Should You Buy, Sell or Hold ANET Stock Ahead of Q1 Earnings?

Arista Networks, Inc. ANET is scheduled to report first-quarter 2025 earnings on May 6. The Zacks Consensus Estimate for revenues and earnings is pegged at $1.96 billion and 59 cents per share, respectively. Earnings estimates for Arista for 2025 have remained steady at $2.47 per share over the past 60 days but decreased marginally to $2.87 per share for 2026.

ANET Estimate Trend

Earnings Surprise History

The communications components provider delivered a four-quarter earnings surprise of 12.9%, on average, beating estimates on each occasion. In the last reported quarter, the company pulled off an earnings surprise of 14%. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

Earnings Whispers

Our proven model does not predict an earnings beat for Arista for the first quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. 

Arista currently has an ESP of 0.00% with a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Shaping the Upcoming Results

Arista holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. It is increasingly gaining market traction in 200- and 400-gig high-performance switching products. 

The company 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. 

During the quarter, the company introduced new features to improve the performance and efficiency of AI (artificial intelligence) clusters. The newly launched Cluster Load Balancing in the Arista Extensible Operating System optimizes AI workload performance through consistent, low-latency network flows, while the Arista CloudVision Universal Network Observability enhances troubleshooting and ensures job completion reliability at scale with AI job-centric observability. The platform’s deep-dive analytics help identify performance bottlenecks with precision by analyzing network devices, server Network Interface Cards and associated flows. Its flow visualization feature provides intuitive visibility into AI job flows at microsecond granularity, accelerating issue resolution. Furthermore, the platform’s proactive features detect anomalies early, correlating network and compute performance to ensure that AI workloads remain efficient and uninterrupted.   

With these new upgrades, Arista continues to lead the way in optimizing AI networks, ensuring high-efficiency AI workload execution and supporting the ever-growing demands of modern AI infrastructures. As a result, the demand for Arista's solutions is expected to rise, potentially driving higher revenues.

Price Performance

Over the past year, Arista has gained 26.5% compared with the industry’s growth of 20.9%, outperforming peers like Juniper Networks, Inc. JNPR and Cisco Systems, Inc. CSCO. Juniper has gained 3.3% and Cisco soared 22.4% during this period. 

One-Year ANET Stock Price Performance

Key Valuation Metric

From a valuation standpoint, Arista appears to be trading relatively cheaper compared to the industry and below its mean. Going by the price/earnings ratio, the company shares currently trade at 31.06 forward earnings, lower than 34.29 for the industry and the stock’s mean of 34.85. 

Investment Considerations

Arista continues to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. It is well-poised for growth in data-driven cloud networking business with proactive platforms and predictive operations. It offers one of the broadest product lines of datacenter and campus Ethernet switches and routers in the industry. Arista provides routing and switching platforms with industry-leading capacity, low latency, port density and power efficiency.

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 also innovates in areas such as deep packet buffers, embedded optics and reversible cooling. With customers deploying transformative cloud networking solutions, the company has announced several additions to its multi-cloud and cloud-native software product family with CloudEOS Edge.

However, Arista is 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.

End Note

With solid fundamentals and healthy revenue-generating potential driven by robust demand trends, Arista appears poised to benefit in the long run. Further, a strong emphasis on quality, diligent execution of operational plans and continuous portfolio enhancements are driving more value for customers. 

However, it looks a bit expensive relative to its valuation metrics. Moreover, with declining earnings estimates, the stock is witnessing a negative investor perception at the moment. Arista seems to be treading in the middle of the road, and investors could be better off if they trade with caution.

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

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