Arista Rises 79.7% in a Year: How Should You Play the Stock?

Arista Networks, Inc. ANET has gained 79.7% in the past year compared to the Internet software industry’s growth of 44.7%. The stock has outperformed the Zacks Computer & Technology sector and the S&P 500 during the same time frame.

It has also outperformed its peers like Hewlett Packard Enterprise Company HPE and Cisco Systems, Inc. CSCO. HPE has gained 32.2% and Cisco soared 40.2% during this period.

ANET Rides on Strength in AI Networking, Strategic Acquisition

Arista continues to introduce leading-edge solutions for cloud, Internet service providers and enterprise networks to meet the rising demands of AI/ML-driven network architectures. These innovations enabled Arista to deliver a superior customer experience and increase customer engagement.

As enterprises rush to integrate AI into their business processes, it is creating a major strain on their compute infrastructure. With high AI workloads, the exchange of large volumes of data takes a significant time to process due to an inefficient network. This poor network creates a bottleneck leading to idle cycles on GPUs, wastage of capital resources and raising operating costs. Hence, building an efficient network infrastructure has become paramount to improve GPU utilization.

Arista’s leading-edge Etherlink and EOS (Extensible Operating System) have effectively solved this issue. With the most comprehensive end-to-end portfolio offerings, Arista has become a preferred AI networking platform for several enterprises across sectors. Specifically, its growing prowess in scale-out back-end and scale-out front-end networking is a major tailwind. The industry is mostly dominated by NVIDIA GPUs, but Arista is also working on pilot projects on other AI accelerators such as AMD MI series. Such an initiative augurs well for long-term sustainable growth. Its strong focus on innovations is enabling the company to gain a competitive edge against its other competitors in the enterprise networking vertical, such as Cisco and HPE.
 
Per a Precedence Research report, the AI in networks market size is projected to grow from $15.28 billion in 2025 to $192.34 billion in 2034 with a compound annual growth rate 32.51%. With its robust portfolio offerings, Arista stands to gain from this trend. Arista expects to generate $750 million in revenues from back-end AI networking, while aggregated AI networking revenue is projected to cross $1.5 billion in 2025.

The acquisition of VeloCloud, a leading provider of AI-optimized SD-WAN solutions, also significantly boosted Arista’s foothold in the data center and campus networking vertical. This is likely to boost commercial prospects.

Strong Cash Flow and Robust Liquidity are Positives

In the first six months of 2025, Arista generated $1.84 billion of net cash from operating activities compared with $1.5 billion in the year-ago period. In the second quarter, Arista generated $1.2 billion in cash from operations. The figure is the highest in Arista’s history, reflecting strength in its business model.

The company’s debt-to-capital ratio stands at 0.0% compared with the industry’s average of 16.2%. In the second quarter, its current ratio is 3.33, well above the industry’s average of 1.95. A current ratio above 1 suggests that a company is well-positioned to meet its short-term obligations.

Estimate Revision Trend

Earnings estimates for Arista for 2025 and 2026 have increased over the past 60 days.

Key Valuation Metric of ANET

From a valuation standpoint, Arista trades at a forward price-to-sales ratio of 18.14, higher than the industry.

End Note

Arista is set to gain from strong demand trends in the AI networking verticals driven by its comprehensive portfolio and strong focus on innovation. Solid growth in cash flow underscores efficient capital management. Strong liquidity will enable it to make further investments in product development and acquisitions in the future. Northward estimate revision highlights growing confidence of investors about Arista’s growth potential. Owing to these factors, Arista, which carries a Zacks Rank 2 (Buy), appears to be a good investment option currently. 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).

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