Financial research concept

Networking Service Gross Margin

Networking service gross margin measures service gross profit as a percentage of service revenue using the issuer's disclosed service revenue and service cost of revenue.

By Lee BaileyPublished Sep 25, 2026

Research context

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Research date: Sep 25, 2026Use the dated article and cited sources for the definition, examples, and stated limitations.
Operating-model context: 16 connected conceptsPart of the reviewed Networking Platform Economics; issuer definitions remain distinct where disclosed.
Company examples: 1 reviewed companyRelationships reflect supported examples, not a normalized cross-company KPI ranking.

Grizzly Bulls calculates an approximate service gross margin of 81.9%
Service margin exceeded product margin by about 21.2 points
The margin is a calculation, not an issuer-reported KPI
Part of the Networking Platform Economics
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Networking service gross margin measures service gross profit as a percentage of service revenue using Arista's disclosed service revenue and service cost of revenue.

Arista reported $1.429 billion of service revenue and $258.3 million of service cost of revenue for 2025.

Grizzly Bulls calculates an approximate service gross margin of 81.9%

The calculation is:

($1.429B - $0.258B) / $1.429B = 81.9%

That implies approximately $1.171 billion of service gross profit from the rounded disclosed values.

Service margin exceeded product margin by about 21.2 points

The derived product gross margin was about 60.7%. That is about 21.2 points below the service margin.

The spread helps explain why revenue mix matters to blended gross-profit economics even when service is the smaller revenue stream.

The margin is a calculation, not an issuer-reported KPI

Support staffing, renewal activity, service scope, and cost allocation can change the result.

Use Networking Product Gross Margin for the matching comparison.

Primary source: Arista Networks 2025 Form 10-K.

Part of the Networking Platform Economics

Connect networking product-category mix, hardware and support economics, customer and geographic concentration, deferred-revenue conversion, and supply-chain exposure to understand networking-platform performance.

Browse the full operating model in Company Analysis →

Where this concept fits

Unit economics and concentrationCurrent relationship
Product and service gross margins show the different cost structures of hardware-oriented shipments and support delivery. Non-Americas mix and top-two customer concentration show where revenue is generated and how dependent results are on a small number of large customers whose deployment timing and pricing can affect reported margins.
Non-Americas Revenue Mix Product Gross MarginService Gross MarginCurrent conceptTop-Two Customer Concentration
Platform mix and revenue composition
Core, Cognitive Adjacencies, and Software and Services describe Arista's product-category mix, while product and service revenue use the financial-statement classification. Product and service revenue mix therefore answer a different question from product-category mix and should be analyzed separately.
Cognitive Adjacencies Mix Core Revenue Mix Networking Product Revenue Product Revenue Mix Networking Service Revenue Service Revenue Mix Software & Services Mix
Deferred revenue and supply-chain commitments
Deferred revenue and its opening-balance recognition rate connect product acceptance and support contracts to future recognition, while the two-year future-revenue mix adds timing. Inventory write-downs and purchase commitments show the operating risk created when long-lead sourcing and product transitions outrun realized customer demand.
Networking Deferred Revenue Deferred Revenue Recognition Rate Two-Year Future Revenue Mix Inventory Write-Downs Purchase Commitments

See It in Company Research

These companies are examples of how the concept is reported or discussed in public filings. Definitions can differ by issuer; these links open company research rather than a normalized metric comparison.

ANETOpen operating-model research →16 of 16 reviewed concepts in Networking Platform EconomicsUnit economics and concentration4 of 4 bridge concepts supportedContinue through this bridge:Non-Americas Revenue Mix Product Gross Margin Top-Two Customer Concentration

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Compare public companies

Compare the derived 81.9% service margin with product economics using the same reported cost-of-revenue framework.

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