Arista Networks

Arista just delivered its first three billion dollar quarter, with revenue of 3.04 billion dollars in Q2 2026. That is up 37.7% from a year ago and up 12.1% from just three months earlier. Net income hit 1.21 billion dollars in the quarter, and management guided next quarter to roughly 3.3 billion dollars. Growth is speeding up, not slowing down, which is rare for a company already this large.

Arista keeps about 45 cents of every dollar of sales as operating profit, and that margin actually improved to 45.4% from 44.7% a year ago. The company holds roughly 13.3 billion dollars in cash and investments with no debt, and generated 2.78 billion dollars in operating cash in just six months. Customer prepayments climbed to 6.87 billion dollars, meaning orders are locked in well into the future.

Gross margins fell to 62.9% from 65.2% a year ago, meaning it now costs Arista more to build each switch. Memory and component prices are rising, and the giant cloud customers buying in bulk push hard on price. Inventory also grew to 2.54 billion dollars, so if AI spending cools off, Arista could be stuck holding gear it cannot sell quickly.

A handful of massive cloud customers drive most of Arista's sales, with the top two alone historically accounting for over 40% of revenue. That works beautifully while they are spending, but one budget pause hits immediately. Chip makers are also bundling their own networking with AI systems, which could squeeze Arista out of deals even as the market keeps growing.