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Arista Surges 53.6% in the Past Year: Is it Worth Investing in Now?
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Key Takeaways
Arista has gained 53.6% in a year, outpacing peers like Hewlett Packard and Cisco.
Strong cloud networking demand and Arista 2.0 strategy fuel its solid growth outlook.
Margin strain from higher costs and customer concentration risks temper investor optimism.
Arista Networks, Inc. (ANET - Free Report) has surged 53.6% over the past year compared with the industry’s growth of 75.3%. It has also outperformed its peers, such as Hewlett Packard Enterprise Company (HPE - Free Report) and Cisco Systems, Inc. (CSCO - Free Report) . While Hewlett Packard has gained 27%, Cisco is up 31.4% over this period.
Arista continues to benefit from the expanding cloud networking market, led by a strong demand for scalable infrastructure. 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.
One-Year ANET Stock Price Performance
Image Source: Zacks Investment Research
ANET Buoyed by Multi-Domain Software Strength
Arista holds a leadership position in the 100-gigabit Ethernet switching share-in-port for the high-speed data center segment. It is increasingly gaining market traction in 200- and 400-gig high-performance switching products. In addition, the company 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. The company also innovates in areas such as deep packet buffers, embedded optics and reversible cooling.
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. 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.
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. This supports video conferencing applications like Google Hangouts, Microsoft Teams and Zoom. The acquisition of Awake Security, a Network Detection and Response platform provider that combines AI (artificial intelligence) with human expertise to autonomously hunt and respond to insider and external threats, has expanded its cognitive campus portfolio with new platforms. These include the 750 Series modular chassis and the 720 Series 96-port fixed switch. Arista has also announced unified edge innovations across wired and wireless networks for its Cognitive Campus Edge portfolio for Enterprise Workspaces and an enterprise-grade Software-as-a-Service offering for the flagship CloudVision platform.
Arista 2.0 Strategy Gaining Steam
The Arista 2.0 strategy is resonating well with customers, as its modern networking platforms are foundational for the transformation from silos to data centers. The company boasts a comprehensive portfolio with the right network architecture for client-to-campus data center cloud and AI 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.
The Arista 2.0 strategy includes three components that are likely to drive growth over the next few years. The first component involves focused plans to invest in core businesses by rolling out new solutions and improved AI offerings. Secondly, Arista aims to emphasize more on software-as-a-service for improved revenue visibility. Last but not least, the company plans to enter adjacent markets to target a broader customer base.
Estimate Revision Trend of ANET
Earnings estimates for Arista for 2025 have climbed 20.1% to $2.81 over the past year, while the same for 2026 has increased 14.6% to $3.21. The positive estimate revision depicts optimism about the stock’s growth potential.
Image Source: Zacks Investment Research
ANET Fret Over Margin Niggles
Despite the positives, Arista continues to derive a substantial portion of its revenues from a limited number of large customers, leading to high customer concentration risk. In addition, efforts to develop new technologies and products that address emerging technological trends, evolving industry standards and changing end-customer needs increase operating costs. Moreover, the redesigning of products and their supply chain mechanism has eroded margins. The company is witnessing increased demand, but there are lingering supply bottlenecks for advanced products. As such, when Arista increases orders for these components and tries to build up inventory, it is blocking working capital.
Image Source: Zacks Investment Research
End Note
With healthy revenue-generating potential driven by robust demand trends, Arista appears poised for solid growth momentum. Further, a strong emphasis on quality, diligent execution of operational plans and continuous portfolio enhancements are driving more value for customers. Solid traction from the Arista 2.0 strategy is a major tailwind. An uptrend in estimate revision further portrays positive investor sentiments.
However, margin woes amid high selling, general & administrative and R&D costs and elevated customer inventory levels weigh on its bottom line. With a Zacks Rank #3 (Hold), Arista appears to be treading in the middle of the road, and investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Arista Surges 53.6% in the Past Year: Is it Worth Investing in Now?
Key Takeaways
Arista Networks, Inc. (ANET - Free Report) has surged 53.6% over the past year compared with the industry’s growth of 75.3%. It has also outperformed its peers, such as Hewlett Packard Enterprise Company (HPE - Free Report) and Cisco Systems, Inc. (CSCO - Free Report) . While Hewlett Packard has gained 27%, Cisco is up 31.4% over this period.
Arista continues to benefit from the expanding cloud networking market, led by a strong demand for scalable infrastructure. 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.
One-Year ANET Stock Price Performance
Image Source: Zacks Investment Research
ANET Buoyed by Multi-Domain Software Strength
Arista holds a leadership position in the 100-gigabit Ethernet switching share-in-port for the high-speed data center segment. It is increasingly gaining market traction in 200- and 400-gig high-performance switching products. In addition, the company 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. The company also innovates in areas such as deep packet buffers, embedded optics and reversible cooling.
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. 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.
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. This supports video conferencing applications like Google Hangouts, Microsoft Teams and Zoom. The acquisition of Awake Security, a Network Detection and Response platform provider that combines AI (artificial intelligence) with human expertise to autonomously hunt and respond to insider and external threats, has expanded its cognitive campus portfolio with new platforms. These include the 750 Series modular chassis and the 720 Series 96-port fixed switch. Arista has also announced unified edge innovations across wired and wireless networks for its Cognitive Campus Edge portfolio for Enterprise Workspaces and an enterprise-grade Software-as-a-Service offering for the flagship CloudVision platform.
Arista 2.0 Strategy Gaining Steam
The Arista 2.0 strategy is resonating well with customers, as its modern networking platforms are foundational for the transformation from silos to data centers. The company boasts a comprehensive portfolio with the right network architecture for client-to-campus data center cloud and AI 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.
The Arista 2.0 strategy includes three components that are likely to drive growth over the next few years. The first component involves focused plans to invest in core businesses by rolling out new solutions and improved AI offerings. Secondly, Arista aims to emphasize more on software-as-a-service for improved revenue visibility. Last but not least, the company plans to enter adjacent markets to target a broader customer base.
Estimate Revision Trend of ANET
Earnings estimates for Arista for 2025 have climbed 20.1% to $2.81 over the past year, while the same for 2026 has increased 14.6% to $3.21. The positive estimate revision depicts optimism about the stock’s growth potential.
Image Source: Zacks Investment Research
ANET Fret Over Margin Niggles
Despite the positives, Arista continues to derive a substantial portion of its revenues from a limited number of large customers, leading to high customer concentration risk. In addition, efforts to develop new technologies and products that address emerging technological trends, evolving industry standards and changing end-customer needs increase operating costs. Moreover, the redesigning of products and their supply chain mechanism has eroded margins. The company is witnessing increased demand, but there are lingering supply bottlenecks for advanced products. As such, when Arista increases orders for these components and tries to build up inventory, it is blocking working capital.
Image Source: Zacks Investment Research
End Note
With healthy revenue-generating potential driven by robust demand trends, Arista appears poised for solid growth momentum. Further, a strong emphasis on quality, diligent execution of operational plans and continuous portfolio enhancements are driving more value for customers. Solid traction from the Arista 2.0 strategy is a major tailwind. An uptrend in estimate revision further portrays positive investor sentiments.
However, margin woes amid high selling, general & administrative and R&D costs and elevated customer inventory levels weigh on its bottom line. With a Zacks Rank #3 (Hold), Arista appears to be treading in the middle of the road, and investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.