Arista and Cisco post record AI results, stocks fall 11.41% and 7.27%

Both companies reported in August and framed AI networking as the engine behind their results, but the market's reaction was a sharp sell-off: Arista dropped 11.41% and Cisco 7.27% last week despite the records. The divergence in their approaches is part of the backdrop. Arista sells focused switches built around its EOS software, and CEO Jayshree Ullal said EtherLink adoption now exceeds 100 cumulative customers, up from the initial four to five discussed in 2024. Cisco, by contrast, controls more of its own supply chain, buying Silicon One chips directly from Taiwan Semiconductor Manufacturing and securing three Scale Across design wins for the P200, though that control weighed on non-GAAP gross margin, which slipped to 66.3% from 68.4%.

The competitive frontier is scale-across traffic between data centers, where both now vie for the same orders. Arista's concentration remains a concern, with Ullal expecting "one, maybe two, 10% customers" alongside Microsoft and Meta Platforms. Cisco's demand is broader, with product orders up 35%, or 25% ex-hyperscalers, which points to a genuine enterprise upgrade cycle beyond the cloud giants. Price increases also added about five points to Cisco's revenue growth, potentially masking the underlying volume picture.

Looking ahead, the questions center on execution. For Arista, the test is whether it can hold its 62% to 64% gross margin target while Ullal warns of a supply crunch lasting "until 2028." For Cisco, the November 12, 2026 report will show whether AI revenue moves toward $7.5B. Arista's P/E near 65 leaves little room for a stumble, while Cisco offers a $0.42 quarterly dividend and $8.1B left in buyback authorization, framing the trade-off between faster growth and steadier returns.