Arista Bets Big on Ethernet for AI, Boosts Forecasts Despite Tariff Concerns

Networking giant Arista Networks is projecting a future where open standards like Ethernet and UALink will dominate the AI data center landscape, a conviction that has led the company to significantly raise its financial forecasts. This optimistic outlook comes despite earlier concerns over potential tariff impacts that had caused a dip in the company’s share price.

Arista’s chief executive, Jayshree Ullal, reported that the second fiscal quarter, ending June 30, saw only a negligible impact from tariffs, attributing strong performance to an efficient supply chain and inventory benefits. Buoyed by what it perceives as increasing momentum across the AI, cloud, and enterprise sectors, Arista has revised its annual growth estimate from an initial 17 percent to a more ambitious 25 percent, targeting a robust $8.75 billion in revenue.

This positive forecast, however, arrives with a degree of caution, as signals from the US administration indicate a potential unveiling of new tariffs on imported semiconductors in the near future. Such measures could inevitably inflate the cost of numerous components crucial to IT equipment, including Arista’s networking switches.

At the heart of Arista’s strategy is a dual approach to network architecture: a scale-out front-end complemented by a scale-up and scale-out combination for back-end networks. Ullal elaborated on the evolution of these back-end systems, noting that high-bandwidth, low-latency interconnects linking multiple accelerators within a single rack, while currently dominated by proprietary solutions like NVLink, are expected to transition to open standards such as Ethernet or UALink within the next few years. Similarly, scale-out back-end networks that connect accelerators across different racks, traditionally reliant on InfiniBand, are rapidly migrating towards Ethernet, specifically leveraging the Ultra Ethernet Consortium specification released in June.

This shift plays directly into Arista’s strengths, with Ullal highlighting the company’s extensive Etherlink portfolio, comprising over 20 products. She asserted that Ethernet, as a transport protocol, is poised to significantly benefit both Arista and chipmaker Broadcom.

Looking ahead, Ullal anticipates a fundamental convergence of back-end and front-end networks as large language models continue to expand into distributed training and inference applications. This integration will make it increasingly challenging to precisely delineate between the two in the future, but Arista forecasts aggregate AI networking revenue to exceed $1.5 billion in 2025, with continued growth projected for years to come.

In other developments, the recent acquisition of the VeloCloud software-defined wide area network (SD-WAN) business from Broadcom last month is expected to contribute minimally to Arista’s financial year 2025 results, according to CFO Chantelle Breithaupt.

For the second quarter, Arista reported an impressive $2.2 billion in revenue, marking a 30.4 percent increase year-over-year and a 10 percent rise from the first quarter of 2025, reflecting gains across all product sectors. However, the period also saw an uptick in operating expenses and research and development spending, primarily due to higher costs associated with new product introductions. For the upcoming quarter, Breithaupt forecasts a modest revenue increase to approximately $2.25 billion.