Driven by the robust growth in artificial intelligence (AI)-related capital expenditures, Arista Networks reported better-than-expected financial results for the third quarter.
According to Zhitong Finance, Arista Networks (ANET.US) reported better-than-expected third-quarter financial results, driven by robust growth in artificial intelligence (AI)-related capital expenditures. Nevertheless, the stock plummeted 10% during after-hours trading.
Year-to-date, the company's stock has surged nearly 40%.
It is understood that Arista primarily sells computer network switches used for communication in internet data centers, with its largest customers being Microsoft (MSFT.US) and Meta (META.US). Analysts widely anticipate that the stock will be bolstered this year due to customer investments in AI infrastructure. With rising demand for internet data centers and increased network bandwidth requirements for running AI workloads, Arista Networks' market outlook appears highly promising.
For the quarter ended September 30, the networking solutions company reported adjusted earnings per share (EPS) of $0.75, surpassing the consensus estimate of $0.71; under GAAP, EPS was $0.67, also exceeding expectations of $0.66.
Total quarterly revenue reached $2.31 billion, a 27% year-over-year increase, outperforming market expectations of $2.27 billion. Adjusted gross margin reached 65.2%, exceeding forecasts by one percentage point.
Looking ahead, the Santa Clara-based company forecasts fourth-quarter revenue to range between $2.3 billion and $2.4 billion, with a midpoint of $2.35 billion slightly above market expectations of $2.33 billion. The adjusted gross margin is projected to be between 62% and 63%, compared to market expectations of 63.2%; the adjusted operating margin is expected to be 47%-48%.
Arista CEO Jayshree Ullal commented in the earnings report: "Our data center strategy has gained broad recognition from customers and analysts alike, as it delivers an exceptional experience from client endpoints to campus networks, and further to cloud data centers and AI infrastructure. After delivering another strong performance in the third quarter of 2025, Arista has solidified its position as a strategic networking supplier while consistently demonstrating robust execution capabilities."
During the September Analyst Day event, Arista projected that fiscal year 2026 revenue would grow by 20% to $10.5 billion, with AI networking business revenue expected to surge 70% from this year’s $1.5 billion to approximately $2.75 billion in 2026.
