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Call sheet · Q2'26

Arista Networks (ANET)

Q2'26 earnings call · held August 4, 2026 · compared with the Q1'26 call · management-credibility review
7/12
Disclosure score
1 high, 2 medium, 2 low flags
Financial quality
Bottom line
The market is missing the **$0.7 bn deferred revenue buildup** that points to a pipeline of AI‑fabric contracts, but the **rise in DSO to 68 days and inventory to $2.5 bn** signals cash‑flow timing pressure. While revenue and operating income beat expectations, the real constraint is the **supply‑chain and working‑capital squeeze** that could choke cash generation as shipments accelerate. Management’s bold 40% growth guidance hinges on converting these deferred contracts into cash - **my view changes if operating cash flow fails to rebound in Q3**.

The 30-second version

  • Sleeper story: Deferred revenue surge signals future upside but also timing risk
  • Headline view - $3 bn revenue beat but operating margin is stretched by higher mix cost
  • Red flag: DSO up to 68 days and inventory rising, raising cash‑flow timing concerns

What changed this quarter

MetricQ1'26Q2'26Change
Revenue$2.71 bn, +35.1% YoY$3.0 bn, +37.7% YoY+$0.29 bn (+11%)
Operating Income$1.29 bn, 47.8% of revenue$1.5 bn, 49.9% of revenue+$0.21 bn (+16%)
Deferred Revenue$6.2 bn$6.9 bn+$0.7 bn (+11%)
Inventory$2.38 bn$2.5 bn+$0.12 bn (+5%)
DSO64 days68 days+4 days
Purchase Commitments$8.9 bn$9.7 bn+$0.8 bn (+9%)
Operating Margin47.8% YoY49.9% YoY+2.1 pp

Accountability tracked

1 new promise made2 narrative shifts flagged
Inside the full report
The complete write-up covers the full promise ledger with kept/missed calls, disclosure-quality scoring, the metrics-vanished check, verification items, and the questions to ask next quarter.
Read the full ANET Q2'26 report Subscribe
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Scores, kept-promise rates, and flags on this site reflect the author's opinion, applying a stated methodology to statements management made on public earnings calls. Informational and educational purposes only - not investment advice, a recommendation, or an offer to buy or sell any security. Sources believed reliable but not guaranteed; the author may hold positions in the securities discussed.

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