# As AI Networks Scale In Three Directions, So Does Arista > Source: > Published: 2026-08-10 14:11:32+00:00 # As AI Networks Scale In Three Directions, So Does Arista Being an IT equipment supplier is a bit like having a seat on the floor of the New York Stock Exchange back in the 1980s before so much automation came in. The seats marshal their own money and that of their customers and then went out on the floor waving pieces of paper to try to buy stuff. (To be fair, they were also often trying to sell stuff, which no IT supplier is trying to do with any component contracts, although that would be an interesting way for them to make money, too.) With companies like Arista Networks, they build up a revenue backlog, and customers pay some of that backlog up front, giving the company greater visibility into the future so they can better plan their component supply chain and their factory operations, and then they start waving big piles of money around to get as much wafer, packaging, memory, and other components to meet that demand. It’s not a mystery. If they pay more for the components, and they pay more, they get more. It is a constant state of negotiation, with great intensity among the most voracious users of chippery in the world. There must be a lot of Maalox being guzzled on a daily basis. Those who do well at this game can grow their revenues, and Arista Networks has learned to play this game, and thus it is growing smartly and can even raise its guidance by $1.1 billion for 2026. There is a chance that Arista Networks can beat this number by a little bit and is saving some upside that is a little fuzzy today that will crystalize later for dramatic effect. In the second quarter ended in June, product revenues rose by 38.8 percent to $2.61 billion, with growth pretty much across all product lines and segment categories. Services revenues, thanks to the adoption of its EOS network operating system as well as its CloudVision data tracking, LANZ latency analyzer, Path Tracer link anaylzer, DANZ Monitoring Fabric packet broker, and Connectivity Monitor jitter and packet loss tools, the services and subscription part of the business is keeping pace. (We presume, because Arista Networks does not break this composite number out anymore.) In any event, services revenues alone were up 31.3 percent to $430.5 million. Our best guess is that Arista Networks had $137.2 million in software subscriptions, up 4.3X year on year, and that software and subscriptions together hit $567.7 million, up 58 percent. There may be some “blue box” deals where hyperscalers and cloud builders buy Arista Networks gear and put their own network operating systems and monitoring and traffic shaping tools on the boxes, but the neoclouds, sovereigns, AI model builders, and large enterprises that are also driving AI cannot afford to create this stuff for themselves, so they just buy it along with their switches. They really have no choice, other than to grab SONiC and a bunch of open source tools, and that is not a lot of fun. Add it all up, and revenues for the company rose by 37.7 percent to $3.04 billion, which was 12.1 percent sequential growth from Q1 2026 and which also is the first time that the company broke through $3 billion in sales in a quarter. Operating income was up 39.7 percent to $1.38 billion and net income rose by 36.5 percent to $1.21 billion and represented a very healthy 40 percent of revenues. Equally important to revenue and profit growth is cash and equivalents, which provides comfort and maneuvering room in a tight supply chain world as well as the chance for Arista Networks to make tactical and strategic acquisitions should they arise. Arista Networks had $13.34 billion in cash and equivalents as the June quartered ended, up 50.9 percent from a year ago. The company had $6.87 billion in deferred revenues, up 69 percent, and had $9.7 billion in customer purchase commitments, up 2.7X year on year. In the call going over the financial results with Wall Street analysts, the company showed this interesting chart that shows it has seen this deferred revenue movie before: This AI spike here in the 2020s is obviously much larger than the cloud spike a decade ago. Let’s drill down into the groups at Arista Networks. Here is our table characterizing this over time: And here is a chart for those of you who think in pretty pictures: I like both, as you have no doubt surmised a long time ago. . . . There is plenty of witchcraft in these numbers, and our estimates are shown in bold red italics as usual. Arista Networks has boosted its forecast for AI back end and front end networks by $100 million for all of 2026, to $3.6 billion, which would represent around 2.1X growth year on year. The campus group is still expected to do around $1.25 billion in sales this year, which would represent 53.4 percent growth in our model. And the overall revenues for the company has been boosted by $1.1 billion to $12.6 billion for the full year. That would represent a 44 percent growth for all of Arista Networks compared to 2025 sales. By the way, scale across networks are including in that AI back end/front end category. And Jayshree Ullal, chief executive officer at the company, gave a little color on that, saying that scale across networks – those networks that link datacenters and regions together – would represent about 30 percent of revenues in this category in 2026, or $1.08 billion, with scale up networks – those linking the memories of GPUs and XPUs inside a node or rackscale system into a coherent whole – and scale out networks – those that more loosely couple multiple nodes or rackscale systems together to share work – would represent the remaining 70 percent, or $2.52 billion. Ullal added that the scale across market in 2026 represents maybe a $3 billion opportunity for the switch gear and another $1 billion for the optics, which implies that Arista Networks has pretty high market share at around a little more than a third of this emerging space – as I expect given its share of overall datacenter networking. She also said that looking out into 2030, scale across switching would be around a $15 billion opportunity, with another $5 billion for related optics added on top of that. Scale up is another big opportunity where we expect Arista Networks to do well, particularly in switches using [Broadcom’s Tomahawk 6 Ultra switch ASIC](https://www.nextplatform.com/connect/2025/07/17/broadcom-tries-to-kill-infiniband-and-nvswitch-with-one-ethernet-stone/1632256). But that market can only grow as fast as people stop using Nvidia’s NVLink and NVSwitch scale up networking and use other XPUs or compel Nvidia to adopt a cheaper and more standardized approach. (Both are likely until Nvidia ends up with maybe 65 percent of the market instead of damned near 100 percent.) Here is how Ullal cased the situation with scale up: “Where it's non-Nvidia, Arista will be excited and will be working more closely both in the scale up and scale out – in some cases to build custom racks with their custom processors so that we can better tune our network with the behavior for their inference or training engine. In the Nvidia cases, it's going to take a bit longer. I feel a little bit like two or three years ago we were talking about InfiniBand and now we don't mention InfiniBand. But it took two or three years to move to Ethernet. So it will take time to go from a proprietary scale-up that's been around a long time with NVLink to these other alternatives, even if Ethernet is really good. But I expect us to do much better there.” Finally, as you know, *The Next Platform* cares about the datacenter businesses of IT suppliers, and so here is a chart that estimates the datacenter revenues and operating profits at Arista Networks: In my model, the datacenter business in aggregate had $2.82 billion in sales, up 37.7 percent, with operating profit of $1.28 billion, up 39.7 percent. That operating income is a very healthy 45.4 percent of revenues.