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Why Arista's Blowout Q2 Is Good News for Chip-Giant Broadcom

Written by Leo Miller. Published 8/18/2025.

Key Points

Arista Networks saw shares move up big after reporting impressive beats in Q2.
The firm's strong product revenue growth bodes well for Broadcom, as the two firms have a close-knit relationship.
Arista is working to bring next-generation networking equipment to data centers, with Broadcom's new Tomahawk 6 chip expected to play a key role.

Within the data center and artificial intelligence (AI) sector, one of the standout Q2 reports came from Arista Networks (NYSE: ANET). The company beat expectations on both revenue and EPS, delivering a substantial surprise.

Because data centers are highly interconnected, Arista's strong performance is also good news for its supplier, Broadcom (NASDAQ: AVGO).

Data Center Supply Chain: Arista and Broadcom

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Arista designs Ethernet routers and switches that direct data traffic within large-scale data centers. As data centers demand more processing power, they upgrade both their compute chips and networking gear. While Arista engineers the overall switch and router systems, it sources a critical component—networking chips—from Broadcom.

When Arista's hardware sales rise, its purchases of Broadcom's networking chips increase in tandem. That close relationship means Arista's outperformance is a reliable indicator of rising chip demand for Broadcom.

Arista's Q2 Product Revenue Drives Broadcom Demand

Arista reported Q2 revenue growth of over 30%, outpacing analyst expectations of roughly 25%. For Q3, the company projects $2.25 billion in sales, implying about 24% growth year-over-year.

Arista's business breaks down into product revenue (new switches and routers) and service revenue (technical support, software updates, maintenance). Broadcom benefits directly from Arista's product segment, since that includes the networking chips Broadcom supplies.

In Q2, Arista's product revenue surged 31.9%, compared to 22.7% growth in services. This nearly 1,000-basis-point gap shows that hardware demand—Broadcom's bread and butter—drove the beat.

The market reaction on August 6 underscores this link. Arista shares jumped more than 17% on the earnings news. Broadcom followed suit, gaining 3%, while the iShares Semiconductor ETF (NASDAQ: SOXX) slipped 0.8%. That divergence suggests Broadcom's move was tied specifically to Arista's strong results, not a broad industry rally.

Looking Ahead: Tomahawk 6 and Next-Gen Networking

In June, Broadcom began shipping its latest high-speed networking chip, Tomahawk 6. However, these initial units were "basic proof of concepts," and Broadcom doesn't expect a significant revenue ramp until customer deployments accelerate.

Arista confirmed in its Q2 call that Tomahawk 6 is already in its labs, teasing "a new product next year." That development pipeline is critical for Broadcom, since Arista's launch of Tomahawk-6-powered switches would mark the first meaningful revenue stream for the chip.

As data centers upgrade to next-generation networking infrastructure, the Tomahawk 6 rollout could be a key catalyst, translating Arista's momentum into further upside for Broadcom shares.

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