ANET Rides on Strength in Cloud Networking Market: Will it Sustain?

Arista Networks Inc. ANET is benefiting from healthy traction in the cloud networking vertical. In the second quarter, the company’s revenues surged to $2.2 billion from $1.69 billion in the prior-year quarter. The company is steadily introducing various solutions for cloud, Internet service providers and enterprise networks to match the rising demands of AI/ML-driven network architectures. These innovations are enabling Arista to deliver a superior customer experience and increase customer engagement. The top line beat the consensus estimate of $2.11 billion.

The company boasts one of the broadest ranges of data center and campus Gigabit Ethernet switches (1/2.5/5/10/25/40/50/100/400) and routers in the industry. Its routing and switching platforms offer industry-leading capacity, low latency, port density and power efficiency.
 
AI deployments across industries are leading to a surge in data traffic. These AI workloads are putting pressure on the front-end cloud. This factor is driving up the migration from 100G to 400G and sometimes to 800G as well. Arista’s comprehensive portfolio stands to gain from these cloud network upgradation initiatives.

Arista expects the demand for its networking switches to continue in the upcoming quarters. It has been indicated that major hyperscaler customers will likely deploy Arista switches for back-end deployments in 2026, with revenues projected to reach $10 billion. Owing to solid momentum in cloud and AI, the company has also raised its guidance by $550 million to $8.75 billion.

How Are Competitors Faring?

Arista faces competition from Hewlett Packard Enterprise HPE and Cisco Systems Inc. CSCO in the cloud networking space. HPE is benefiting from a robust demand environment for its edge-to-cloud platform, GreenLake, backed by growing digital transformation initiatives. The GreenLake solution ensures greater visibility into resource utilization across co-located and public cloud-based workloads. With the acquisition of Juniper Networks, HPE has significantly strengthened its networking domain in AI, cloud and hybrid solutions.

Cisco’s solutions are also witnessing solid order growth from major players in the cloud computing space. In the third quarter, its data center switching orders jumped double digits year over year. Its partnership with NVIDIA is driving innovation. The Cisco Secure AI factory with NVIDIA provides a reliable framework for creating secure AI-native data centers for enterprises, sovereign cloud providers and newly emerging Neocloud providers.

ANET’s Price Performance, Valuation & Estimates

Shares of Arista have surged 50.9% over the past year compared with the industry’s growth of 38.3%.

From a valuation standpoint, Arista trades at a forward price-to-sales ratio of 18.35, above the industry average.

The Zacks Consensus Estimate for Arista’s earnings for 2025 has increased over the past 60 days.

Arista currently carries a Zacks Rank #2 (Buy). 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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