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 ANET (Arista Networks) makes money is essential for investors and anyone interested in the business of enterprise networking. In this post, we break down ANET's quarterly income statement (Q2 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick ANET Overview

Arista Networks (ANET) operates as a global provider of cloud networking solutions for large data centers, high-performance computing environments, and enterprise networks. Its business model centers on designing, manufacturing, and selling high-speed Ethernet switches, routers, and related software. Revenue comes primarily from the sale of networking products (hardware and software), with a smaller but growing contribution from services such as support, maintenance, and software subscriptions. The company’s business segments reflect this split between product and service revenue, with a strong focus on innovation and customer-centric solutions.

Revenue Breakdown

• Total Revenue (Q2 2025): $2.20B (+30.4% YoY)
  • Product Revenue: $1.88B (85.1% of total, +31.9% YoY)
  • Service Revenue: $327.8M (14.9% of total, +22.7% YoY)
  • Growth is powered by robust demand for cloud networking equipment, expansion in enterprise markets, and ongoing adoption of next-generation data center solutions.

Gross Profit and Margins

• Gross Profit: $1.44B (65.2% gross margin)
  • Cost of Revenue: $766.2M (+29.2% YoY)
  • ANET maintains robust margins due to its scalable digital business model, high-value product mix, and operational efficiencies in manufacturing and supply chain management.
• Most costs come from hardware manufacturing, component sourcing, and technical support for deployed products.

Operating Income and Expenses

• Operating Income: $986.2M (+41.0% YoY, 44.7% margin)
• Operating Expenses: $452.4M (+13.8% YoY)
  • R&D: $296.5M (+10.8% YoY, 13.4% of revenue) — Focused on developing next-generation networking hardware, cloud software, and AI-driven network management.
  • SG&A: $155.9M (+19.8% YoY, 7.1% of revenue) — Includes sales, marketing, customer support, and administrative functions.
  • ANET continues to prioritize innovation and invest in growth while maintaining efficiency in operating costs.

Net Income

• Pre-Tax Income: $1.08B (+40.2% YoY, 49.0% margin)
• Income Tax: $191.4M (17.7% effective tax rate)
• Net Income: $888.8M (+33.6% YoY, 40.3% net margin)
• ANET converts a significant portion of sales into profit due to its scalable product offerings, efficient cost structure, and strong pricing power.

What Drives ANET's Money Machine?

• Product Revenue: 85%+ of revenue comes from high-speed Ethernet switches, routers, and cloud networking hardware/software.
• Cloud and Data Center Demand: Continued expansion of cloud providers and hyperscale data centers drives volume and pricing.
• R&D Investment: $296.5M in Q2 2025, fueling innovation in AI networking, security, and software-defined infrastructure.
• Enterprise Expansion: Growth in enterprise and campus networking, though still a smaller share, represents a future growth area not yet at full profitability.

Visualizing ANET's 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 customer support, 40% of revenue drops to the bottom line.

Key Takeaways

• ANET's money comes overwhelmingly from networking product sales to cloud and enterprise customers.
• High gross and net margins illustrate the power of ANET's scalable, innovation-driven business model.
• Heavy investment in R&D, balanced by efficiency in operating costs, supports long-term growth.
• Ongoing growth is driven by cloud adoption, enterprise expansion, and next-gen networking technologies.

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FAQ About ANET's Income Statement

1. What is the main source of ANET's revenue in 2025?

ANET generates over 85% of its revenue from product sales, primarily high-speed Ethernet switches and cloud networking hardware. Service revenue, including support and software subscriptions, contributes about 15%.

2. How profitable is ANET in Q2 2025?

ANET reported net income of $888.8M in Q2 2025, with a net margin of approximately 40.3%, reflecting strong profitability driven by high-margin products and efficient cost management.

3. What are the largest expense categories for ANET?

The biggest expenses on ANET's income statement are operating expenses, particularly Research & Development (R&D) at $296.5M in Q2 2025, as ANET prioritizes innovation in networking hardware, software, and AI-driven solutions. SG&A costs were $155.9M, supporting sales and customer operations.

4. Why does the enterprise segment operate at a loss?

The enterprise segment, despite generating growing revenue, posted an operating loss in Q2 2025. This is because ANET aggressively invests in expanding its enterprise and campus networking footprint, believing these will drive long-term growth—even if the division is unprofitable today.

5. How does ANET's effective tax rate compare to previous years?

ANET's effective tax rate in Q2 2025 was 17.7%, consistent with previous years. This moderate rate is primarily due to tax benefits from share-based compensation and international structuring.