UPDATE 2-Arris Group Q3 tops market, sees Q4 mostly in line

* Q3 adj. EPS $0.25 vs est EPS $0.24

* Q3 rev $275.8 mln vs est $273.8 mln

* Sees Q4 profit largely above Street view

* Sees Q4 gross margin in similar range, or higher than Q3

* Shares rise 1 pct after the bell (Recasts, adds conference call details)

BANGALORE, Oct 26 (Reuters) - Communications technology company Arris Group Inc (ARRS.O) posted third-quarter results above market expectations, helped by a rise in gross margins, and forecast fourth-quarter earnings largely above estimates.

Arris, which sells products that enable high speed data and video traffic, expects fourth-quarter gross margins to be in a similar range to the third quarter, or a "bit" higher.

Third-quarter gross margins rose to 41.9 percent, compared with 35.7 percent last year, helped by strong cable modem termination system (CMTS) sales.

"With internet traffic growing at 40 to 50 percent a year, we expect this business to remain strong for quite sometime," said Chief Executive Bob Stanzione on a conference call with analysts.

According to Comscore Inc's (SCOR.O) latest report, Internet video downloads increased 19 percent in August, compared to July and seem to be accelerating as the year goes on, Stanzione said.

"At this growth rate, our service provider customers have to double network capacity every 18 to 24 months," he added.

Third-quarter net income was $21.7 million, or 17 cents a share, compared with $22.4 million, or 18 cents a share last year. Excluding items, it earned 25 cents a share.

Revenue fell 7 percent to $275.8 million.

Analysts on average had expected Arris to earn 24 cents a share on revenue of $273.8 million for the third quarter, according to Thomson Reuters I/B/E/S.

The company forecast fourth-quarter earnings of 22 cents to 26 cents a share, excluding items, on revenue of $265 million to $285 million.

Analysts were looking for a profit of 23 cents a share on revenue of $275.3 million.