On Tuesday, Arista Networks (NYSE:ANET) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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View the webcast at https://events.q4inc.com/attendee/274051223

Watch the full earnings call below:

Summary

Arista Networks Inc reported Q1 2026 revenue of $2.71 billion, a 35.1% year-over-year increase, surpassing guidance of $2.6 billion, driven by strong demand in AI and specialty providers.

The company anticipates full-year revenue growth of 27.7%, reaching $11.5 billion, with AI-related revenue targets revised to $3.5 billion amid strong demand.

Despite robust demand, supply chain constraints, particularly in wafers and chips, are a significant challenge, impacting lead times and potentially gross margins.

Arista is leading in AI networking strategy with innovations such as its AI fabric use cases (scale up, scale out, and scale across) and the new XPO optics form factor, which has garnered significant industry support.

Deferred revenue is increasing, reflecting new product qualifications and customer readiness, with the expectation of recognition over multiple quarters.

Gross margin for Q1 2026 was reported at 62.4%, influenced by customer mix and rising supply chain costs.

Arista’s AI-focused initiatives and strategic wins in various sectors, including cloud and insurance, highlight its diversified growth strategy.

The company is actively working on expanding its scale-up capabilities for 2027, while scale-out and scale-across segments are key revenue drivers for 2026.

Full Transcript

OPERATOR

Rudolph Araujo (Head of Investor Advocacy)

Jaishree Ulal (Chairperson and Chief Executive Officer)

Todd Nightingale (Co-President)

Jaishree Ulal (Chairperson and Chief Executive Officer)

Chantal Brightoff (Chief Financial Officer)

Rudolph Araujo (Head of Investor Advocacy)

Thank you, Chantel. We will now move to the Q and A portion of the Arista earnings call to allow for greater participation. I’d like to request that everyone please limit themselves to one question. Your line will be placed on mute after your question. Thank you for your understanding. Regina, please take it away.

Regina (Moderator)

We will now begin the Q and A portion of the Arista earnings call. To ask a question during this time, simply press Star and then the number one on your telephone keypad. If you’d like to withdraw your question, press Star and the number one again, please pick up your handset before asking questions to ensure optimal sound quality. Our first question will come from the line of Simon Leopold with Raymond James. Please go ahead.

Simon Leopold (Equity Analyst at Raymond James)

Great. Thank you very much for taking the question. I wanted to explore your commentary around the Scale Across opportunity in particular and I guess what I’m trying to get a better sense is how much revenue, if any, did that contribute last year and how material is that to the $3.5 billion forecast you’re giving this year and how should that trend longer term? Thank you.

Jaishree Ulal (Chairperson and Chief Executive Officer)

Regina (Moderator)

Our next question will come from the line of George Nader with Wolff Research.

George Nader

Jaishree Ulal (Chairperson and Chief Executive Officer)

Regina (Moderator)

Our next question will come from the line of Entwine with New street research.

Antoine

Please go ahead. Hi, thank you very much for taking my question. So with supply outstripping demand, I’m wondering how much does your current supply allow you to grow this year? Next is the updated unit supply growth guide of 28% growth rate, a good reflection of how much supply you’ve secured for this year and what could that number look like next year based on how much supply you think you can get as of today?

Jaishree Ulal (Chairperson and Chief Executive Officer)

Regina (Moderator)

Our next question will come from the line of Erin Rakers with Wells Fargo.

Erin Rakers (Equity Analyst at Wells Fargo)

Jaishree Ulal (Chairperson and Chief Executive Officer)

Ken Duda (Co-President)

I It’s just been an incredible journey to live through this and see the level of infrastructure build off we’re getting and how well positioned our hardware and software roadmaps are to address these ever evolving more advanced use cases. It’s a blast to get to work on this stuff.

Jaishree Ulal (Chairperson and Chief Executive Officer)

Okay, that’s always fun when your job is a blast. So Ben Bolen, I still see one, I think one, maybe two 10% customers. And Todd Nightingale, hopefully we can ship it. Oh, sorry, Erin Rakers.

Regina (Moderator)

And our next question will come from the line of Ben writes with Melius Research.

Ben Bolen (Equity Analyst at Cleveland Research)

Chantal Brightoff (Chief Financial Officer)

Todd Nightingale (Co-President)

The teams are also doing everything they can to make sure we control our costs, especially in the manufacturing side. And that includes bringing on secondary providers, quality new components, et cetera, to make our supply chain more resilient and more cost effective in the long run.

Jaishree Ulal (Chairperson and Chief Executive Officer)

Regina (Moderator)

Our next question will come from the line of Michael Ng with Goldman Sachs.

Michael Ng (Equity Analyst at Goldman Sachs)

Please go ahead. Hey, good afternoon. Thanks for the question. I was just wondering if you could talk about whether or not Arista is seeing networking attached opportunities for customers that are using TPU or TPU like architectures and then anything you comment about as it relates to growing Neo cloud traction, is that something that you think may be a little bit underappreciated by the analyst community? Thank you very much.

Jaishree Ulal (Chairperson and Chief Executive Officer)

Regina (Moderator)

Our next question will come from the line of Sean o’ Laughlin with TD Cowan. Please go ahead.

Sean O’Laughlin

Jaishree Ulal (Chairperson and Chief Executive Officer)

Ken Duda (Co-President)

The other thing I like to mention here is just how good it feels to be have the same set of products in the same common operating system management suite and operating model across the front end and back end. This lowers cost for the customer, simplifies their design process to get that leverage. And we’re one of the few vendors who can do that. I think only. Yeah, I think so. I think only. Yes, absolutely. Good point, Ken.

