Will Arista Networks Stock Keep Soaring as Q2 Earnings Approach?

Arista Networks ANET has joined a wave of tech stocks that are receiving upgrades from analysts thanks to its AI-driven data center innovation and robust revenue growth.

Considering such, there is much enthusiasm building ahead of Arista Networks' Q2 report next Tuesday, August 5.

To that point, Arista Networks' stock has rebounded more than +30% in the last three months and is now less than 10% from its all-time peak of $133 a share (stock-split adjusted basis), which it hit in January.

Arista Networks Q2 Expectations

As a brief preview, Arista Networks' Q2 sales are thought to have spiked 25% to $2.11 billion from $1.69 billion a year ago. Even better, Q2 earnings are also expected to be up 25% to $0.65 per share compared to EPS of $0.52 in the prior period.

Adding to the enthusiasm for Arista Networks' Q2 report is that the cloud networking solutions leader has topped sales estimates for 22 consecutive quarters and has reached or exceeded the Zacks EPS Consensus in every quarter since 2014. Over the last four quarters, Arista Networks has posted an average sales and earnings surprise of 2.61% and 11.82% respectively.

Arista Networks' Robust Revenue Growth

Piggybacking on analysts upgrading Arista Networks' stock due to its robust revenue growth, the company’s top line is now expected to expand 19% this year and is projected to stretch another 17% in fiscal 2026 to $9.76 billion.

Since the pandemic, Arista Networks' top line has expanded more than 200% with 2020 sales at $2.31 billion. The remarkable post-pandemic surge has been fueled by major cloud players like Microsoft MSFT and Alphabet GOOGL, which rely heavily on Arista Networks' tailor-made AI data center networking platforms.

EPS Outlook & Revisions

Taking advantage of its sales growth, Arista Networks' bottom line is currently slated to expand 13% in FY25 with FY26 earnings forecasted to pop another 15% to $2.97 per share.

Reassuringly, FY25 and FY26 EPS estimates have continued to trend higher over the last 90 days, moving slightly higher in the last month.

Bottom Line

Attributed to the trend of positive earnings estimate revisions, Arista Networks' stock lands a Zacks Rank #1 (Strong Buy) and could certainly be in store for more upside as its Q2 results approach next week.

As a reminder that Arista Networks' stock previously traded over $400 a share prior to its 4-1 stock split last year, now appears to be an ideal time to buy ANET before it gets more expensive.

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

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