Arista Networks Inc Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tal Liani - BofA Securities Inc - Analyst : I want to ask about the sequential or the guidance, and it's a more fundamental question, but I'll back it up with numbers. If you look at last year, the growth was very consistent kind of the last three quarters of the year, the sequential growth rate is between 6.5%, 7.5%. When you look at this year, you started with 10% growth in and it goes to 5% and now only 1.6%. So there is a deceleration. And the question is, what is the underlying what are the underlying drivers for the deceleration? What do we need to take for it for next year? What does it mean? And should we be concerned about the growth going forward?

Question: Aaron Rakers - Wells Fargo Securities LLC - Analyst : I'll stick to kind of the model as well. I'm curious when I look at the gross margin guidance for this quarter, I think it was 62% to 63%. I guess if we were to assume that your services gross margin stays consistent, at 81%, 82%. It would seem to imply that product gross margin falls below 60%. So I guess the question is, can you unpack the gross margin drivers in this quarter in terms of the guidance? How much is tariff weighted? Or is there other dynamics to consider? And does that change kind of the expectation as we look forward?

Question: Michael Ng - Goldman Sachs Group Inc - Analyst : Thank you for the question. I was wondering if you could just talk about Arista's positioning as we move into more full rack solutions. Is this going to be more of a partnership model? How do you think about addressing this, I say, growing convergence between compute and networking?

Question: Atif Malik - Citigroup Inc - Analyst : Jayshree, in your prepared remarks, you mentioned large language model providers like OpenAI and topic, and they have announced partnerships with your cloud tighten. Can you share with us who is driving the decision-making on networking hardware on these announcements? And just your commentary on your share being stable within the circle of your Titan? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 04, 2025 / 9:30PM, ANET.N - Q3 2025 Arista Networks Inc Earnings Call

Question: Samik Chatterjee - JPMorgan Chase & Co - Analyst : Jayshree, maybe just going back to your earlier response to another query, you mentioned some variability in shipments at a customer level, maybe driving some of the lumpiness quarter to quarter. Just curious if you had talked about previously the Tier 1 customers you're engaged with progressing to their cluster sizes, 100,000 and more. Like how -- has there been any change relative to those plants that are driving the duration here in terms of the fourth quarter guide? Or what is sort of behind the variability that you're seeing in terms of shipment? Is it supply driven at all? Any color on that front?

Question: David Vogt - UBS AG - Analyst : I'm going to ask this question at the risk of Jayshree yelling at me. When we think about your '26 outlook that you just raised, which we didn't expect you to raise this early in the cycle, if I just take what you're doing with regards to the AI-centric opportunity, Campus and Bello, it doesn't leave a lot of room for growth in the core business outside of AI and campus. Maybe can you speak to what you're seeing in that particular market and how we should think about that progressing through 2026?

Question: Meta Marshall - Morgan Stanley & Co Ltd - Analyst : Great. Maybe a question for you, Jayshree. Just on I know you guys aren't breaking out the front end and back end anymore. But just as more inference kind of use cases are getting built out, just what are you seeing in terms of just like how the front-end network upgrades are happening maybe versus where your expectations were a year ago?

Question: Simon Leopold - Raymond James & Associates Inc - Analyst : I wanted to come back to the topic around the blue box, which you've talked about quite a bit at the analyst meeting. So I appreciate it's not new. But what I don't quite think I understand how it may be evolving or changing in that it sounds like there's a broader base of customers that may be employing it and that this is a factor that's in your 2026 margin guidance. Could you elaborate on what you're assuming Blue Box trends are in 2026?

Question: James Fish - Piper Sandler & Co - Analyst : Just on that topic of Blue Box tracking way maybe not just 2026, but what do you see in terms of the mix regarding the adoption curve as to what percentage of the business could actually represent over not just next year but three, five years from now? And you guys mentioned the convergence of end and back end. Does that take away from kind of your advantage of where you sit today, though, if that mine starts to blur a little more and allows competition to enter?

Question: Antoine Chkaiban - New Street Research LLP - Analyst : I'd like to ask about the UHC. So can you maybe tell us about the progress that the consortium is making, whether the different voices are aligned and what milestones investors should be looking out for going forward?

Question: Antoine Chkaiban - New Street Research LLP - Analyst : I'm asking about the Ultra Ethernet consortium. Maybe can you tell us about the progress that the consortium has?

Question: George Notter - Wolfe Research LLC - Analyst : I think in the monologue, you mentioned Neo Cloud is an area where you're getting more momentum. I think you guys actually said at the Analyst Day as well. I'm just curious like what are you seeing with that customer set? I guess from my perspective, I've historically cut out of that customer as being more focused on the bundle, which isn't necessarily your game, but it sounds like you're maybe talking a bit more positively. I'm just wondering what you're seeing in that space.

Question: Jeff Hobson - Needham & Company LLC - Analyst : This is Jeff Hobson on for Ryan Koontz. We've seen a lot of the deals with the hyperscalers or the AI model companies with new data center buildouts, probably not a level since we've seen with the cloud buildout. So I was just curious, is there a way to think about Arista's opportunity with new network builds versus refreshing or upgrading existing networks? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 04, 2025 / 9:30PM, ANET.N - Q3 2025 Arista Networks Inc Earnings Call

Question: Ben Bollin - Cleveland Research Co LLC - Analyst : Jayshree, you talked a little bit about some of the tightening lead time conditions out there. Curious what you're seeing from these cloud customers around engineering and delivery lead times, how that has evolved? And changes you're seeing on your confidence in delivering their needs whatever, in the next 12, 18 months. That's it.