en.Wedoany.com Reported - US-based Arista Networks reported its first-quarter results for fiscal year 2026, with revenue growing 35% year-over-year to $2.7 billion, slightly above earlier guidance. However, the tightening supply situation for memory chips is expanding, making the networking equipment vendor more cautious in its outlook for the coming quarters and explicitly stating it will bear higher procurement costs.

CEO Jayshree Ullal stated bluntly on the earnings call: "Our demand is actually the best I have seen in my tenure at Arista, yet supply is a different story. We are facing an industry-wide shortage, from wafers, silicon chips, CPUs, optical components to memory chips, nothing is spared, and procurement costs are also rising." She further added that initially the problem was thought to be limited to memory chips, "Now all wafer fabrication facilities are facing challenges, and every type of chip is hard to get."

Ullal explained that due to excessively long lead times for critical chips, the company has entered into multi-year purchase commitments with suppliers to ensure supply continuity. She said: "We will do whatever it takes, including sacrificing gross margins, to meet demand this year and next, because we absolutely do not want to see GPUs idle and AI infrastructure underutilized due to the network not being in place."

 

CFO Chantelle Breithaupt provided specific figures: Purchase commitments surged from $6.8 billion at the end of the last fiscal year to $8.9 billion in the first quarter, with the increase primarily concentrated in chips related to new products and AI deployments. She also noted that factors such as changes in new product demand, component supply fluctuations, and supplier lead times could cause inventory levels to climb in subsequent quarters.

Regarding gross margin, it slightly decreased to 62.4% in the first quarter, due to a reduced sales mix from high-margin enterprise customers. Financial analysis firm William Blair analyzed in a research report that Arista's chip supply pressure is closely related to Broadcom—its platform foundation is precisely Broadcom's Jericho and Tomahawk Ethernet chips. The report suggests that if supply issues are not alleviated within the next one to two years, it could constrain the company's delivery and revenue recognition in the short term.

Regarding the integration progress of the VeloCloud acquisition, Ullal also briefly mentioned that these assets are being smoothly integrated into the branch and campus strategic system, bringing more distributed enterprise use cases and channel motions targeting managed service providers. The acquisition was completed last summer, aimed at enhancing connectivity from branch offices to campus headquarters.

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