Why Is Arista Networks (ANET) Down 9% Since Last Earnings Report?

Core Viewpoint - Arista Networks reported strong Q3 2025 earnings, with significant year-over-year revenue and earnings growth, driven by robust demand and innovative product launches [2][3][4]. Financial Performance - GAAP net income increased to $853 million (67 cents per share) from $748 million (58 cents per share) year-over-year, while non-GAAP net income rose to $962.3 million (75 cents per share) from $769 million (60 cents per share) [3]. - Revenues surged to $2.31 billion from $1.81 billion in the prior-year quarter, exceeding the consensus estimate of $2.24 billion [4]. - Product sales totaled $1.91 billion, up from $1.52 billion, and service revenues increased to $396.6 million from $287.1 million [5]. Market Position - Approximately 80% of total revenues came from the Americas, with the remainder from international markets, highlighting Arista's strong leadership in the Data Center and Cloud Networking sectors [6]. Profitability Metrics - Non-GAAP gross profit rose to $1.51 billion, with margins improving to 65.2% from 64.6% due to better inventory management and supply-chain discipline [7]. - Operating income for the quarter was $978.2 million, up from $785.3 million, with total operating expenses increasing to $512 million from $376.4 million [8]. Cash Flow and Liquidity - In the first nine months of 2025, Arista generated $3.11 billion in net cash from operating activities, compared to $2.68 billion in the previous year [9]. - As of September 30, 2025, the company had $2.33 billion in cash and cash equivalents, with $1.4 billion available for share repurchase under its buyback program [9]. Future Outlook - For Q4 2025, management expects revenues between $2.3 billion and $2.4 billion, with a full-year revenue growth projection of 26%-27% to approximately $8.87 billion [10]. - Revenue for 2026 is anticipated to reach roughly $10.65 billion, reflecting a 20% year-over-year increase [10]. Analyst Sentiment - Recent estimates for Arista Networks have trended upward, indicating positive sentiment among analysts [11][13]. - The company holds a Zacks Rank 3 (Hold), suggesting an expectation of in-line returns in the coming months [12][13].