Q3 2026 results
| Metric | Result | Change |
|---|---|---|
| Revenue | $3.66 billion | up 58.5% year-over-year |
| Operating Income | $1.8 billion | 49.1% of revenue |
| Net Income | $1.5 billion | 41.9% of revenue |
| Diluted EPS | $1.20 | up 55.8% year-over-year |
| Gross Margin | 64% | down from 65.2% in the prior year |
Guidance and outlook
- Q4 2026 revenue: $3.9 billion to $4 billion
- Q4 2026 gross margin: 63% to 64%
- Q4 2026 operating margin: 48% to 49%
- Q4 2026 diluted EPS: $1.26 to $1.30
- FY 2027 revenue growth: 38% to 40% (approximately $18.5 billion)
- FY 2027 gross margin: 62% to 64%
- FY 2027 operating margin: approximately 49%
How management sounded
Confident (+8 on our -10 to +10 scale). Management raised annual guidance for the fourth time, reported record revenue growth, and provided a strong initial outlook for 2027. Management sounded more upbeat than on 92% of the 190 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Q&A summary
AI Deployment Scale
Asked: Is the 10 gigawatt deployment target an industry or Arista-specific number?
Answer: Jayshree Ullal clarified that the 10 gigawatt figure refers to new distributed deployments Arista expects to support by the end of 2027 across various compute accelerators.
R&D Spending
Asked: Why was there a large sequential jump in R&D expenses?
Answer: Management explained the increase was driven by investments in AI-tolerating systems, liquid cooling technology, and infrastructure upgrades required to partner with hyperscalers.
2027 Revenue Outlook
Asked: How confident is the company in the 38% to 40% growth guidance for 2027?
Answer: Management expressed high confidence based on strong demand signals, strategic supply chain partnerships, and long-term agreements for components like memory and silicon.
Campus Growth
Asked: What is driving growth in the campus and branch segment?
Answer: Management attributed the growth to the enterprise market shifting toward Arista's reliable, standards-based architecture and the need for secure, mission-critical networking.
What to watch before the next call
- Execution of the 2027 revenue growth target of $18.5 billion.
- Progress on scale-up AI fabric trials expected to begin in 2027.
- Management of inventory levels and supply chain constraints as purchase commitments increase.
