Arista Rides AI Scale Out Networks, Moves Into Scale Across, And Awaits Scale Up

Arista Networks raised its 2026 revenue guidance from $11.25 billion to $11.5 billion and its AI-related networking forecast from $3.25 billion to $3.5 billion, driven by growing demand for scale-out Ethernet fabrics and new scale-across AI networking products. The company expects AI networking to eclipse its core datacenter business as soon as this year if component supply improves, with scale-up networking using the ESUN protocol becoming material in 2027 and 2028. CEO Jayshree Ullal said scale-across networking will eventually account for at least a third of Arista’s AI sales, though supply constraints continue to limit near-term growth.

connect Arista Rides AI Scale Out Networks, Moves Into Scale Across, And Awaits Scale Up Like so many other IT suppliers to the tech titans, it will not be long before AI networking will be the largest part of the business at Arista Networks. In fact, if the company can get more supplies of switch ASICs and other components, it could happen this year. If not, the cross over with the core datacenter networking business that has defined the company in its first decade and a half will be eclipsed by AI networking for scale up, scale out, and scale across fabrics in 2027 for sure. Given the shortages in the IT industry for all kinds of components, Arista has visibility into its hyperscaler and cloud builder customers, and not because these customers are generous with their capacity planning, but because if they aren’t honest about what they need a year early, Arista can’t get the components scheduled and the gear built. We don’t know what the supply constraints are for the Arista products, but we do think it is telling that Arista raised its guidance for 2026 from $11.25 billion to $11.5 billion and its for AI-related networking from $3.25 billion to $3.5 billion when talking about its first quarter results ended in March. That is another way of saying that the rest of the business is stuck in the mud. Which is why Wall Street was not happy with Arista when the numbers came out. To get a better picture of where Arista is going and where it has been, we put together this summary by product category a few quarters ago, and we have updated it with the most recent guidance: And here is the raw data behind that chart: Here’s the thing, though. Arista has actually turned in good numbers, and it is positioned to benefit mightily from the GenAI boom, particularly as it moves from supplying scale out Ethernet fabrics to supporting the ESUN scale up protocol on switches beginning in 2027 as well as scale across Ethernet fabrics that glue datacenters together for very large scale AI systems, which the company can sell now. Jayshree Ullal, Arista’s chief executive officer, explained that opportunity on the call with Wall Street analysts thus: “The advent of ESUN, Ethernet for Scale-Up Networking, specifications allows for increasing or decreasing computing power in a flexible manner with Ethernet to automatically adapt to workload demands. Scale up will be a new entry for Arista in 2027 and beyond, where we will be working closely with our customers to build AI racks with very fast interconnects for co-packaged copper, CPC, or open co-packaged optics, CPO, as well as supporting collectives and memory acceleration.” “Scale-out or horizontal scaling involves adding more machines to a leaf/spine fabric, moving workloads across multiple servers or nodes or even connecting other elements like storage or CPUs. As you scale out massive datasets, bottlenecks can be resolved with collective and protocol acceleration at L2, L3, and cluster load balancing, all at wire rate. The system must deliver consistent performance without degradation as more nodes participate. Arista is a shining example here with greater than a hundred cumulative customers to date in 800 Gb/sec Ethernet deployments, and we expect the addition of 1.6 Tb/sec in 2027 at production scale.” As for scale up and scale across network sales, Ullal did not make any specific predictions, but she did say that in the mid-term, scale across would drive at least a third of the company’s AI sales to two thirds for normal scale across Ethernet networking. She offered no guidance on ESUN scale up switch sales on top of that, and said that was really going to not be material until 2027 and into 2028. Ullal did say that the majority of customers getting ready for early trials are waiting for 1.6 Tb/sec ports, but a few customers are experimenting with ESUN atop 800 Gb/sec gear. As for the supply chain issue that is governing Arista’s sales to a large extent, Ullal said that it started out with a DRAM problem that might be a few quarters, and now it is a wafer and package fabrication problem that is affecting the whole chip industry and it may take one or two years to normalize. Hence the rise in purchase commitments at Arista, which we presume customers are prepaying with deferred revenues, also double compared to this time last year, to help cover those costs and lock in prices now as best can be done. In the March quarter, Arista had $2.31 billion in product revenues, up 36.6 percent year on year and up 10.3 percent sequentially. That is a pretty good first quarter for any IT supplier in terms of growth. Services revenues rose by 27.3 percent to $397.7 million, up a smidgen sequentially. Add them up and Arista had $2.71 billion in revenues, up 35.1 percent year on year and up 8.9 percent from Q4 2025. Operating income was $1.16 billion up 34.8 percent and net income was $1.02 billion up 25.7 percent, and representing 37.8 percent of revenues. Arista ended the March quarter with $12.35 billion in cash and equivalents, up by 51.6 percent since last year and giving it huge latitude in what it does and does not do. Including prepaying for components to make sure it has a fair share of supply. My model suggests that Arista had $2.52 billion in datacenter revenues in Q1 2026, up 32.3 percent, with operating income of $1.08 billion, up 32 percent. It is hard to find a company that is expanding into new markets and yet keeping an even keel and does it as well as Arista does.