Arista Networks, Inc. ANET is witnessing solid revenue growth backed by solid customer wins and robust portfolio strength. In the third quarter, the company’s revenues surged to $2.31 billion from $1.81 billion in the prior-year quarter, beating the Zacks Consensus Estimate of $2.24 billion. The 27.5% year-over-year growth rate is primarily backed by continuous leadership in AI networking innovation.
Arista’s Etherlink portfolio is one of the major revenue drivers. Its Etherlink portfolio is UEC compliant (Ultra Ethernet Consortium), and it also comes with advanced data traffic handling features like packet trimming, packet spraying and dynamic load balancing. These features improve GPU utilization and match the ultra-low latency requirements of AI clusters. Owing to these factors, the Ethernet switches are gaining traction among AI and cloud titans, as well as neocloud providers.
The AI total addressable market is expected to exceed $100 billion, and Arista, with its comprehensive portfolio, is benefiting from this trend. ANET is collaborating with several prominent organizations, such as NVIDIA, Arm, AMD and OpenAI to develop a cutting-edge AI stack. These factors are driving Arista’s top line.
The company is also steadily advancing its portfolio. It recently introduced an AI agent to streamline network operations. The company is also working on Cloudvision AI that will give end-to-end visibility, intelligence and security. The solution will nullify costly inefficiencies in the network. Such a strong focus on innovation is allowing ANET to tap into the growing AI data center market.
The company is well on track to achieve its target of generating $1.5 billion in AI revenues in 2025. Management has also estimated that the company will generate $2.75 billion in AI revenues in 2026. For 2025, the company is projected to generate $8.87 billion in revenues, indicating a 26-27% uptick.
How Are Competitors Faring?
Arista faces competition from Hewlett Packard Enterprise Company HPE and Cisco Systems, Inc. CSCO. HPE’s revenues increased 19% year over year to $9.1 billion and surpassed the Zacks Consensus Estimate by 4.1%. The company is benefiting from a staggering 54% year-over-year increase in network business. HPE’s Enterprise Server segment sales are rising, backed by strong demand for AI servers, as well as growth in server systems.
In the October quarter, Cisco’s revenues increased 7.5% to $14.88 billion, surpassing the Zacks Consensus Estimate by 0.71%. Its revenues from the network business grew 15% year over year. However, Cisco witnessed a decline in revenues from the security segment.
ANET’s Price Performance, Valuation & Estimates
Shares of Arista have surged 20.8% over the past year against the industry’s fall of 0.8%.
Image Source: Zacks Investment Research
From a valuation standpoint, Arista trades at a forward price-to-sales ratio of 14.16, above the industry average.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Arista’s earnings for 2025 has increased over the past 60 days.
Image Source: Zacks Investment Research
Arista currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
