Arista Networks Inc

Strong results + raised outlook (good): - Q2 revenue: just over $3.0B, +37.7% YoY, and above guidance of $2.8B. - Q2 profitability: operating income ~$1.5B (49.9% margin); net income ~$1.3B (42.9% margin). - Gross margin: 63.4% (down from 65.6% YoY, up from 62.4% QoQ). - Guidance raise (3rd time in 2026): FY2026 revenue $12.6B (~+40% growth YoY), up from prior $11.5B (May) and +~$2.1B vs $10.5B Analyst Day goal. - FY2026 product goals: Campus ≥ $1.25B, AI fabrics ≥ $3.5B. - Q3 2026 guidance: revenue ~$3.3B, gross margin ~63%, operating margin 48–49%, diluted EPS $1.06–$1.08.

Supply chain is improving materially but not “fixed” (surprising/good with a caveat): - Management repeatedly emphasized the industry still faces a multi-year supply problem; they explicitly said the industry may have a 2-year problem and they don’t expect resolution until ~2028. - Still, Arista claims meaningful progress: improved lead times/inventory management across thousands of SKUs, new supplier qualification/optionality, improved delivery terms, and capacity increases in manufacturing and distribution.

Big enabler: multiyear purchase commitments + expanded manufacturing/distribution + liquid cooling (good but risk is working capital): - Multiyear purchase commitments increased to ~$9.7B (from $8.9B end of Q1), described as key to securing components. - Manufacturing/distribution expansion: 3 contract manufacturers and 3 distribution facilities (U.S., Asia, Mexico) for geographic diversity. - Liquid cooling supply chain established (cold plates, quick disconnect, tubing capacity agreements) to support next-gen AI infrastructure. - Working capital pressure risk: inventory rose to ~$2.5B (from ~$2.4B), with DSOs ~68 days (up from 64). They warned inventories/cash timing could be elevated while component timing balances.