Arista Networks (ANET.US) reported Q1 revenue above expectations, with gross margins slightly lower than expected, causing the stock to drop over 10% after hours.

"Data-driven, from client to cloud" leading enterprise in the network industry, Arista Networks (ANET.US) announced its financial performance for the first quarter ending March 31, 2026. The company's first quarter revenue reached $2.709 billion, an increase of 8.9% quarter-on-quarter and a significant 35.1% year-on-year growth, exceeding the market's average expectation of $2.62 billion. GAAP diluted earnings per share were $0.80, while non-GAAP diluted earnings were $0.87, both surpassing the market's average expectation. In the same period last year, they were $0.64 and $0.661, respectively. The company's adjusted operating margin was 47.8%, higher than the expected 46.4%. However, the adjusted gross profit margin was 62.4%, slightly lower than the market's general expectation of 62.7%. Arista Chairman and CEO Jayshree Ullal said, "Arista had a strong start in 2026, with excellent performance and industry-leading Net Promoter Scores (NPS). We uniquely captured the critical convergence opportunity from secure client, to campus, to cloud, and AI networks." Arista CFO Chantelle Breithaupt commented, "We are proud of the strong start to fiscal year 2026. Despite the macro and supply chain uncertainties, our performance demonstrates the team's rigorous execution. Achieving a 35% revenue growth while delivering a non-GAAP EPS of $0.87 demonstrates our ability to drive high-quality growth while also focusing on profitability." In terms of company updates, this quarter saw the release of the XPO high-density liquid-cooled pluggable optical module, designed for the next generation AI data centers. Compared to traditional pluggable optical modules, XPO can reduce up to 75% of network racks, save 44% of floor space, support shorter copper cables and RF low-power AI lateral expansion interconnect technology. The NPS score for 2026 reached a high of 89, with the updated Net Promoter Score showing that 94% of customers hold a very positive attitude towards the company. This industry-leading indicator highlights the company's focus on driving customer success and satisfaction. Furthermore, the company empowered AI centers with AI Spine. Arista launched the universal AI Spine based on the 7800 chip, offering large-scale expansion, predictable performance, and high-speed interface support. Powerful features like virtual output queues (VOQ) eliminate head-of-line blocking, while large buffers can absorb AI microburst traffic and prevent PFC storms. In terms of financial outlook, for the second quarter of 2026, the company expects revenue of approximately $2.8 billion; non-GAAP operating margin between 46% and 47%; and non-GAAP diluted earnings per share of approximately $0.88. At the time of writing, the stock plunged 11.62% after hours.