ANET 10-Q filed 2026-11-04 | Key takeaways
ANET filed its 10-Q; the most relevant disclosure change is expanded Purchase commitments: Non-cancellable purchase commitments increased to $11.4 billion as of September 30, 2026, up from $9.7 billion as of June 30, 2026, with $9.3 billion expected within 12 months and $2.1 billion after 12 months. Customer concentration: Customer A represented 16% of revenue; Customer B represented 26% of revenue.
Key takeaways
Revenue: Q3 revenue $3.66 billion, up 58.5% y/y; nine-month revenue $9.4 billion, up 44.3% y/y
Non-cancellable purchase commitments increased to $11.4 billion from $9.7 billion to secure supply for AI network deployments
Inventories increased to $3.21 billion from $2.25 billion at year-end 2025, with evaluation inventory more than doubling to $874.3 million
Customer concentration: two customers accounted for over 10% of revenue with Customer A at 16%, 15%, 21% and Customer B at 26%, 20%, 18% for 2025, 2024, 2023
Americas revenue represented 81.4% of total Q3 revenue, up from 79.8% in Q3 2025; non-Americas was 18.6% of revenue
Effective tax rate decreased to 18.5% from 20.8% primarily due to one-time deferred tax provision from OBBB Act enactment in 2025
Cash and marketable securities totaled approximately $14.4 billion as of September 30, 2026
Key metrics
Customer concentration
Disclosure changes
- Purchase commitments
Non-cancellable purchase commitments increased to $11.4 billion as of September 30, 2026, up from $9.7 billion as of June 30, 2026, with $9.3 billion expected within 12 months and $2.1 billion after 12 months.
Elevated purchase commitments reflect the company's strategy to secure supply for rapid AI network deployment and navigate tightening memory and silicon markets, increasing working capital requirements and supply chain risk. - Inventories
Inventories increased to $3.21 billion as of September 30, 2026, from $2.25 billion at December 31, 2025, with evaluation inventory more than doubling to $874.3 million from $403.7 million.
Significant increase in evaluation inventory reflects increased customer trials and contracts with acceptance periods for new AI Ethernet products, creating variability in revenue recognition and risk of excess inventory. - Gross margin
Gross margin decreased to 63.6% and 62.9% for the three and nine months ended September 30, 2026, compared to 64.6% and 64.5% for the same periods in 2025.
Product gross margin decreased primarily due to higher product costs partly offset by supply chain productivity improvements; supply chain inflation and material scarcity continue to pressure margins. - Deferred revenue and other performance obligations
Total revenue from deferred revenue, contract liabilities and other performance obligations expected to be recognized in future periods amounts to $8.6 billion as of September 30, 2026, up from $8.4 billion as of June 30, 2026.
Growing deferred revenue and performance obligations provide visibility into future revenue; approximately 91% expected to be recognized over the next two years. - Research and development expenses
R&D expenses increased by $160.9 million (49.4%) and $289.9 million (32.6%) for the three and nine months ended September 30, 2026, driven by increased personnel costs of $18.5 million and $77.9 million, and increased new product introduction costs of $137.0 million and $203.6 million.
Significant R&D investment in new product introductions supports the company's AI Ethernet and campus networking expansion strategy. - Other income
Other income increased to $273.1 million in Q3 2026 from $98.9 million in Q3 2025, driven by gains on strategic investments and increased interest income.
The $135.8 million other income in Q3 2026 compared to $(0.9) million in Q3 2025 reflects significant gains on strategic investments.
Primary source
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