What changed in Arista Networks,'s 10-Q for the quarter ended March 31, 2026

No corresponding language in the FY2025 10-Q.

No corresponding language in the FY2025 10-Q.

No corresponding language in the FY2025 10-Q.

No corresponding language in the FY2025 10-Q.

No corresponding language in the FY2025 10-Q.

Arista Networks is an industry leader in data-driven, client to cloud networking for large AI, data center, campus and routing environments. Arista's platforms deliver availability, agility, automation, analytics and security through an advanced network operating stack. Since Arista's inception, our founders have reimagined cloud networks for performance, scale and programmability with a focus on differentiating in three ways: uncompromising reliability built on the foundation of robust quality assurance capabilities with a suite of automated diagnostics, advanced open and standards-based technology and intelligent automation to decrease the manual workload on the operator. At the core of Arista's platform is Arista EOS, a modernized publish-subscribe state-sharing networking operating system. Arista EOS, combined with a set of network [removed] applications and our Ethernet switching and routing platforms using best of breed merchant silicon, provides customers with a highly competitive and diversified portfolio of products with improved price/performance and time to market.

[removed] We believe that cloud computing represents a fundamental shift from traditional legacy network architectures. As organizations of all sizes have moved workloads to the cloud, spending on cloud and next-generation data centers has increased rapidly, while traditional legacy IT spending has grown at a slower rate. Our cloud networking platforms are well positioned to address the growing cloud networking market, and to address increasing performance requirements driven by the growing number of connected devices, as well as the need for constant connectivity and access to data and applications.

[removed] The expansion of generative AI computing and distributed applications is further pushing the boundary of predictable scale and performance in the network. A common characteristic of these AI workloads is that they are both data and compute intensive. A typical AI workload involves large sparse matrix computations, distributed across hundreds or thousands of processors (CPU, GPU, TPU, etc.) with intense computations for a period of time and requires a high-bandwidth, scalable, lossless network in order to service these workloads. With the exponential growth of AI applications, the need for standardized transport like Ethernet becomes paramount, enabling a power-efficient interconnect while overcoming the complexities of traditional approaches. Our AI strategy is based on achieving two key objectives: (1) deliver network switching products intended to provide a robust interconnect that seamlessly links GPUs, compute and storage to deliver fast job completion time for training and generative AI workloads; and (2) offer customers the Arista Autonomous Virtual Assist ("AVATM") which uses natural processing language to provide AI-assisted outcomes for network operations, security and observability.

Our cash, cash equivalents and marketable securities are held for general business purposes, including the funding of working capital. Our marketable securities investment portfolio is primarily invested in highly-rated securities, with the primary objective of minimizing the potential risk of principal loss. We plan to continue to invest for long-term growth. We believe that our existing balances of cash, cash equivalents and marketable securities, together with cash generated from operations, will be sufficient to meet our working capital requirements and our growth strategies for at least the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our spending to support research and development activities, the timing and cost of establishing additional sales and marketing capabilities, the introduction of new and enhanced product and service offerings, our costs associated with supply chain activities, including access to outsourced manufacturing, our costs related to investing in or acquiring complementary or strategic businesses and technologies, the continued market acceptance of our products, stock repurchases, and capital expenditures, including the planned construction of a building for office, lab and data center space. In addition, we expect that our inventory and purchase commitments will remain volatile as we ramp new product introductions. In particular, we have increased our purchase commitments to respond to the rapid deployment of AI networks and reduce overall lead times which may increase our working capital requirements. [removed] If we require or elect to seek additional capital through debt or equity financing in the future, we may not be able to raise capital on terms acceptable to us or at all. If we are required and unable to raise additional capital when desired, our business, operating results and financial condition may be adversely affected.

From time to time, we repurchase shares of our common stock pursuant to repurchase programs that are funded from working capital. Our current repurchase program (the "Existing Repurchase Program") allows for stock repurchases of up to $1.2 billion through May 2027. In May 2025, our board of directors authorized and announced a new $1.5 billion stock repurchase program (the "New Repurchase Program" and together with the Existing Repurchase Program, the "Repurchase Programs"). The Repurchase Programs do not obligate us to acquire any of our common stock and may be suspended or discontinued by the Company at any time without prior notice. During the three months ended March 31, 2025, we repurchased a total of $787.1 million of our common stock under our Existing Repurchase Program. As of March 31, 2025, the remaining authorized amount for repurchases under the Existing Repurchase Program was $133.9 million. In April 2025, we repurchased [removed] an additional $100.0 million of our common stock authorized under the Existing Repurchase Program. Refer to Note 6. Stockholders' Equity and Stock-Based Compensation of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q for further discussion.