Regina (Moderator)

Our next question will come from the line of Mita Marshall with Morgan Stanley.

Mita Marshall (Equity Analyst at Morgan Stanley)

Please go ahead.

Jaishree Ulal (Chairperson and Chief Executive Officer)

Todd Nightingale (Co-President)

Jaishree Ulal (Chairperson and Chief Executive Officer)

Yeah, it’s stunning to me. I remember when I first talked to Andy and Vijay, they said, oh, we think we’ll get about 20 signatures. And then it was 40 and now it’s north of 100. So it tells me the whole consortium is coming together for things like Ethernet, IP and standards and standardization of optics.

Regina (Moderator)

Our next question will come from the line of Tal Leiani with Bank of America.

Tal Leiani (Equity Analyst at Bank of America)

Please go ahead. Hi guys, can you hear me? Yes, we can hear you.. Hello. I promised myself to be nice today, so I have a good question for you.

Jaishree Ulal (Chairperson and Chief Executive Officer)

I promise to be nice too.

Tal Leiani (Equity Analyst at Bank of America)

Jaishree Ulal (Chairperson and Chief Executive Officer)

Chantal Brightoff (Chief Financial Officer)

The only other thing I’d add, thank you, Jaishree, is that we do recognize some of it every quarter. So it’s not like it’s one balance. This is aging and growing tile. We recognize things every quarter. Things come in and things are recognized to the P and L. So I just wanted make sure you understand that.

Jaishree Ulal (Chairperson and Chief Executive Officer)

Yeah, it’s not piling. Some things go in and some things come out. Yeah. Does that make sense? Tal. What? You’re on mute. No, no, they mute him after his question. Oh, he does? Okay. All right.

Regina (Moderator)

Our next question will come from the line of Amit Daryanani with Evercore. Please go ahead.

Amit Daryanani (Equity Analyst at Evercore)

Yep. Thanks for taking my question. You know, I guess, Jeffrey, you folks have kind of positioned XPO as the next osfp. And I would love to kind of Understand, from the OFC demos to potentially deployments in 27, how do you see changing the optics architecture within AI clusters? And then maybe specifically for Arista, does that change the growth profile or your content per AI rack or cluster as we go forward? Thank you.

Jaishree Ulal (Chairperson and Chief Executive Officer)

Regina (Moderator)

Our next question comes from the line of Ryan Koontz with Needham.

Jeff Hobson

Please go ahead. Hi, this is Jeff Hobson on Orion. I appreciate the question on the scale across. It seems like that would be a really good fit for all Arista’s capabilities and I know you mentioned it would maybe be around a third of revenue this year but but is this something where scale across could even be larger than scale out over the next couple of years? Thank you.

Jaishree Ulal (Chairperson and Chief Executive Officer)

Regina (Moderator)

Our next question comes from the line of Somic Chatterjee with JP Morgan.

Samik Chatterjee

Jaishree Ulal (Chairperson and Chief Executive Officer)

Regina (Moderator)

Our next question comes from the line of Carl Ackerman with BNP Paribas.

Carl Ackerman (Equity Analyst at BNP Paribas)

Please go ahead. Yes, thank you. Jaishree, you are doing more networking design today more than ever. Does that change your ability to monetize your services to capture more of the work of the other value that you’re adding to this, to these applications? And I guess as you address that given the large mix of services revenue within Deferred, could services revenue accelerate faster and represent perhaps 25 or 30% of sales going forward? Thank you.

Jaishree Ulal (Chairperson and Chief Executive Officer)

Regina (Moderator)

Our next question comes from the line of Matt Nicknam with Truist.

Matt Nicknam

Please go ahead. Hey, thanks so much for taking the question. I just wanted to go back to gross margin. So I know we were sort of in that 62ish range they dipped about 170bps year on year. And I want to dig into whether it was primarily mix related or you know maybe if you can quantify whether there, how significant the memory and cost related impacts were. If there’s any call you can provide. Thanks.

Chantal Brightoff (Chief Financial Officer)

Regina (Moderator)

of David Vogt with ubs. Please go ahead.

Andrew

Todd Nightingale (Co-President)

Yeah, and just to add to that David, the real hole is lead times. We are experiencing such significant wafer fab shortages that we’re not getting the chips in time. So more than a whole, I would just say our purchase commitments are multi years because we’re having to deal with forecasts that are out multiple years so that we get them in time because the lead time of these chips is so long. So I think that’s the biggest hole. Lead times.

Jaishree Ulal (Chairperson and Chief Executive Officer)

Yeah, we are experiencing 52 week lead times pretty reliably with reservation needs beyond that. And our customers certainly do not want to wait that long.

Regina (Moderator)

Our next question comes from the line of James Fish with Piper Sandler.

James Fish (Equity Analyst at Piper Sandler)

Jaishree Ulal (Chairperson and Chief Executive Officer)

Regina (Moderator)

Regina, we have time for one last question.

Ben Bolen (Equity Analyst at Cleveland Research)

Jaishree Ulal (Chairperson and Chief Executive Officer)

OPERATOR

This concludes Arista Networks Inc’s first quarter 2026 earnings call. We have a presentation posted that provides additional information on our results which you can access on the investor section of our website. Thank you for joining us today and for your interest in Arista. Thank you for joining. Ladies and gentlemen, this concludes today’s call. You may now disconnect.