Arista vs. Ciena: Which Network Infrastructure Stock Has the Edge?

Arista Networks, Inc. ANET and Ciena Corporation CIEN are two of the leading players in the global networking infrastructure industry. 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.   

On the other hand, Ciena is a leading provider of optical networking equipment, software and services. It offers a wide range of products and solutions that leverage WaveLogic coherent optical technology and intelligent photonics solutions. These are optimized for the convergence of coherent optical transport, open optical networking, Optical Transport Network (OTN) switching and IP routing and switching.

With a diversified portfolio of cloud networking solutions for data centers and cloud computing environments, both Arista and Ciena have the wherewithal to cater to the evolving demands of business enterprises. Let us delve a little deeper into the companies’ competitive dynamics to understand which of the two is relatively better placed in the industry.

The Case for Arista

Arista holds a leadership position in 100-gigabit Ethernet switches and is increasingly gaining market traction in 200-and-400-gig high-performance switching products. It 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. Arista has made several additions to its multi-cloud and cloud-native software product family with CloudEOS Edge. It has introduced new cognitive Wi-Fi software that delivers intelligent application identification, automated troubleshooting and location services. The versatility of Arista’s unified software stack across various use cases, including WAN routing, campus and data center infrastructure, sets it apart from other competitors in the industry. 

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 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. Arista should benefit from its software-driven, data-centric approach, which helps customers build their cloud architecture and enhance the cloud experience they offer their clients.

However, Arista remains plagued by high operating costs. Total operating expenses in first-quarter 2025 increased around 22.3% to $417.3 million, owing to a rise in headcount, new product introduction costs and higher variable compensation expenditures. Moreover, the redesigning of products and their supply chain mechanism has eroded margins. Although the company is witnessing increased demand, there are lingering supply bottlenecks for advanced products. Therefore, it is increasing orders for these components and trying to build up inventory, which is blocking working capital. Arista also faces severe competition in each of its served markets, especially from industry leader Cisco Systems, Inc. CSCO.

The Case for Ciena

Ciena’s revenues are primarily generated from the growing demand for packet optical transport and switching products, integrated networks and service management software. The company has been diversifying its footprint in data center connectivity. This has enhanced its reach into a broader end-to-end optical and data equipment market. It is increasingly investing in the data and optical fiber market to cash in on the tremendous growth opportunity presented by bandwidth demand from network service providers. Network upgrades by telecom carriers to meet demand bode well for the company’s long-term growth prospects. Ciena has added several new products and capabilities to its 5G Network Solutions portfolio, aimed at reducing network complexity and accelerating operators’ migration to 5G. 

Increased network traffic, higher demand for bandwidth and adoption of cloud architectures remain key growth drivers as Ciena expects to improve its profitability with a balanced mix of new and existing customers. WaveLogic 6 Extreme is seeing strong market adoption, attracting customers looking for more capacity while saving space and power in their networks. Ciena is currently the only provider offering a 1.6 terabit WAN solution and anticipates maintaining this lead in next-generation optical technology for at least two years. Its coherent, pluggable solutions saw strong demand in the fiscal second quarter, and are on track to double year-over-year revenues to at least $150 million in fiscal 2025. Additionally, it is expanding its customer base for coherent routing and securing deals with international service providers and enterprise clients.
 
However, Ciena faces potential disruptions from new tariffs and retaliatory trade actions, which are likely to increase costs for raw materials and components, disrupt supply chains and adversely impact global demand. These challenges may weigh on margins and hinder international expansion, requiring strategic adjustments to eliminate risks. During the fiscal second quarter, the company was plagued by a fast-changing U.S. tariff environment, which had hurt its bottom line. Despite quick mitigation efforts, system adjustments led to a mid-single-digit million-dollar loss. With the current tariff setup, management anticipates tariff costs of around $10 million each quarter in fiscal 2025.

How Do Zacks Estimates Compare for ANET & CIEN?

The Zacks Consensus Estimate for Arista’s 2025 sales and EPS implies a year-over-year growth of 19.1% and 13.2%, respectively. The EPS estimates have been trending northward over the past 60 days.

The Zacks Consensus Estimate for Ciena’s fiscal 2025 sales implies year-over-year growth of 14%, while that for EPS implies a rise of 24.2%. The EPS estimates have been trending southward over the past 60 days.

Price Performance & Valuation of ANET & CIEN

Over the past year, Arista has gained 20.5% compared with the industry’s growth of 36.3%. Ciena has gained 58.9% over the same period.

Ciena looks more attractive than Arista from a valuation standpoint. Going by the price/earnings ratio, Ciena’s shares currently trade at 26.1 forward earnings, significantly lower than Arista’s 39.1.

ANET or CIEN: Which is a Better Pick?

Arista carries a Zacks Rank #3 (Hold), while Ciena carries a Zacks Rank #5 (Strong Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Both companies expect their sales and profits to improve in 2025. Arista has shown steady revenue and EPS growth for years, while Ciena has been facing a bumpy road. Arista has long-term earnings growth expectations of 14.8%, while Ciena has long-term earnings growth expectations of 34.9%. Ciena has a better price performance and attractive valuation metrics compared with Arsia. However, based solely on a superior Zacks Rank, Arista appears to be a better investment option at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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