Arista lifts outlook after record Q3 growth

Arista Networks (ANET) delivered its fastest growth as a public company in the third quarter of 2026 and set guidance that targets up to $4.0 billion in revenue for the fourth quarter. The company reported Q3 revenue of $3.66 billion, marking a 58.5% increase from a year earlier and exceeding its own $3.3 billion revenue guidance. Non-GAAP diluted earnings per share came in at $1.20, above analyst estimates that ranged around $1.08 to $1.10. The results reflected strong demand for Arista’s networking products, especially in AI-related deployments.

The performance also translated into robust profitability. Non-GAAP operating income reached $1.8 billion, representing 49.1% of revenue. Non-GAAP net income was $1.53 billion, or a non-GAAP diluted EPS of $1.20, while GAAP EPS stood at $1.22. Non-GAAP gross margin was 64.0%, slightly below the prior year’s 65.2%, reflecting a shift in product mix.

Arista’s revenue expansion was driven mainly by its product business. Product revenue rose to $3.19 billion from $1.91 billion, a 66.9% increase year over year, while service revenue grew 17.9% to $467.6 million. Management highlighted strong momentum across customer sectors and emphasized Arista’s growing role in networking for generative and agentic AI workloads.

Operational metrics underscored the scale of the quarter. The company generated $1.2 billion in operating cash flow and ended the period with $14.4 billion in cash and marketable securities. Inventory increased to $3.2 billion and purchase commitments to $11.4 billion, as Arista built capacity to meet rising AI-related demand. The quarter’s revenue growth rate of 58.5% year over year and 20.5% sequentially was the highest since Arista’s IPO.

For the fourth quarter of 2026, Arista guided revenue to a range of $3.9 billion to $4.0 billion. The company forecast non-GAAP gross margin between 63% and 64% and non-GAAP operating margin between 48% and 49%. Non-GAAP EPS for the quarter is expected to fall between $1.26 and $1.30, above analyst expectations near $1.15 to $1.17.

The new outlook implies full-year 2026 revenue of roughly $13.3 billion to $13.4 billion and non-GAAP EPS of about $4.35 to $4.39. Arista raised its fiscal 2026 revenue guidance to just over $13.3 billion at the midpoint, representing 48% annual growth. Management also introduced an initial 2027 revenue target of approximately $18.5 billion, implying continued, though moderating, expansion.

Investors responded positively to the earnings beat and guidance. Arista’s stock was up about 10.23% in extended trading to $187 following the report.

While Arista signaled that growth is expected to slow from the exceptionally high third-quarter rate, the company’s guidance still points to solid sequential and year-over-year increases. The combination of record quarterly performance, raised full-year targets, and an initial 2027 outlook around $18.5 billion underscores management’s confidence in sustained demand for its AI-focused networking solutions.