We use cookies to improve your experience, analyze site usage, and show relevant ads. Go to our Privacy Policy for details.
The call conveyed strong commercial and financial momentum: high revenue growth (Q1 revenue +35.1% YoY), robust profitability, record operating cash flow, a raised full-year revenue target and an increased AI sales target. Product and market advances (number-one share >10GbE, >100 vendors endorsing XPO, numerous enterprise and cloud wins) support durable demand. Key concerns centered on industry-wide supply constraints (extended lead times, higher procurement costs), gross margin pressure from mix and supply premiums, deferred revenue/acceptance timing volatility, and elevated purchase commitments and inventory. Overall, the positives (growth, profitability, cash, AI traction, product leadership) outweigh the operational and supply-chain headwinds, but management expects supply-driven volatility in near-term quarters.
Arista guided Q2 revenue of approximately $2.8 billion with gross margin of 62–63%, operating margin of 46–47%, diluted EPS of about $0.88 on ~1.27 billion diluted shares, and an effective tax rate near 21.5%. For fiscal 2026 they raised revenue growth to 27.7% targeting roughly $11.5 billion, reiterated a FY gross margin range of 62–64% and an operating margin of ~46% (tax rate ~21.5%), raised the AI fabrics target to $3.5 billion (from $3.25B) and maintained a campus revenue goal of $1.25 billion. Management also noted Q1 as the starting base (Q1 revenue $2.71B; Q1 gross margin 62.4%; operating income $1.29B or 47.8%; net income $1.11B or 40.9%; diluted EPS $0.87 on 1.27B shares) and warned of working-capital variability amid supply constraints (cash ≈ $12.35B; cash from ops ≈ $1.69B; inventory $2.38B; inventory turns 1.7; purchase commitments $8.9B; deferred revenue $6.2B).
Q1 revenue of $2.71B, up 35.1% year-over-year and above guidance of $2.6B. Management raised FY2026 revenue growth target to 27.7% (approximately $11.5B) and provided Q2 revenue guidance of ~ $2.8B.
Operating income of $1.29B (47.8% of revenue) and net income of $1.11B (40.9% of revenue). Diluted EPS was $0.87, up 31.8% year-over-year. Company maintains ~46% operating margin outlook for the year.
Generated $1.69B of cash from operations in the quarter (the strongest in company history). Cash, cash equivalents and marketable securities totaled ~$12.35B.
Raised AI target to $3.5B (up from $3.25B) and expects to more than double AI sales annually. Over 100 cumulative customers in 800G deployments with plans for 1.6T production scale in 2027. Launched XPO optics form factor endorsed by >100 vendors (notable features: 12.8Tb per pluggable module, 204.8Tb per OCP rack unit, integrated cold plate up to 400W).
Management reports the number one market share in high-speed switching (>10GbE) per major analysts. Notable customer wins across Neo Cloud AI, service provider backbone upgrades, insurance observability deployments, and large-scale manufacturing rollouts—showing broad sector traction.
Net Promoter Score improved from 87 to 89 (cited as translating to 94% customer approval). Continued traction of EOS, AVD automation tooling, EtherLink portfolio and 7800R series in AI and scale-across use cases.
Operating expenses slightly down to $396.8M (14.6% of revenue). R&D investment remained strong at $271.5M (10% of revenue). DSOs improved to 64 days (from 70 days) and inventory turns modestly improved to 1.7 (from 1.5).
Welcome to the first quarter 2026 Arista Networks, Inc. financial results earnings conference call. During the call, all participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. If you need to reach an operator at any time during the conference, please press the star key followed by zero. As a reminder, this conference is being recorded and will be available for replay from the Investor Relations section on the Arista website following this call. Mr.
Rudolph Araujo, Arista's head of investor advocacy, you may begin. Thank you, Regina.
Good afternoon, everyone, and thank you for joining us. With me on today's call are Jayshree Ullal, Arista Networks, Inc. Chairperson and Chief Executive Officer, and Chantelle Breithaupt, Arista's Chief Financial Officer. This afternoon, Arista Networks, Inc. issued a press release announcing its fiscal first quarter results for the period ending 03/31/2026. If you want a copy of this release, you can find it on our website. During the course of this conference call, Arista Networks, Inc. management will make forward-looking statements, including those relating to our financial outlook for the second quarter of the 2026 fiscal year, longer-term business model and financial outlooks for 2026 and beyond, our total addressable market and strategy by addressing these market opportunities, including AI, inventory management, lead times, and product innovation, which are subject to the risks and uncertainties that we discussed in detail in our docu...