[removed] Purchase obligations not recorded on our balance sheet represent an estimate of all non-cancellable open purchase orders and contractual obligations, made either directly by Arista or by our contract manufacturers on our behalf, in the ordinary course of business for which we have not received the goods or services. As of March 31, [removed] 2025, we had [removed] $3.5 billion of such purchase obligations, of which [removed] $3.0 billion are expected to be received within one year, and [removed] $0.5 billion are expected to be received after one year. These open purchase orders are considered enforceable and legally binding, and while we may have some limited ability to reschedule and adjust our requirements based on our business needs prior to the delivery of goods or performance of services, this can only occur with the agreement of the related supplier.

Gross margin [removed] was 63.7% for the three months ended March 31, [removed] 2025, consistent with the amount in the same period in 2024.

[removed] We are working closely with our contract manufacturers and suppliers to optimize our supply chain [removed] and production efforts in response to [removed] the uncertainty around international trade [removed] policy and tariff [removed] rates. While our supply chain has currently not experienced a significant disruption as a result of the recent trade measures, the extent of such policies and tariffs that will ultimately be implemented is unknown at this time, and the future impact to our supply chain and cost of our products is uncertain. We continue to ship products against previously committed demand/deployment plans and [removed] accelerate some deployments where needed, while trying to balance our customers' requirements and lead times [removed] with the availability of key components and products [removed] and lead times of our key suppliers and contract manufacturers. [removed] As a result, some shipments against these previously committed demand/deployment plans have extended into 2025. Given the timing and prioritization of customer orders and shipment patterns, as well as the timing and outcome of customer trials and contracts with acceptance periods, near term revenue trends may not be reflective of current demand [removed] levels, and as discussed above will also benefit from demand/deployment plans that have been previously committed.[removed] We expect that our inventory and purchase commitments will remain volatile as we ramp new product introductions. The magnitude of these balances, combined with a reduction in customer demand-planning horizons and shifting customer product priorities, has resulted in an increased risk that we may not be able to sell all of this inventory, which in turn has resulted in additional excess and obsolete inventory and supplier liability charges. In addition, inflation pressure in our supply chain and scarcity of some materials needed to build our products have increased our cost of revenue and have impacted, and may continue to negatively impact our gross margin. These cost pressures may be increased if escalating tariff and non-tariff international trade measures continue to affect our supply chain. We also may not be able to fully mitigate the cost impacts of escalating tariff and non-tariff international trade measures or be able to pass on the full burden of the increase in trade-related costs to our customers, which could further negatively impact our gross margin. While we have seen improvements in our supply chain and manufacturing operations, any remaining or new supply chain and manufacturing related constraints could negatively impact our business in future periods.

Our cash, cash equivalents and marketable securities are held for general business purposes, including the funding of working capital. Our marketable securities investment portfolio is primarily invested in highly-rated securities, with the primary objective of minimizing the potential risk of principal loss. We plan to continue to invest for long-term growth. We believe that our existing balances of cash, cash equivalents and marketable securities, together with cash generated from operations, will be sufficient to meet our working capital requirements and our growth strategies for at least the next 12 [removed] months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our spending to support research and development activities, the timing and cost of establishing additional sales and marketing capabilities, the introduction of new and enhanced product and service offerings, our costs associated with supply chain activities, including access to outsourced manufacturing, our costs related to investing in or acquiring complementary or strategic businesses and technologies, the continued market acceptance of our products, stock repurchases, and capital expenditures, including the [removed] planned construction of a building for office, lab and data center space. In addition, we expect that our inventory and purchase commitments [removed] will remain volatile as we ramp new product introductions. In particular, we have increased our purchase commitments to respond to the rapid deployment of AI [removed] networks and reduce overall lead [removed] times which may increase our working capital [removed] requirements. If we require or elect to seek additional capital through debt or equity financing in the future, we may not be able to raise capital on terms acceptable to us or at all. If we are required and unable to raise additional capital when desired, our business, operating results and financial condition may be adversely affected.

During the three months ended March 31, [removed] 2024, cash provided by operating activities was [removed] $513.8 million, consisting of net income of [removed] $637.7 million, non-cash adjustments to net income of $7.2 million and offset by a net [removed] increase of $131.1 million in working capital [removed] requirements. The non-cash adjustments to net income [removed] were driven by stock-based compensation and depreciation and amortization, largely offset by an increase in deferred [removed] taxes primarily due to the capitalization of research and development costs under Section 174 of the Internal Revenue Code ("IRC"). The increase in [removed] working capital requirements primarily consisted of a $207.2 million decrease in accounts payable primarily due to timing of payments, an $80.0 million increase in [removed] inventory and an increase in accounts receivable of $65.5 million. These cash [removed] outflows were partly offset by a [removed] $157.5 million increase in [removed] income tax payables related to timing of payments, and an increase in deferred revenue of $157.0 million primarily resulting from an increase in customer PCS contracts, partly offset by a reduction in product deferred revenue related to customer contracts with acceptance terms, and a $38.1 million decrease in prepaid and other assets.