01—Abstract
Summary
Summary of the 8-K filed August 4, 2026. Cited figures are marked; the original filing is the authoritative source.
Arista Networks (ANET) reported second quarter 2026 results that marked its first quarter with revenue above $3 billiona.
Revenue was $3.036 billionb, up 37.7% year-over-year and 12.1% sequentially. GAAP diluted EPS was $0.95 and non-GAAP diluted EPS was $1.02, up roughly 40% from $0.73 a year earlier. Profitability held firm: GAAP operating margin was 45.4% and non-GAAP operating margin was 49.9%, both modestly higher than a year ago.
Non-GAAP gross margin, however, compressed to 63.4% from 65.6%, and GAAP gross margin fell to 62.9% from 65.2%, which is the most notable soft spot in the report. Balance sheet and cash generation were strong. Operating cash flow for the first six months was $2.78 billionc versus $1.84 billion a year earlier.
Cash plus marketable securities reached about $13.3 billiond, up from $10.7 billion at year-end 2025, with no share repurchases during the first half, compared with $983 million in the prior-year period. Deferred revenue rose sharply to $6.87 billion total (current plus non-current), up from $5.37 billion at December 31, 2025, which points to strong forward visibility. Inventory and accounts receivable also grew, and other assets increased notably, which investors may want to monitor.
For third quarter 2026, management guided to revenue of approximately $3.3 billion, a non-GAAP operating margin of 48% to 49%, and non-GAAP diluted EPS of $1.06 to $1.08. The guidance implies continued sequential growth but a slightly lower operating margin than Q2, consistent with the gross margin pressure seen this quarter. The company also highlighted new 1.6 Tbps AI fabric platforms and its Arista 2.0 platform strategy as drivers of future demand.
02—Key points
Key Highlights
- Record revenue of $3.036 billion, up 37.7% year-over-year and 12.1% sequentially, marking the first $3+ billion quarter.
- Non-GAAP diluted EPS of $1.02, up about 40% year-over-year from $0.73; GAAP diluted EPS of $0.95 versus $0.70.
- Non-GAAP operating margin of 49.9%, up from 48.8%, while GAAP operating margin rose to 45.4% from 44.7%.
- Gross margin compressed: non-GAAP gross margin fell to 63.4% from 65.6% a year earlier, and GAAP gross margin fell to 62.9% from 65.2%.
- Deferred revenue surged to $6.87 billion from $5.37 billion at year-end 2025, indicating strong forward demand visibility.
- Q3 2026 guidance calls for revenue of about $3.3 billion, non-GAAP operating margin of 48% to 49%, and non-GAAP diluted EPS of $1.06 to $1.08.
- Cash and marketable securities grew to about $13.3 billion; no share repurchases were made in the first half of 2026 versus $983 million in the prior-year period.
03—Questions
Frequently Asked Questions
How strong was Arista's revenue growth in Q2 2026?
Revenue reached $3.036 billion, up 37.7% from $2.205 billion in Q2 2025 and up 12.1% from Q1 2026. Product revenue grew about 39% year-over-year to $2.605 billion, and service revenue grew about 31% to $430.5 million.
Did margins improve or decline?
Operating margins improved modestly: non-GAAP operating margin rose to 49.9% from 48.8%, and GAAP operating margin rose to 45.4% from 44.7%. Gross margins declined, with non-GAAP gross margin at 63.4% versus 65.6% a year earlier. Investors should watch whether operating leverage from opex discipline can offset gross margin pressure going forward.
What does the Q3 2026 guidance imply?
Management expects revenue of about $3.3 billion, a non-GAAP operating margin of 48% to 49%, and non-GAAP diluted EPS of $1.06 to $1.08. This implies roughly 9% sequential revenue growth at the midpoint, with operating margin expected to be slightly below Q2's 49.9%.
How is Arista's balance sheet and cash flow position?
Operating cash flow for the first six months was $2.78 billion, up from $1.84 billion a year earlier. Cash and marketable securities totaled about $13.3 billion at June 30, 2026, up from about $10.7 billion at year-end 2025. The company did not repurchase stock in the first half of 2026, compared with $983 million in the prior-year period.
Why did deferred revenue increase so much?
Total deferred revenue rose to about $6.87 billion from $5.37 billion at December 31, 2025, an increase of roughly 28% in six months. This growth suggests customers are prepaying or committing to future purchases, which supports near-term revenue visibility, though investors should confirm the drivers in the 10-Q filing.
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