Core Insights - Arista Networks, Inc. (ANET) reported strong fourth-quarter 2025 results, with revenues and adjusted earnings significantly increasing year over year, driven by robust demand trends and innovative product launches [1] Financial Performance - GAAP net income for the quarter rose to $955.8 million or 75 cents per share, up from $801 million or 62 cents per share in the previous year [2] - Non-GAAP net income reached a record high of $1.05 billion or 82 cents per share, compared to $849.6 million or 66 cents per share in the year-ago quarter, beating the Zacks Consensus Estimate by 7 cents [2] - For the full year 2025, GAAP earnings were $3.51 billion or $2.75 per share, an increase from $2.85 billion or $2.23 per share in 2024 [3] Revenue Growth - Quarterly revenues surged to $2.49 billion from $1.93 billion in the prior-year quarter, exceeding the consensus estimate of $2.37 billion [4] - Total revenues for 2025 increased to $9.01 billion from $7 billion in 2024, driven by strong demand across the product portfolio [4] Product and Service Performance - Net quarterly sales from products totaled $2.09 billion, up from $1.61 billion in the year-ago quarter, while service revenues increased to $392.1 million from $322.3 million [5] - The Americas contributed approximately 79% to total revenues, with international revenues making up the remainder [6] Profitability Metrics - Non-GAAP gross profit rose to $1.58 billion with respective margins of 63.4% and 64.2%, although the margin declined year over year due to a higher mix of sales to cloud and AI Titan customers [7] - Total operating expenses increased to $530.9 million from $431.4 million in the year-ago quarter, but operating income rose to $1.03 billion from $799.6 million [8] Future Outlook - For Q1 2026, management expects revenues to be approximately $2.6 billion, with a projected 25% revenue growth for 2026 [9][11] - Non-GAAP gross margin is expected to be between 62-63% and non-GAAP operating margin around 46% for Q1 2026 [11] Cash Flow and Liquidity - In 2025, Arista generated $4.37 billion of net cash from operating activities, compared to $3.71 billion in 2024 [10] - As of December 31, 2025, the company had $1.96 billion in cash and cash equivalents [10]

Economic Indicators - The U.S. consumer price index rose by 0.2 percent in January, lower than the expected 0.3 percent increase, following a 0.3 percent rise in December [2][20] - The annual growth rate of consumer prices slowed to 2.4 percent in January from 2.7 percent in December, below the anticipated 2.5 percent [2][20] - Core consumer prices, excluding food and energy, increased by 0.3 percent in January, matching expectations, while the annual growth rate dipped to 2.5 percent from 2.6 percent [3][21] Stock Market Reactions - Major U.S. stock indices experienced a sell-off, with the Nasdaq dropping 469.32 points (2.0 percent), the S&P 500 falling 108.71 points (1.6 percent), and the Dow declining 669.42 points (1.3 percent) [5] - The sell-off was partly driven by concerns regarding the impact of artificial intelligence on various industries, including financial, transportation, logistics, and commercial real estate [6][8] - Cisco Systems saw a significant drop of 12.3 percent after reporting better-than-expected fiscal second-quarter results but providing disappointing guidance for the current quarter [6] Sector Performance - The NYSE Arca Networking Index fell by 3.0 percent, influenced by Cisco's performance [7] - Gold stocks experienced substantial weakness, with the NYSE Arca Gold Bugs Index declining by 6.9 percent due to a drop in gold prices [7] - Transportation stocks also faced significant declines, with the Dow Jones Transportation Index plunging by 4.0 percent amid AI concerns [7] International Market Impact - Asian stocks followed Wall Street lower, with concerns over AI's impact on various sectors influencing investor sentiment [12] - European stocks showed mixed results, with the French CAC 40 Index down by 0.3 percent, while the U.K.'s FTSE 100 Index and the German DAX Index rose by 0.1 percent and 0.3 percent, respectively [18]

Core Viewpoint - Arista Networks' stock is experiencing gains following earnings reports that indicate the company may be managing supply-chain pressures more effectively than its competitor Cisco Systems [1] Company Summary - Arista Networks is showing resilience in supply-chain management, which is reflected in its stock performance [1] - The positive earnings report suggests a competitive advantage over Cisco Systems in handling supply-chain challenges [1] Industry Summary - The performance of Arista Networks may signal a shift in the competitive landscape within the networking industry, particularly in relation to supply-chain management [1]

