Arista Networks owes suppliers $11.4 billion, 62% of 2027 revenue; gross margin must hold 63% on Feb. 12
Demand was settled by a record quarter. The filing behind it shows who pays for the parts: Arista pre-buys the silicon, two buyers who took 42% of 2025 revenue decide whether it ships, and gross margin is already giving ground.
Vincent Jiangthree-minute read
The fine print holds the real number
A day after the earnings call on which chief financial officer Chantelle Breithaupt reported "record high revenue growth since our IPO at 58.5%," Arista Networks−0.30% — Arista Networks, down 0.30 percent as of its last quote filed its 10-Q, the quarterly report owed to the Securities and Exchange Commission 1. Note 4 holds the number that matters: $11.4 billion of non-cancellable purchase commitments to suppliers, with $9.3 billion due within 12 months, up from $9.7 billion in June 12.
Inventory ended the quarter at $3.2 billion, up from $2.5 billion in June 1. The commitments alone equal about 62% of the roughly $18.5 billion of 2027 revenue chief executive Jayshree Ullal has guided to, for a year in which she expects AI fabric sales to roughly double, to about $7 billion 1. Breithaupt says the money goes mostly to chips for new products and AI deployments 1.
The print itself was covered here on November 4 link 3. New since are the filing's parts bill, and the Form 4, the insider-trade filing, showing co-founder Andreas Bechtolsheim sold 260,000 shares, about $43 million 3.
Commitments and inventory together rose $2.4 billion in one quarter
Arista is buying its 2027 revenue before it has sold it
- Purchase commitments
- Inventory
Data
| Purchase commitments | Inventory | |
|---|---|---|
| Q2 2026 | $9.7B | $2.5B |
| Q3 2026 | $11.4B | $3.2B |
Two buyers decide whether it ships
Arista can afford the bet: about $14.4 billion of cash and securities, on a balance sheet Ullal describes as carrying "0 debt" 1. The exposure is the customer list. Two end buyers took 26% and 16% of 2025 revenue 2, the pair Ullal calls "our dearest ones are M&M," Microsoft−1.89% — Microsoft, down 1.89 percent today and Meta+0.39% — Meta, up 0.39 percent today, 42% between them 15.
The filing warns their AI buildouts have "at times come in conjunction with a reduction" in previously planned purchases 2. The racks are contested, too. IDC's tracker put Nvidia's second-quarter Ethernet switch revenue at $3.86 billion, up 2.8 times in a year, against Arista's $2.53 billion, up 37.6% 6.
Nvidia now out-sells Arista in Ethernet switching
Nvidia's $3.9B grew 2.8x in a year; Arista's $2.5B grew 37.6%
Data
| Value | |
|---|---|
| Cisco | $5.43B |
| Nvidia | $3.86B |
| Arista | $2.53B |
| Huawei | $1.55B |
| HPE | $1.15B |
The margin pays for the slot
Gross margin was 64.0% in the quarter, down from 65.2% a year earlier, with the fourth quarter guided to 63% to 64% and 2027 to 62% to 64% 1. The filing names the cause: "the tightening of supply conditions in the memory and silicon markets" has "continued to put pressure on our gross margin" 2.
Gross margin has not held 64% for four straight quarters
Data
| Gross margin | |
|---|---|
| Q2 '24 | 64.9% |
| Q3 '24 | 64.2% |
| Q4 '24 | 63.8% |
| Q1 '25 | 63.7% |
| Q2 '25 | 65.2% |
| Q3 '25 | 64.6% |
| Q4 '25 | 62.9% |
| Q1 '26 | 61.9% |
| Q2 '26 | 62.9% |
| Q3 '26 | 63.6% |
A founder sold into the slide
The market swung both ways around the story. A broad AI hardware selloff left the stock 21% below its record even after Friday's 7% bounce to $171 4. On November 5, inside that slide, Bechtolsheim sold at a weighted average of $165.45 under a trading plan adopted on February 20; his family trust still holds 180 million shares, about 14% of those outstanding 32. Monday brought the other leg: the stock closed up 9.2% at $186.54 after five banks raised their targets, UBS to $291 7.
February 12 prices the parts
The fourth-quarter report, due February 12, carries the test: guided revenue of $3.9 to $4.0 billion 14. At about 30 times forward earnings, below its five-year average near 36 times, the market is not paying for the 2027 growth plan 4. The tell is one line of the income statement.
Gross margin at 63% or better is the parts converting into shipped revenue: the guide holds, consensus estimates about $2 billion below it climb 5, and a holder stands pat. Below 63%, with Nvidia−5.37% — Nvidia, down 5.37 percent today growing several times faster on the same racks 6, Arista is financing a rival's share of the fabric with its own balance sheet 2.
Get Data Center by email, free
Who is building AI's data centers, and who is paying for them. In our daily email, every weekday.
