AI capital expenditure strong, Arista Networks (ANET.US) Q3 revenue and profits both exceed expectations.

Driven by the booming capital expenditure in artificial intelligence (AI) related sectors, Arista Networks (ANET.US) announced better-than-expected financial performance in the third quarter. However, the stock price plummeted by 10% in after-hours trading. The company's stock price has increased by nearly 40% so far this year. Arista mainly sells computer network switches for internet data center communication, with its biggest customers being Microsoft Corporation (MSFT.US) and Meta (META.US). Analysts generally expect the company's stock to be boosted this year due to customer investments in AI infrastructure. With the increasing demand for internet data centers and the growing need for network bandwidth to run AI workloads, Arista Networks has promising market prospects. In the quarter ending on September 30, the network solutions company reported an adjusted earnings per share of $0.75, higher than the market's expectation of $0.71; GAAP earnings per share were $0.67, also surpassing the expected $0.66. Quarterly total revenue reached $2.31 billion, a 27% year-on-year increase, surpassing the market's expected $2.27 billion. The adjusted gross margin reached 65.2%, 1 percentage point higher than expected. Looking ahead, the Santa Clara-based company expects fourth-quarter revenue to be between $2.3 billion and $2.4 billion, with a midpoint of $2.35 billion slightly higher than the market's expectation of $2.33 billion. The adjusted gross margin is expected to be between 62% and 63%, while the market expectation is 63.2%; the adjusted operating profit margin is expected to be 47%-48%. Arista CEO Jayshree Ullal commented in the financial report, "Our data center strategy has gained wide recognition from customers and analysts, as it provides an excellent experience from the client to the campus network, to the cloud data center, and AI infrastructure. After delivering impressive results in the third quarter of 2025, Arista has solidified its position as a strategic network provider and continues to demonstrate robust execution capabilities." At an analyst day event in September, Arista had forecasted that revenue for the fiscal year 2026 would increase by 20% to $10.5 billion, with AI network business revenue expected to grow by 70% from $1.5 billion this year, reaching around $2.75 billion in 2026.