Arista Networks Inc Earnings - Q4 2025 Analysis & Highlights
Arista Networks Inc. (ANET) reported a strong Q4 2025 and full-year 2025 performance, exceeding revenue guidance and achieving record revenue of $9 billion for the year, driven by significant growth in cloud, AI, and enterprise sectors. The company provided an optimistic 2026 fiscal year outlook, raising its revenue growth projection to 25%, or approximately $11.25 billion, with increased targets for AI centers and cognitive campus and branch revenues. Management highlighted the company's strong position in high-performance switching, its commitment to innovation and customer intimacy, and its strategic focus on AI networking and network adjacencies, despite facing challenges related to supply chain constraints and rising component costs, particularly for memory and silicon.
Key Financial Results
Total revenues in Q4 2025 were $2.49 billion, marking a 28.9% year-over-year increase and surpassing the upper end of guidance.
Fiscal year 2025 revenue reached a record $9 billion, representing 28.6% growth.
Non-GAAP gross margin for fiscal year 2025 was 64.6%.
Overall gross margin in Q4 2025 was 63.4%, slightly above guidance but down from 64.2% in the prior year due to a higher mix of sales to cloud and AI titan customers.
Non-GAAP operating margin for fiscal year 2025 was 48.2%.
Operating income for Q4 2025 was $1.2 billion, or 47.5% of revenue.
Operating income for fiscal year 2025 was $4.3 billion, or 48.2% of revenue.
Net income for Q4 2025 was $1.05 billion, or 42% of revenue, marking the first time Arista delivered over $1 billion in net income.
Diluted earnings per share (EPS) for Q4 2025 was $0.82, up 24.2% from the prior year.
Diluted EPS for fiscal year 2025 was $2.98, a 28.4% increase year-over-year.
Services and subscription software contributed approximately 17.1% of revenue in Q4 2025.
International revenues for Q4 2025 were $528.3 million, or 21.2% of total revenue.
R&D spending in Q4 2025 was $272.6 million, or 11% of revenue.
Sales and marketing expense in Q4 2025 was $98.3 million, or 4% of revenue.
G&A costs in Q4 2025 were $26.3 million, or 1.1% of revenue.
Business Segment Results
Cloud and AI titans contributed 48% of annual customer sector revenue for 2025.
Enterprise and financials accounted for 32% of annual customer sector revenue for 2025.
AI and specialty providers, including Apple, Oracle, and emerging neoclouds, performed strongly at 20% of annual customer sector revenue for 2025.
Core sector revenue was driven at 65% of revenue.
Combined campus and routing adjacencies contributed approximately 18% of revenue.
Network software and services based on subscription models contributed approximately 17% of revenue.
Arista surpassed 150 million cumulative ports of shipments in Q4 2025.
International growth in Asia and Europe was north of 40% annually.
Arista exceeded its strategic goals of $800 million in campus and branch expansion and $1.5 billion in AI center networking.
800-gig adoption saw an excellent uptick in 2025, gaining greater than 100 customers cumulatively for Etherlink products.
Arista added another 350 CloudVision customers in Q4 2025, reaching an aggregate of 3,000 customers over the past decade.
Capital Allocation
Cash, cash equivalents, and marketable securities ended Q4 2025 at approximately $10.74 billion.
Arista repurchased $620.1 million of its common stock at an average price of $127.84 per share in Q4 2025.
For fiscal year 2025, Arista repurchased $1.6 billion of its common stock at an average price of $100.63 per share.
Of the $1.5 billion repurchase program approved in May 2025, $817.9 million remained available.
Operating cash flow for Q4 2025 was approximately $1.26 billion.
Capital expenditures for Q4 2025 were $37 million.
Arista incurred approximately $100 million in CapEx during fiscal year 2025 for initial construction work on expanded facilities in Santa Clara.
Industry Trends and Dynamics
Arista is experiencing an unprecedented networking demand with a massive and growing Total Addressable Market (TAM) of $100-plus billion.
The momentum of generative AI, cloud, and enterprise is driving significant growth.
AI networking revenue is projected to double from 2025 to 2026 to $3.25 billion.