Group 1: AI and Technology Sector - European stocks are opening cautiously due to skepticism about returns on AI infrastructure investments [1] - OpenAI has alerted U.S. lawmakers about Chinese startup DeepSeek using advanced techniques to replicate AI model behavior [1] - Microsoft AI head stated that most computer-based roles could be automated within 12-18 months as the company pushes for "professional-grade AGI" [2] - Cisco Systems provided a weaker-than-expected profitability forecast, indicating that higher memory-chip prices are impacting its performance [6] Group 2: Automotive and Electric Vehicle Industry - Rivian Automotive exceeded fourth-quarter expectations and aims for a significant increase in vehicle deliveries this year [3] Group 3: Economic Indicators and Market Reactions - U.S. stocks fell as concerns grew over AI's potential impact on revenues and profit margins across various sectors, including financial and commercial real estate [6] - Treasury yields reached two-month lows as first-time unemployment claims decreased less than expected and existing home sales hit a two-year low [7] - The tech-heavy Nasdaq Composite dropped by 2%, the S&P 500 fell by 1.6%, and the Dow declined by 1.3% [7] Group 4: Commodity Markets - Gold prices rose over 1% after a previous decline of 3%, influenced by diminishing hopes for Federal Reserve rate cuts [5] - Oil prices continued to decline, pressured by a bearish outlook from the International Energy Agency and prolonged diplomatic talks between the U.S. and Iran [5]

Core Insights - Arista Networks reported strong fourth-quarter results, exceeding revenue and margin targets, driven by momentum in AI-focused data center networking and an expanding campus and routing portfolio [4][6] - The company raised its fiscal 2026 growth outlook, targeting approximately 25% growth to about $11.25 billion, with expectations to double AI networking revenue from 2025 to 2026 [6][15] Financial Performance - Fourth-quarter revenue was $2.49 billion, up 28.9% year-over-year, and full-year revenue reached a record $9 billion, reflecting a 28.6% increase [3][6] - Operating income for the quarter was $1.2 billion, or 47.5% of revenue, contributing to a full-year operating income of $4.3 billion, or 48.2% of revenue [2] - Net income for the quarter was $1.05 billion, marking Arista's first quarter exceeding $1 billion in net income, with diluted EPS of $0.82 [2] Margins and Guidance - Non-GAAP gross margin for the fourth quarter was 63.4%, slightly above guidance but down from 64.2% a year earlier [3] - For fiscal 2026, the company expects non-GAAP gross margin of 62% to 64% and raised the operating margin outlook to approximately 46% [15] Customer and Revenue Mix - Arista's revenue by customer sector includes 48% from cloud and AI titans, 32% from enterprise and financials, and 20% from AI and specialty providers [9] - The company surpassed 150 million cumulative ports shipped in the fourth quarter, with international growth in Asia and Europe rising "north of 40% annually" [7] AI Networking Initiatives - Arista expects to double AI networking revenue to $3.25 billion in 2026, driven by accelerating Etherlink adoption and an imminent shift to 1.6T switching [6][11] - The company is co-designing AI rack systems and has gained over 100 cumulative customers for Etherlink [10] Supply Chain and Deferred Revenue - Executives warned of supply-chain constraints, particularly around memory, indicating a potential one-time price increase on memory-intensive SKUs [5][16] - Total deferred revenue increased to $5.4 billion, up from $4.7 billion, with volatility tied to customer-specific acceptance clauses [21][17] Capital Returns - In Q4, Arista repurchased $620.1 million of shares, totaling $1.6 billion for fiscal 2025, with $817.9 million remaining under the repurchase program [18]

Core Viewpoint - Arista Networks outperformed Cisco Systems in addressing margin concerns and shifting investor focus, resulting in a significant positive market reaction for Arista's stock while Cisco's shares declined sharply [1]. Group 1: Earnings Results - Arista's stock surged by 12% in after-hours trading following its earnings report, indicating strong investor confidence [1]. - In contrast, Cisco's shares fell by 12% during regular trading hours, reflecting negative investor sentiment towards its earnings performance [1].

Core Insights - The company achieved record revenue of $9 billion for 2025, driven by the 'Arista 2.0' strategy and strong momentum in generative AI, cloud, and enterprise sectors [1] - International growth was a significant performance driver, with both Asia and Europe experiencing annual growth rates exceeding 40% [1] - The core cloud and AI titans contributed 48% of total revenue, while the 'AI and specialty providers' segment, including major players like Apple and Oracle, grew to account for 20% of revenue [1] Strategic Developments - The company surpassed strategic milestones with $800 million allocated for campus/branch expansion and $1.5 billion for AI center networking in the fiscal year [1] - Management attributes market leadership to the differentiated EOS software stack, which facilitates high-performance switching across a range of speeds from 10G to 800G [1] - The acquisition of VeloCloud in July 2025 has been successfully integrated into a unified client-to-branch-to-campus secure networking solution [1] Market Positioning - The company is positioning itself as the 'gold standard' for terabit networks, with a focus on reducing job completion time for training and minimizing latency for inference [1]

