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Can ANET Stock Revive its Growth Momentum After the Sudden Slide?
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Arista Networks, Inc. (ANET - Free Report) has plunged 30.7% over the past three months compared with the industry’s decline of 6.4%. It has underperformed its peers, such as Juniper Networks, Inc. (JNPR - Free Report) and Cisco Systems, Inc. (CSCO - Free Report) . While Juniper has declined 4.2%, Cisco has gained 4.4% over the same period.
Three-Month ANET Stock Price Performance
Image Source: Zacks Investment Research
High Concentration Risks, Competitive Pressures Hurt ANET
Arista continues to derive a substantial portion of its revenues from a limited number of large customers, leading to high customer concentration. Any change in the demand patterns of these clients can significantly affect the top line. In addition, efforts to develop new technologies and products that address emerging technological trends, evolving industry standards and changing end-customer needs increase operating costs. Moreover, the redesigning of products and their supply chain mechanism has eroded margins. The company is witnessing increased demand, but there are lingering supply bottlenecks for advanced products. As such, when Arista increases orders for these components and tries to build up inventory, it is blocking working capital.
Arista is also facing stiff competition in cloud networking solutions, particularly in the 10-gigabit Ethernet and above. Cisco is the dominant player in the data center networking market due to its diverse portfolio of IP-based networking products. Apart from Cisco, Arista faces significant competition from large network equipment and system vendors such as Brocade, Dell, Hewlett-Packard, Juniper (in the routing platform), Extreme Networks and Mellanox Technologies.
Solid Demand Trends Buoy ANET
Arista holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. It is increasingly gaining market traction in 200-and-400-gig high-performance switching products.
Additionally, Arista offers one of the broadest product lines of data center and campus Ethernet switches and routers in the industry. It provides routing and switching platforms with industry-leading capacity, low latency, port density and power efficiency. The company also innovates in areas such as deep packet buffers, embedded optics and reversible cooling.
Arista is witnessing solid demand trends among enterprise customers backed by its multi-domain modern software approach, which is built upon its unique and differentiating foundation, the single EOS (Extensible Operating System) and CloudVision stack. The versatility of Arista’s unified software stack across various use cases, including WAN routing and campus and data center infrastructure, sets it apart from other competitors in the industry. This, in turn, has translated into solid revenue growth for the company over the years.
Image Source: Zacks Investment Research
Arista 2.0 Strategy Gains Steam
Arista continues benefiting from the expanding cloud networking market, driven by strong demand for scalable infrastructure. In addition to high capacity and easy availability, its cloud networking solutions promise predictable performance and programmability, enabling integration with third-party applications for network management, automation and orchestration.
The Arista 2.0 strategy is resonating well with customers, with its modern networking platforms being foundational for transformation from silos to centers of data. The company boasts a comprehensive portfolio with the right network architecture for client-to-campus data center cloud and AI (artificial intelligence) networking backed by three guiding principles. These include best-in-class, highly proactive products with resilience, zero-touch automation and telemetry with predictive client-to-cloud one-click operations with granular visibility and prescriptive insights for deeper AI algorithms.
The Arista 2.0 strategy includes three components that are likely to drive growth over the next few years. The first component involves focused plans to invest in core businesses by rolling out new solutions and improved AI offerings. Secondly, Arista aims to emphasize more on software-as-a-service for improved revenue visibility. Last but not least, the company plans to enter adjacent markets to target a broader customer base.
Estimate Revision Trend of ANET
Earnings estimates for Arista for 2025 have climbed 21.9% to $2.56 over the past year, while the same for 2026 has increased 29.2% to $3.01. The positive estimate revision depicts optimism about the stock’s growth potential.
Image Source: Zacks Investment Research
End Note
With healthy revenue-generating potential driven by robust demand trends, Arista appears poised for solid growth momentum. Further, a strong emphasis on quality, diligent execution of operational plans and continuous portfolio enhancements are driving more value for customers. Solid traction from the Arista 2.0 strategy is a major tailwind. An uptrend in estimate revision further portrays positive investor sentiments.
However, margin woes amid high selling, general & administrative and R&D costs and elevated customer inventory levels weigh on its bottom line. Although ANET is currently witnessing a downslide owing to challenging macroeconomic conditions, investors are likely to profit in the long run as the stock is expected to revive its mojo with healthy growth dynamics.
Image: Bigstock
Can ANET Stock Revive its Growth Momentum After the Sudden Slide?
