Arista Networks Inc Earnings - Q3 2025 Analysis & Highlights
Arista Networks' Q3 2025 earnings call highlighted record growth driven by AI, strong financial performance, and a positive outlook for 2026, with key discussions on AI and cloud opportunities, campus expansion, and strategic partnerships.
Key Financial Results
Q3 2025 revenue reached almost $2.31 billion.
Software and services contributed approximately 18.7% of revenue.
Non-GAAP gross margin was 65.2%, influenced by favorable mix and inventory benefits.
Americas accounted for almost 80% of revenue, while international contributed approximately 20%.
Operating income for the quarter was $1.12 billion, landing at 48.6% of revenue.
Net income for the quarter was $962.3 million, or 41.7% of revenue.
Diluted earnings per share for the quarter was $0.75, up 25% from the prior year.
Cash, cash equivalents, and investments ended the quarter at $10.1 billion.
Business Segment Results
Strong growth across all product sectors supported the revenue.
The year-over-year gross margin improvement was primarily driven by strength in the enterprise segment.
Capital Allocation
Of the $1.5 billion repurchase program approved in May 2025, $1.4 billion remained available for repurchase in future quarters.
Capital expenditures for the quarter were $30.1 million.
Industry Trends and Dynamics
Arista is experiencing a golden era in networking, with an increasing TAM now of over $100 billion in forthcoming years.
The company is experiencing momentum across cloud and AI titans, neocloud providers, and the campus enterprise.
The demanding scale of AI build-out is clearly unprecedented as we look to move data faster across multi-planar networks.
AI models and tokens are growing in size and complexity, driving network scale of AI XPUs.
Competitive Landscape
Arista interoperates with NVIDIA and is creating an open ecosystem, including AMD, Anthropic, Arm, Broadcom, OpenAI, Pure Storage, and VAST Data.
Arista clarifies its role in white box, co-existing with commodity solutions for simple use cases while offering superior Arista blue boxes and branded EOS platforms.
Macroeconomic Environment
Guidance includes possible known tariff scenarios.
Growth Opportunities and Strategies
Arista is focused on networking for AI and AI for networking, with momentum across data-driven network platforms.
The company's stated goal of $1.5 billion AI aggregate for 2025 is well underway.
Arista is committed to $2.75 billion out of its new target of $10.65 billion in revenue, representing 20% revenue growth in 2026.
Arista unveiled its first Ethernet for Scale-Up Networks (ESUN) specification, along with industry experts.
Arista is collaborating with Oracle Acceleron, building upon a decade of partnership, for AI networks.
Arista is addressing multiple facets of cloud and AI innovation at a systemwide level, converging silicon, hardware, software, cables, optics, and racks as an overall platform.
Arista AVA (Autonomous Virtual Assist) uses AI to help customers design, build, and operate their networks.
Arista is focused on centers of data strategy ranging from client to branch to campus to data and now cloud and AI centers.
Financial Guidance and Outlook
Q4 2025 Revenue: $2.3 billion to $2.4 billion.
Q4 2025 Gross Margin: 62% to 63%, inclusive of possible known tariff scenarios.
Q4 2025 Operating Margin: Approximately 47% to 48%.
Q4 2025 Effective Tax Rate: Approximately 21.5%.
Q4 2025 Diluted Shares: Approximately 1.281 billion.
FY 2025 Revenue Growth: Approximately 26% to 27%, or $8.87 billion at the midpoint.
FY 2025 Campus Segment: Between $750 million and $800 million.
FY 2025 AI Center Target: At least $1.5 billion.
FY 2025 Gross Margin: Approximately 64%, inclusive of possible known tariff scenarios.
FY 2025 Operating Margin: Roughly 48%.
FY 2026 Revenue Growth: Approximately 20%, now at a higher dollar amount of $10.65 billion, inclusive of both a campus target of $1.25 billion and an AI center target of $2.75 billion.
FY 2026 Gross Margin: A range is expected of approximately 62% to 64%, driven by customer mix.
FY 2026 Operating Margin: An outlook of approximately 43% to 45%, allowing for investments in relation to achieving the strategic goals of Arista.
