Fueled by robust capital expenditure in artificial intelligence (AI), Arista Networks (ANET.US) reported better-than-expected financial results for the third quarter. However, its shares plunged 10% in after-hours trading. Year-to-date, the stock has gained nearly 40%.

Arista primarily sells computer networking switches for internet data center communications, with Microsoft (MSFT.US) and Meta (META.US) as its largest customers. Analysts widely anticipate the company’s stock to benefit this year due to increased customer investments in AI infrastructure. Growing demand for internet data centers and higher network bandwidth requirements for AI workloads further brighten Arista’s market outlook.

For the quarter ended September 30, the networking solutions provider reported adjusted earnings per share (EPS) of $0.75, surpassing the consensus estimate of $0.71. GAAP EPS stood at $0.67, also beating expectations of $0.66. Total revenue rose 27% year-over-year to $2.31 billion, exceeding the forecasted $2.27 billion. Adjusted gross margin reached 65.2%, 1 percentage point above estimates.

Looking ahead, the Santa Clara-based company projected Q4 revenue between $2.3 billion and $2.4 billion, with the midpoint of $2.35 billion slightly higher than the consensus estimate of $2.33 billion. Adjusted gross margin is expected to range from 62% to 63%, compared to market expectations of 63.2%, while adjusted operating margin is forecast at 47%–48%.

Arista CEO Jayshree Ullal stated in the earnings release, "Our data center strategy has gained broad recognition from customers and analysts for delivering superior experiences—from client to campus, cloud data centers, and AI infrastructure. Following another strong performance in Q3 2025, Arista has solidified its position as a strategic networking provider while demonstrating consistent execution."

During its September Analyst Day, Arista projected fiscal 2026 revenue growth of 20% to $10.5 billion, with AI networking revenue expected to surge 70% from this year’s $1.5 billion to approximately $2.75 billion by 2026.