Arista Networks 2026 Q2 Earnings Call

Thank you, Regina. Good afternoon, everyone. Thank you for joining us. With me on today's call are Jayshree Ullal, Arista Networks Chairperson and Chief Executive Officer, and Chantelle Breithaupt, Arista's Chief Financial Officer. This afternoon, Arista Networks issued a press release announcing its fiscal second quarter results for the period ending June 30th, 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 management will make forward-looking statements, including those relating to our financial outlook for the third quarter of the 2026 fiscal year, longer-term business model and financial outlooks for 2026 and beyond, our total addressable market and strategy for addressing these market opportunities, including AI, inventory levels and management, lead times, purchase commitments, component supply and product innovation, which are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically in our most recent Form 10-Q and Form 10-K, which could cause actual results to differ materially from those anticipated by these statements. These forward-looking statements apply as of today. You should not rely on them representing our views in the future. We undertake no obligation to update these statements after this call.

This analysis of our Q2 results and our guidance for Q3 2026 is based on non-GAAP and excludes stock-based compensation expense, intangible asset amortization, gains/losses on strategic investments, and the income tax effect of these non-GAAP exclusions, including the recognition of direct access tax benefits associated with stock-based awards. A full reconciliation of our selected GAAP to non-GAAP results is provided in our earnings release. With that, I will turn the call over to Jayshree.

Thank you, Rudy, and welcome everyone to our second quarter 2026 earnings call. Arista is experiencing significant demand to achieve our first $3 billion quarter in revenue. To put this in perspective, just five years ago, our entire year was $2.9 billion in 2021. We have also entered the prestigious Fortune 500 list in 2026, and in addition to that, we are now included in the Russell 50. Our AI fabrics momentum with Etherlink switches now exceeds 100 cumulative customers from the initial four to five customers I spoke of in 2024. Arista has developed innovative features to enable Smart System Upgrade, SSU, deep analytics, load balancing at scale for AI training workloads. Our latest member is the 7060X-E7 for 100 terabit capacity and 1.6 terabit throughput, as well as the first liquid cooling options, highlighting our continued scale-out leadership.

Over a decade ago, we pioneered the use of leaf and spine topologies in the data center and cloud networks. We are now building upon that with our lossless and high-performance AI fabrics. The maximum possible scale for an AI network generally depends on two things, the number of tiers in the network and the number of ports per device, often known as radix. Increasing the tiers and ports is expensive and power hungry. Our customers deploy and often choose the Arista flagship 7800 AI spine to achieve that high scale without adding additional tiers. Scale-across is an important application. The scarcity of compute capacity, physical space, and gigawatts of power mandates that the AI infrastructure must be designed thoughtfully. The Arista 7800 platform continues to be the flagship spine for distributed scale-across applications, providing traffic isolation, contextual routing, and security.

The scale-across switching and routing TAM is forecasted to be roughly $15 billion-$20 billion in 2030. Arista is well-poised in this segment. Our scale-across AI innovations deliver programmable and deterministic routing, SRv6 multi-plane forwarding, multi-tenancy and traffic engineering, as well as load balancing across the regions. We are capable of providing near instantaneous recovery in the event of transient congestion, packet loss, or a physical failure of AI clusters independent of their geographical location. This scale-across use case is expected to be approximately 30% of our overall AI target of at least $3.6 billion in 2026. While compute and AI accelerators supporting billions of parameters often grab the headline, we did introduce a suite of EOS, Extensible Operating System innovations to enable a robust AI network capable of diverse models and accelerators.

At this point, I'd like to invite Ken Duda, our President and Chief Technology Officer, to highlight some of these AI innovations.

Thanks, Jayshree. I have never witnessed the combination of rapid innovation and scale deployment that we are seeing in AI networks. I'd like to call your attention to three innovations: SSU, MRC, and SRv6. First, SSU. SSU is Arista's Smart System Upgrade, the ability to upgrade switch software without any disruption. Frequent upgrades are a hard reality today, especially as AI both uncovers security vulnerabilities and creates tools to exploit them. While many competing systems require a full reboot to address these issues, leading to expensive and disruptive downtime, Arista's EOS handles these upgrades seamlessly. We ensure our customers stay secure without sacrificing even a single minute of valuable XPU cycles. Second, to maximize XPU utilization, you need MRC, or Multipath Reliable Connection. See, in first-generation AI networks, every packet on an XPU-to-XPU flow has to take the same path.

That means if two flows hash to the same link, they both run at half speed. MRC enables senders to spray a single flow across many paths through the fabric, where receivers reassemble any data that arrives out of order, eliminating the performance hit from fabric hash collisions. How is the sender supposed to control which paths the flow will use? That's where the third innovation comes in. SRv6 or Segment Routing, it's not new, but using it to load balance an AI fabric, that's the game changer. The sender tags each packet with a stack of SRv6 segment IDs, dictating the exact path the packet will take. The system then uses real-time congestion signaling to dynamically shift packets away from hotspots. Because Arista EOS provides a single unified operating system, we support this SRv6 intelligence all the way from the scale-out fabric to the long-distance scale-across routing.

It gives our customers the combination of high quality, top performance, and operational simplicity that Arista is known for.

Thank you, Ken. Undoubtedly, the Arista EOS architecture shines with its inherent state sharing, programmability, and single binary. All of this, as you just pointed out, is foundational for reliable accelerator operation and optimal compute utilization. Arista's multi-path and multi-plane monitoring with explicit SRv6 probes ensures that reliable performance for accelerator communication. We have collaborated with leading customers to build that AI fabric with that operational excellence. As you know, during the last six months, I've been quite vocal and candid in sharing our supply chain challenges and concerns, not only affecting us, but affecting the entire industry. While the industry-wide supply tightness and rising component costs persist, Arista has taken individual and aggressive proactive steps. Arista is making solid progress here in addressing our tight supply chain. After all, we have a lot of experience that comes from many years.

During the lawsuit crisis, we had to build a manufacturing site in the U.S. in 2016, during COVID challenges in 2021, and here we are back again in 2026. Our manufacturing rigor is based on a three-pronged approach. The number one is the people and leadership. Recently, we've hired a terrific global operations executive, Eugenia Corrales, with over 35 years of engineering, networking, and manufacturing expertise. She has built an outstanding suite of leaders for new product engineering, contract manufacturing, global supply chain, direct fulfillment, and logistics. We are also partnering closely with our key suppliers to meet our prioritized forecasts, and I'm so thankful to them for their continued cooperation. Finally, Arista is leaning in with our increased multi-year purchase commitments, now almost tripling from a year ago at $3.6 billion to approximately $9.7 billion by the end of Q2 2026.

To describe that relentless execution, I would like to invite Todd Nightingale, our Chief Operating Officer and President. Over to you, Todd. Thanks, Jayshree.