How ANET (Arista Networks) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a networking hardware and software leader like Arista Networks (ANET) makes money is essential for investors and anyone interested in the business of cloud networking. In this post, we break down Arista Networks' quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick Arista Networks Overview

Arista Networks operates a high-performance cloud networking business, providing switches, routers, and network operating systems for large data centers, cloud providers, and enterprise customers. Revenue comes primarily from the sale of networking products (hardware and software), with a growing contribution from support and services. The business is structured around two main segments: Product Revenue (hardware/software sales) and Service Revenue (maintenance, support, and software subscriptions).

Revenue Breakdown

• Total Revenue (Q3 2025): $2.31B (+27.5% YoY)
  • Product Revenue: $1.91B (82.8% of total, +25.5% YoY)
  • Service Revenue: $397M (17.2% of total, +38.1% YoY)
  • Growth is powered by expanding cloud data center demand, enterprise network upgrades, and increased adoption of AI-driven networking solutions.

Gross Profit and Margins

• Gross Profit: $1.49B (64.6% gross margin)
  • Cost of Revenue: $818M (+26.0% YoY)
  • Arista Networks maintains robust margins due to its scalable software-driven business model, premium product positioning, and operational efficiencies.
• Most costs come from hardware manufacturing, supply chain logistics, and technical support.

Operating Income and Expenses

• Operating Income: $978M (+24.6% YoY, 42.4% margin)
• Operating Expenses: $512M (+36.0% YoY)
  • R&D: $326M (+38.2% YoY, 14.1% of revenue) — Focused on next-generation cloud networking, AI integration, and software innovation.
  • SG&A: $186M (+32.2% YoY, 8.1% of revenue) — Includes sales, marketing, and administrative functions to support global expansion.
  • Arista continues to prioritize innovation and invest in growth while maintaining operational efficiency.

Net Income

• Pre-Tax Income: $1.08B (+22.0% YoY, 46.7% margin)
• Income Tax: $224M (20.8% effective tax rate)
• Net Income: $853M (+14.0% YoY, 37.0% net margin)
• Arista Networks converts a significant portion of sales into profit due to its scalable product mix, efficient cost structure, and strong pricing power.

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What Drives Arista Networks' Money Machine?

• Product Revenue: Over 82% of revenue comes from high-performance networking hardware and software solutions for cloud and enterprise customers.
• Cloud and AI Networking Demand: Rapid growth in cloud data centers and AI workloads drives product adoption and upgrades.
• R&D Investment: $326M in Q3 2025, supporting innovation in next-gen networking, AI, and software-defined infrastructure.
• Future Growth Areas: Expansion into AI networking, edge computing, and security solutions, though these segments are not yet major profit contributors.

Visualizing Arista Networks' Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially R&D) taking the largest chunk.
• Even after large investments in innovation and global expansion, 37% of revenue drops to the bottom line.

Key Takeaways

• Arista Networks' money comes overwhelmingly from product sales to cloud and enterprise customers.
• High gross and net margins illustrate the power of Arista's scalable, software-driven business model.
• Heavy investment in R&D, balanced by efficiency in operating costs.
• Ongoing growth is driven by cloud adoption, AI networking, and enterprise digital transformation.

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FAQ About Arista Networks' Income Statement

1. What is the main source of Arista Networks' revenue in 2025?

Arista Networks generates over 82% of its revenue from product sales (networking hardware and software) to cloud and enterprise customers. Service revenue, including support and subscriptions, contributes the remaining 17%.

2. How profitable is Arista Networks in Q3 2025?

Arista Networks reported net income of $853M in Q3 2025, with a net margin of approximately 37%, reflecting strong profitability driven by high-margin products and efficient operations.

3. What are the largest expense categories for Arista Networks?

The biggest expenses on Arista Networks' income statement are operating expenses, particularly Research & Development (R&D) at $326M in Q3 2025, as Arista prioritizes innovation in cloud networking and AI. SG&A costs were $186M, supporting sales and global expansion.

4. Why does [segment/division] operate at a loss?

[If applicable: Service segment, despite generating $397M in revenue, posted an operating loss of over $XXM in Q3 2025. This is because Arista aggressively invests in customer support infrastructure and new service offerings, believing these will drive long-term growth—even if the division is unprofitable today.]

5. How does Arista Networks' effective tax rate compare to previous years?

Arista Networks' effective tax rate in Q3 2025 was 20.8%, consistent with previous years. This moderate rate is primarily due to international structuring and tax benefits from share-based compensation.