Arista Targets 40% Growth on Surging AI Demand

Arista Networks raised its revenue outlook to 40% growth, targeting $12.6 billion as artificial intelligence networking accelerates. At Citi's Global TMT Conference, Chief Financial Officer Chantelle Breithaupt detailed the updated forecast and said purchase commitments jumped to $9.6 billion at the end of the second quarter, up from about $3.6 billion three quarters earlier. The commitments secure chip and memory capacity through 2026 and 2027.

Breithaupt noted that product deferred revenue continues to rise because complex AI deployments take 18 to 24 months before revenue recognition. She advised evaluating trends over four to six quarters alongside purchase commitments. The company expects gross margins of 62% to 64% and operating margins near 48%. Arista holds a 20% to 22% share in the data center market and roughly 5% in campus networking.

Tyson Lamoreaux, senior vice president of cloud and AI networking, highlighted the operational shift to 1.6-terabit link speeds and Arista's XPO architecture for network-powered optics. Initial XPO deployments are expected in the second half of next year, followed by an expansion in 2028. Scale-up Ethernet trials are also slated for late next year, with revenue starting in 2028.

Customer demand is broadening beyond primary hyperscalers. Two hyperscale clients already account for over 10% of revenue, with a third and potentially a fourth expected to cross that threshold. International demand also contributed, as Europe, the Middle East, and Africa grew 36% in the prior quarter. Software is projected to hold steady at 18% to 20% of total revenue.