product announcements

Product	Type	Timeline
7060XE7	launch	—
Liquid Cooling Options	launch	—
EOS Innovations (SSU, MRC, SRv6)	update	—

Deals & partnerships

Anthropic and Palo Alto Webinar on AI security

Arista will host a webinar with Anthropic and Palo Alto to discuss making AI secure, focusing on vulnerabilities and proactive solutions with technology, systems, and processes. Scheduled for September 8th.

Capital programs

Santa Clara Facilities Expansion on track

Benefit:expanded facilities

Construction work to build expanded facilities in Santa Clara remains on track.

Risks & headwinds

Industry-wide supply tightness and rising component costs until 2028

Expected to persist until 2028

Mitigation:Arista has taken individual and aggressive proactive steps, including hiring a new global operations executive, partnering closely with key suppliers, and increasing multiyear purchase commitments to $9.7 billion.

Elevated inventory balances affecting cash flow ahead of deployments

Inventory at $2.5 billion, up from $2.4 billion QoQ

Mitigation:Working through balancing of component timing and availability; increased resiliency through optionality and expanded vendor qualification.

Volatility of product deferred revenue balances quarterly basis

Product deferred revenue increased approximately $600 million sequentially

Mitigation:Acknowledged as a result of increased customer-specific acceptance clauses; management notes it can move significantly independent of underlying business drivers.

What to watch in Q3 FY26

FY26 Revenue Growth

next quarter

Current 40% annual growth ($12.6 billion)

Target Maintain or further raise

Why it matters

Verifying the company's ability to sustain its accelerated growth trajectory and meet its significantly raised full-year revenue target.

Given our improving stance in supply chain, we are excited to increase our guidance for the third time this year to $12.6 billion revenue in 2026. We are now projecting 40% annual growth

Find out whether ANET delivers this. Inve re-checks your case every morning.

Q&A highlights

Does increasing complexity in AI networking (denser clusters, multi-campus/data center connections) increase the value of Arista's integrated platform over white box solutions, and are customers rethinking build vs. buy?

Jayshree Ullal affirmed that Arista's strategy has accelerated, especially in scale-out and scale-across AI fabrics, where consistent performance, security, and traffic engineering are critical. She noted white box solutions are tactical for simpler use cases, but complex AI training and inference demand Arista's Etherlink system-wide portfolio with features like MRC and SRv6, which are difficult to achieve with a box-by-box approach.

“I think you're absolutely right that Arista's networking strategy has accelerated. And as you know, there's 3 types of AI fabrics that are critical for us to participate in, scale-up, scale-out, and scale-across.”

asked by Amit Daryanani · answered by Jayshree Ullal

2 min read 6 chapters

Detailed narrative

AI Fabrics and Innovation

Arista's AI fabrics momentum now includes over 100 cumulative customers, leveraging innovations like Smart System Upgrade (SSU), Multipath Reliable Connection (MRC), and SRv6 for lossless, high-performance AI networks. The 7800 platform is key for distributed scale-across applications, with the Scale-Across switching and routing TAM projected at $15 billion to $20 billion by 2030.

The Scale-Across use case is expected to be approximately 30% of Arista's overall AI target of at least $3.6 billion in 2026.

Supply Chain Improvements

The company has made significant strides in addressing industry-wide supply chain challenges, including hiring a new global operations executive, partnering closely with key suppliers, and tripling multiyear purchase commitments to $9.7 billion by the end of Q2 2026. Efforts include securing memory supply into 2027 across DDR4, DDR5, and NAND, improving PCB and optics capacity within a 12-month window, and establishing a liquid cooling supply chain for next-gen AI infrastructure.

Manufacturing and distribution capacity have also been increased with three contract manufacturers and three distribution facilities.

Financial Performance Highlights

Arista achieved its first $3 billion revenue quarter in Q2 FY26, growing 37.7% year-over-year. Non-GAAP diluted EPS was $1.02, up 39.7% year-over-year. Operating income reached $1.5 billion, representing a 49.9% operating margin. The company generated $1.1 billion in operating cash flow. International revenues contributed $697.8 million, or 23% of total revenue, up from 15.5% last quarter.

Strategic Market Positioning

Arista is well-positioned for the AI super cycle, with its EOS architecture providing foundational reliability and optimal compute utilization for diverse AI models and accelerators. The company emphasizes its system-wide approach over white-box solutions for complex AI networking needs, particularly in scale-out and scale-across use cases, citing operational excellence, advanced AI features, and reliability as key differentiators.

This approach helps customers manage the scarcity of power, space, and compute.

Core Business Strength and Growth Drivers

Beyond AI and campus, Arista expects growth in its core data center front-end and routing adjacencies. The enterprise team has shown tremendous growth, contributing significantly to the incremental $1.1 billion revenue raise for FY26. Routing is seen as an adjacency for edge routing and DCI/scale-across use cases, addressing an incredibly large and growing TAM.

The company anticipates contributions from all product sectors to its increased guidance.

Co-Packaged Optics Strategy

Arista is focused on open Co-Packaged Optics (CPO) solutions, which it believes will allow for multi-vendor interoperability. The company expects trials for open CPO in 2027 and production in 2028-2029, while acknowledging that pluggable optics and copper will remain dominant in the near term. Arista is not in favor of proprietary CPO implementations, advocating for an open interface with socketed optical engines and pigtail fibers.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.