Financial Data and Key Metrics Changes - In Q4 2025, total revenues reached $2.49 billion, reflecting a year-over-year increase of 28.9% and exceeding guidance of $2.3 billion to $2.4 billion [18] - For the fiscal year 2025, total revenue was $9 billion, with a non-GAAP gross margin of 64.6% and an operating margin of 48.2% [6][22] - Net income for Q4 was $1.05 billion, marking the first time the company surpassed $1 billion in net income for a quarter [22] - Diluted earnings per share for Q4 was $0.82, up 24.2% year-over-year, while for the fiscal year, it was $2.98, a 28.4% increase [23] Business Line Data and Key Metrics Changes - Cloud and AI titans contributed 48% to annual customer sector revenue, while enterprise and financials accounted for 32%, and AI and specialty providers contributed 20% [7] - Services and subscription software represented approximately 17.1% of revenue in Q4, down from 18.7% in Q3 [18] - The core sector revenue was driven by high-performance switching, contributing 65% of total revenue [9] Market Data and Key Metrics Changes - International revenues for Q4 were $528.3 million, or 21.2% of total revenue, up from 20.2% in the previous quarter [19] - The company reported strong growth in both Asia and Europe, with international growth exceeding 40% annually [6] Company Strategy and Development Direction - The company aims for aggressive growth in AI networking, raising its 2026 revenue guidance to $3.25 billion for AI centers and maintaining a goal of $1.25 billion for cognitive campus and branch [27] - The strategy includes expanding into new markets and enhancing product offerings, particularly in AI and cloud networking [12][14] - The company is focused on maintaining its leadership in high-performance switching and expanding its partnerships with AI and cloud titans [9][64] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 25% annual growth in 2026, despite challenges related to supply chain constraints and rising costs [17][28] - The company is optimistic about the demand for networking solutions driven by AI and cloud technologies, indicating a growing total addressable market exceeding $100 billion [17] - Management acknowledged the impact of inflation and supply chain issues on operations but emphasized a commitment to innovation and customer satisfaction [16][28] Other Important Information - The company repurchased $620.1 million of its common stock in Q4 at an average price of $127.84 per share, with a total of $1.6 billion repurchased in fiscal year 2025 [23][24] - The total deferred revenue balance increased to $5.4 billion, with product deferred revenue rising by approximately $469 million compared to the previous quarter [26] Q&A Session Summary Question: What are the factors affecting the potential new 10% customers? - Management indicated that acceptance criteria and timing are critical factors, along with demand and supply chain considerations [33] Question: What is the cautious outlook for the rest of the year? - Management clarified that visibility is affected by customer CapEx and the timing of new product shipments, particularly related to AI [41] Question: Can you quantify the revenue and gross margin impact from memory dynamics? - Management acknowledged challenges in the memory market and indicated that while they are comfortable with their guidance, there may be price increases for certain products [50][51] Question: How much of the AI revenue guidance is based on scale-up networking opportunities? - Management noted that current configurations are a mix of scale-out and scale-up, with expectations for significant growth in AI networking [58] Question: How does the company plan to participate in the build-out of model builders' infrastructure? - Management highlighted the importance of network infrastructure for model builders and indicated plans to collaborate with cloud titans [64]

Arista Networks (NYSE:ANET) Q4 2025 Earnings call February 12, 2026 04:30 PM ET Speaker14Welcome to the fourth quarter and 2025 Arista Networks financial results earnings conference call. During the call, all participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. If you need to reach an operator at any time during the conference, please press the star key followed by zero. As a reminder, this conference i ...

Market Overview - U.S. stock markets faced a significant downturn on February 12, 2026, with the Nasdaq Composite experiencing the steepest decline of about 1.7% [2]. - The S&P 500 and Dow Jones Industrial Average both fell by approximately 1.1% [2]. - The market's decline reflects a cautious sentiment among investors, who are reassessing the profitability of the AI sector [1][2]. Technology Sector Performance - The CBOE Volatility Index (VIX) increased, indicating heightened uncertainty among investors [3]. - Companies leading the AI revolution are facing scrutiny, with concerns about their immediate profitability and potential industry disruptions [4]. - AppLovin (APP) saw its stock plummet by 18.3% despite exceeding profit expectations, driven by fears that AI could disrupt its business model [5]. - Cisco Systems (CSCO) experienced an 11.6% drop in share price due to concerns over rising costs associated with the AI arms race [6]. Positive Performers - McDonald's (MCD) stock rose by approximately 2.2% after reporting stronger-than-expected quarterly profits, attributed to successful value initiatives [7]. - Walmart (WMT) shares rallied by 2.9%, indicating a consumer focus on value, which may benefit discount retailers [8]. Upcoming Economic Indicators - Investors are awaiting key economic data, including the Consumer Price Index (CPI) and employment figures, which will influence Federal Reserve decisions on interest rates [9]. - Several companies are set to release earnings reports, particularly in the technology and consumer discretionary sectors, providing insights into corporate profitability [10]. Company Earnings Reports - PG&E Corporation (PCG) reported solid financial results for 2025 and provided an updated outlook for 2026 [11]. - Brookfield Corporation (BN) announced strong earnings and a dividend increase [11]. - Entergy Corporation (ETR) released its 2025 earnings and initiated guidance for the current year [11]. - Applied Materials (AMAT) reported strong first-quarter results, citing high demand related to AI [11]. Market Outlook - The coming days will be critical in determining whether the current market downturn is a temporary pullback or the start of a sustained correction [12]. - Economic data and ongoing earnings season will be closely monitored to assess market strength [12].