Arista Networks, Inc. (ANET - Free Report) has plunged 30.7% over the past three months compared with the industry’s decline of 6.4%. It has underperformed its peers, such as Juniper Networks, Inc. (JNPR - Free Report) and Cisco Systems, Inc. (CSCO - Free Report) . While Juniper has declined 4.2%, Cisco has gained 4.4% over the same period.
Three-Month ANET Stock Price Performance
Image Source: Zacks Investment Research
High Concentration Risks, Competitive Pressures Hurt ANET
Arista continues to derive a substantial portion of its revenues from a limited number of large customers, leading to high customer concentration. Any change in the demand patterns of these clients can significantly affect the top line. In addition, efforts to develop new technologies and products that address emerging technological trends, evolving industry standards and changing end-customer needs increase operating costs. Moreover, the redesigning of products and their supply chain mechanism has eroded margins. The company is witnessing increased demand, but there are lingering supply bottlenecks for advanced products. As such, when Arista increases orders for these components and tries to build up inventory, it is blocking working capital.
Arista is also facing stiff competition in cloud networking solutions, particularly in the 10-gigabit Ethernet and above. Cisco is the dominant player in the data center networking market due to its diverse portfolio of IP-based networking products. Apart from Cisco, Arista faces significant competition from large network equipment and system vendors such as Brocade, Dell, Hewlett-Packard, Juniper (in the routing platform), Extreme Networks and Mellanox Technologies.
Solid Demand Trends Buoy ANET
Arista holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. It is increasingly gaining market traction in 200-and-400-gig high-performance switching products.
Additionally, Arista offers one of the broadest product lines of data center and campus Ethernet switches and routers in the industry. It provides routing and switching platforms with industry-leading capacity, low latency, port density and power efficiency. The company also innovates in areas such as deep packet buffers, embedded optics and reversible cooling.
Arista is witnessing solid demand trends among enterprise customers backed by its multi-domain modern software approach, which is built upon its unique and differentiating foundation, the single EOS (Extensible Operating System) and CloudVision stack. The versatility of Arista’s unified software stack across various use cases, including WAN routing and campus and data center infrastructure, sets it apart from other competitors in the industry. This, in turn, has translated into solid revenue growth for the company over the years.
Image Source: Zacks Investment Research
Arista 2.0 Strategy Gains Steam
Arista continues benefiting from the expanding cloud networking market, driven by strong demand for scalable infrastructure. In addition to high capacity and easy availability, its cloud networking solutions promise predictable performance and programmability, enabling integration with third-party applications for network management, automation and orchestration.
The Arista 2.0 strategy is resonating well with customers, with its modern networking platforms being foundational for transformation from silos to centers of data. The company boasts a comprehensive portfolio with the right network architecture for client-to-campus data center cloud and AI (artificial intelligence) networking backed by three guiding principles. These include best-in-class, highly proactive products with resilience, zero-touch automation and telemetry with predictive client-to-cloud one-click operations with granular visibility and prescriptive insights for deeper AI algorithms.
The Arista 2.0 strategy includes three components that are likely to drive growth over the next few years. The first component involves focused plans to invest in core businesses by rolling out new solutions and improved AI offerings. Secondly, Arista aims to emphasize more on software-as-a-service for improved revenue visibility. Last but not least, the company plans to enter adjacent markets to target a broader customer base.
Estimate Revision Trend of ANET
Earnings estimates for Arista for 2025 have climbed 21.9% to $2.56 over the past year, while the same for 2026 has increased 29.2% to $3.01. The positive estimate revision depicts optimism about the stock’s growth potential.
Image Source: Zacks Investment Research
End Note
With healthy revenue-generating potential driven by robust demand trends, Arista appears poised for solid growth momentum. Further, a strong emphasis on quality, diligent execution of operational plans and continuous portfolio enhancements are driving more value for customers. Solid traction from the Arista 2.0 strategy is a major tailwind. An uptrend in estimate revision further portrays positive investor sentiments.
However, margin woes amid high selling, general & administrative and R&D costs and elevated customer inventory levels weigh on its bottom line. Although ANET is currently witnessing a downslide owing to challenging macroeconomic conditions, investors are likely to profit in the long run as the stock is expected to revive its mojo with healthy growth dynamics.
The stock delivered a trailing four-quarter average earnings surprise of 12.9%. Arista currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.