Networking for AI has achieved production scale with an all Ethernet-based Arista AI Center.
Arista was a founding member of the Ethernet-based standards for scale-up with ESUN and completed the Ultra Ethernet Consortium 1.0 specification for scale-out AI networking in 2025.
The company is co-designing several AI rack systems with 1.6T switching emerging in 2026.
Arista is seeing a shift in customer focus, with some customers heavily concentrating on AI rather than traditional cloud services.
The ESUN specification for scale-up networking is expected to be completed in 2026, with real production levels anticipated in 2027, primarily centered around 1.6T rather than 800-gig.
Competitive Landscape
Arista is confident in its number one position in market share in high-performance switching according to most major industry analysts.
The company interoperates with NVIDIA, the recognized worldwide market leader in GPUs, and is broadening the OpenAI ecosystem to include companies like AMD, Anthropic, Arm, Broadcom, OpenAI, Pure Storage, and VAST Data.
Arista is emerging as the gold standard terabit network for running intense training and inference models.
The company's Net Promoter Score is 93%, and it has the lowest security vulnerabilities in the industry.
Arista is seeing about 20% to 25% of deployments where AMD is becoming the preferred accelerator, with Arista being preferred in these scenarios due to its support for open standards and multi-vendor configurations.
Macroeconomic Environment
Arista is facing challenges with mounting supply chain issues, allocation, rising costs of memory and silicon fabrication, and inflationary pressures.
The memory situation has worsened significantly in 2026, with prices being exponentially higher and shortages expected to last multiple years.
Memory is considered the "new gold" for the AI and automotive sector.
Arista has been absorbing costs in 2025 but expects a one-time price increase on selected memory-intensive SKUs in 2026.
Growth Opportunities and Strategies
Arista 2.0 momentum is clear, with the company at the epicenter of mission-critical network transactions.
The company is becoming the preferred network innovator for client to cloud and AI networking with a differentiated software stack and CloudVision software foundation.
Arista is committed to an aggressive goal of $1.25 billion for 2026 for the cognitive campus and branch.
The company launched its Blue Box initiative, offering enriched diagnostics of its hardware platforms, dubbed Netdi.
Arista launched its flagship 7800R4 spine in Q4 2025 for various routing use cases, including DCI and AI spines, with 460 terabits of capacity.
Arista's AI for networking strategy based on AVA (Autonomous Virtual Assist) curates data for higher-level functions.
The company's validated designs for network simulation, digital twin, and validation functionality optimize platforms for Network-as-a-Service.
Arista is seeing increased global relevance with customers and channels, conducting large customer events across Asia, Europe, and the United States.
The company is experiencing traction in the $5 million to $10 million and $1 million customer categories.
Arista's leadership team has driven strategic and cohesive execution, and the company has grown to approximately 5,200 employees exiting 2025.
Arista anticipates a diversified customer base in 2026, potentially including one or two additional 10% customers.
The company is actively involved in the ESUN specification and Ultra Ethernet Consortium 1.0 specification to ensure open standards for AI networking.
Financial Guidance and Outlook
Arista raised its 2026 fiscal year outlook to 25% revenue growth, delivering approximately $11.25 billion.
The company maintains its 2026 campus revenue goal of $1.25 billion.
The AI centers goal was raised from $2.75 billion to $3.25 billion for 2026.
Gross margin for fiscal year 2026 is reiterated in the range of 62% to 64%, inclusive of mix and anticipated supply chain cost increases for memory and silicon.
The operating margin outlook for 2026 was raised to approximately 46%.
The structural tax rate is expected to return to 21.5% in 2026.
Q1 2026 guidance includes revenues of approximately $2.6 billion, gross margin between 62% and 63%, and operating margin at approximately 46%.
Q1 2026 effective tax rate is expected to be approximately 21.5%, with approximately 1.275 billion diluted shares.
Purchase commitments at the end of Q4 2025 were $6.8 billion, up from $4.8 billion at the end of Q3 2025, mostly representing purchases for chips related to new products and AI deployments.
Total deferred revenue balance was $5.4 billion, up from $4.7 billion in the prior quarter, with the majority being product-related.
