Arista Networks

Arista just posted 2.71 billion dollars in Q1 2026 revenue, up 35.1% from a year ago. That's a meaningful acceleration from the 29% growth pace it was running last year. Net income hit 1.02 billion dollars in a single quarter, and operating cash flow came in at a massive 1.69 billion dollars. Management guided next quarter to roughly 2.8 billion dollars in revenue, signaling the AI data center boom is still feeding straight into Arista's order book.

Arista now sits on roughly 12.4 billion dollars in cash and marketable securities with no debt. Non-GAAP operating margins held steady at a remarkable 47.8%, and the company generates billions in free cash flow with very little capital spending required. Even better, deferred revenue jumped to 6.2 billion dollars, meaning customers are locking in orders well into the future and giving Arista unusual visibility for a hardware business.

Gross margins slipped to 61.9% on a GAAP basis, down from 63.7% a year ago, as memory chip costs rise and big cloud customers negotiate harder on price. The stock also trades at a steep premium of around 50 times earnings, which means any single miss could trigger a sharp drop. Purchase commitments have ballooned to 6.8 billion dollars, so if AI demand cools, Arista could be sitting on excess inventory.

Just two customers, Meta and Microsoft, account for over 40% of Arista's revenue. NVIDIA has also pushed its way into about 12% of the data center Ethernet switch market and keeps bundling networking with its AI chips. If a single hyperscaler pulls back on spending, switches vendors, or builds more networking in-house, Arista feels the impact immediately given how concentrated its customer base remains.