Key Stats
- Current Price: $170 (May 5, 2026)
- Q1 2026 Revenue: $2.71B, up 35% YoY
- Q1 2026 Non-GAAP EPS: $0.87, up 34% YoY
- Full-Year 2026 Revenue Guidance: ~$11.5B (28% growth)
- Q2 2026 Revenue Guidance: ~$2.8B
- Q2 2026 Non-GAAP EPS Guidance: ~$0.88
- TIKR Model Price Target: $350
- Implied Upside: ~105%
Arista Networks Stock Posts a 35% Revenue Beat as AI Demand Outpaces Supply
Arista Networks stock (ANET) opened its fiscal 2026 with $2.71B in Q1 revenue, a 35% YoY gain that came in above management’s own $2.6B guidance midpoint.
Non-GAAP EPS reached $0.87, up 34% from $0.65 in the prior-year quarter and ahead of the $0.82 Arista posted in Q4 2025.
AI and specialty cloud providers led demand in the quarter, with CEO Jayshree Ullal noting on the Q1 2026 earnings call that the company’s demand environment is “the best I’ve ever seen in my Arista tenure.”
Arista now claims the number-one market share position in high-speed switching for the greater than 10 gigabit Ethernet category, having overtaken multiple incumbent vendors over the course of 2025, according to Ullal.
The enterprise segment delivered strong results across both data center and campus, with the recently acquired VeloCloud integrating into the branch and campus strategy through managed service provider channels.
Operating cash flow for the quarter reached $1.69B, described by CFO Chantelle Breithaupt as the strongest in Arista’s history, driven by earnings performance and a rise in deferred revenue.
Arista raised its full-year 2026 revenue forecast to approximately $11.5B, implying 27.7% growth, up from a prior target that started the year at roughly 20% growth before two successive increases.
The company also raised its AI fabric revenue target to $3.5B for 2026, up from $3.25B, representing more than a doubling of AI-related sales YoY, according to Breithaupt.
Supply chain constraints are the primary operational risk: Ullal called the shortage a “1 to 2 year” issue spanning wafers, silicon, CPUs, optics, and memory, with 52-week component lead times now standard and purchase commitments rising to $8.9B from $6.8B in Q4.
For Q2 2026, guidance calls for approximately $2.8B in revenue, gross margin between 62% and 63%, and non-GAAP EPS of approximately $0.88.
Arista Networks Stock and the Financials Behind the Beat
The Q1 2026 income statement shows a business generating strong operating leverage while absorbing deliberate margin trade-offs to secure supply continuity.
Revenue has accelerated steadily from $1.57B in Q1 2024 to $2.71B in Q1 2026, with YoY growth climbing from 16% in Q1 2024 to 35% in the most recent quarter, the fastest pace across the eight quarters visible in the screenshot.
Gross margin came in at 62.4%, within the full-year guidance range of 62% to 64% but down from 65.2% in Q2 2025, reflecting a mix shift toward larger cloud and AI customers who carry lower gross margin accretion, as Breithaupt confirmed on the call.
The income statement shows gross margin has moved in a narrow band across eight quarters, ranging from 62.9% in Q4 2025 to a high of 65.2% in Q2 2025, with no sustained compression trend despite rising input costs.
Operating income reached $1.29B in Q1 2026, up from $860M in Q1 2025 and $1.03B in Q4 2025, reflecting strong revenue scaling against a relatively flat operating expense base.
Operating margin held at approximately 48% in Q1 2026, consistent with the 42% to 45% range seen through 2024 before Arista’s operating leverage accelerated as revenue crossed the $2B quarterly threshold in early 2025.
Total operating expenses of $397M were essentially flat sequentially from $397M in Q4 2025, even as revenue grew $221M in the same period, the clearest signal of the operating model’s efficiency.
Management reiterated a full-year operating margin target of approximately 46%, signaling some expected compression from Q1’s 48% level as mix and supply costs evolve through the second half.
What Does the Valuation Model Say?
The TIKR model prices Arista Networks stock at $350, implying approximately 105% upside from the current price of $170 over a ~5-year horizon, with a mid-case annualized return of near 17%.
The mid-case model assumes a revenue CAGR of near 18% and a net income margin of approximately 40%, both conservative relative to Arista’s trailing one-year net income margin of 42% and the ~29% one-year revenue growth rate the company just reported.
Q1’s $2.71B print and the guidance raise to $11.5B for 2026 put the base case for this fiscal year firmly on track with the model’s assumptions, reducing near-term downside risk in the valuation.
The primary risk to the model is the supply constraint: if Arista cannot ship to demand in 2026 and 2027, revenue could undershoot the model’s CAGR, compressing the upside scenario regardless of underlying demand strength.
At current prices, the TIKR model suggests Arista Networks stock is materially undervalued, and this quarter’s results reinforce rather than challenge that view.
Supply is now the binding constraint for ANET stock: Arista has more demand than it can ship, and the investment outcome over the next two years depends heavily on how quickly the component shortage eases.
What Has to Go Right
- Arista ships to its $11.5B full-year revenue target, requiring roughly $2.8B per quarter for the remainder of 2026, a figure already set as Q2 guidance
- The $8.9B in purchase commitments translates into delivered product, unlocking the $6.2B deferred revenue balance as customer acceptance clauses clear
- AI fabric revenue reaches $3.5B in 2026 as scale-out and scale-across deployments accelerate, with at least one new customer crossing the 10% revenue threshold
- Gross margin recovers toward the upper end of the 62% to 64% guidance range in H2 2026 as enterprise mix improves and supply costs stabilize
What Could Still Go Wrong
- Component lead times remain at 52 weeks or longer through 2027, capping shipable revenue below stated demand and forcing additional guidance conservatism
- Gross margin stays compressed at the low end of the 62% to 64% band as Arista continues paying premium prices to secure supply, sacrificing incremental profitability to protect customer relationships
- Deferred revenue of $6.2B grows further without recognition, creating a perception gap between booked demand and reported revenue that weighs on the multiple
- Scale-up Ethernet networking, targeted for meaningful contribution in 2027, faces delays if ESUN specifications or liquid-cooling qualification cycles extend beyond current timelines
Should You Invest in Arista Networks, Inc.?
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