Arista Networks (ANET) AI Stock Analysis

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Arista Networks

(NYSE:ANET)

84Outperform

Arista Networks' stock is bolstered by excellent financial performance, backed by strong revenue growth and profitability. The company's leadership in cloud and AI sectors further enhances its outlook. However, the high valuation and some operational challenges, such as the decline in Meta revenue and gross margin compression, moderately offset these strengths.

Positive Factors

Growth Strategy

Arista is added to the Analyst Focus List due to growth strategy with potential upside to the December-25 price target of $140.

Market Position

Arista is well positioned to beat and maintain against the lowest expectations seen for the stock in the past few years.

Negative Factors

Competition Concerns

Concern that white-box vendors have made inroads into parts of the network has pressured the shares.

Tariff Impact

There is a modest negative impact expected from the 10% baseline tariff on all countries other than China.

Arista Networks (ANET) vs. S&P 500 (SPY)

Market Cap

$113.97B

Dividend YieldN/A

Average Volume (3M)12.17M

Price to Earnings (P/E)40.8

Beta (1Y)2.08

Revenue Growth19.50%

EPS Growth34.64%

CountryUS

Employees4,412

SectorTechnology

Sector Strength67

IndustryComputer Hardware

Share Statistics

EPS (TTM)0.65

Shares Outstanding1,255,625,500

10 Day Avg. Volume11,126,932

30 Day Avg. Volume12,172,808

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market Cap1.17

Enterprise Value/RevenueN/A

Enterprise Value/Gross Profit29.75

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$108.08

Price Target Upside25.02% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering15

Arista Networks Business Overview & Revenue Model

Company DescriptionArista Networks, Inc. develops, markets, and sells cloud networking solutions in the Americas, Europe, the Middle East, Africa, and the Asia-Pacific. The company's cloud networking solutions consist of extensible operating systems, a set of network applications, as well as gigabit Ethernet switching and routing platforms. It also provides post contract customer support services, such as technical support, hardware repair and parts replacement beyond standard warranty, bug fix, patch, and upgrade services. The company serves a range of industries comprising internet companies, service providers, financial services organizations, government agencies, media and entertainment companies, and others. It markets and sells its products through distributors, system integrators, value-added resellers, and original equipment manufacturer partners, as well as through its direct sales force. The company was formerly known as Arastra, Inc. and changed its name to Arista Networks, Inc. in October 2008. Arista Networks, Inc. was incorporated in 2004 and is headquartered in Santa Clara, California.

How the Company Makes MoneyArista Networks generates revenue primarily through the sale of its networking hardware and software products. The company's key revenue streams include the sale of its Ethernet switches and routers, which are integral to building high-speed, scalable networks. Additionally, Arista offers software products and services that enhance network functionality and management capabilities, providing a recurring revenue stream. The company has established significant partnerships with major cloud providers and tech companies, which contribute to its earnings by expanding its market reach and enhancing its product offerings through integrations. Arista's focus on innovation and customer-driven solutions ensures a competitive edge in the rapidly evolving networking industry.

Arista Networks Key Performance Indicators (KPIs)

Any

Gross Margin by Segment

Gross Margin by Segment
Analyzes profitability across different segments, helping to identify areas with strong cost management and pricing power, and those that may need strategic adjustments.

Chart InsightsArista Networks' product gross margins have shown a gradual recovery since 2023, aligning with strategic improvements in supply chain management and high-speed Ethernet leadership. Service margins remain robust, reflecting the company's strong position in network software and subscription services. Despite a slight dip in overall gross margins due to mix changes and tariffs, Arista's focus on AI and cloud innovations, supported by key clients like Microsoft and Meta, positions it well for continued growth. However, challenges such as Meta's revenue decline and international revenue pressures could impact future margins.

Data provided by:

Main Street Data

Arista Networks Financial Statement Overview

Summary

Arista Networks displays an excellent financial profile across all key verticals. Strong revenue growth, high profit margins, and a solid balance sheet with no debt underscore the company's financial strength and competitive positioning.

Income Statement

Very Positive

Arista Networks has demonstrated impressive revenue growth with a robust revenue increase of 19.5% from 2023 to 2024. The company maintains a strong gross profit margin of 64.1%, and a net profit margin of 40.7%, showcasing effective cost management and profitability. Both EBIT and EBITDA margins are healthy at 42.1%, reflecting operational efficiency. These metrics highlight Arista Networks' strong financial performance and competitive positioning in the market.

Balance Sheet

Very Positive

The company has a solid balance sheet with no debt and a strong equity standing, resulting in a favorable debt-to-equity ratio of 0.0. The return on equity is remarkable at 28.5%, indicating efficient use of equity capital to generate profits. The equity ratio of 71.2% further underlines financial stability and low leverage risk, making Arista Networks a financially sound company.

Cash Flow

Very Positive

Arista Networks exhibits strong cash flow management with a significant free cash flow growth rate of 83.8%. The operating cash flow to net income ratio is robust at 1.3, demonstrating effective cash generation relative to net income. The free cash flow to net income ratio is also strong at 1.3, indicating efficient conversion of income to cash. These metrics highlight the company’s ability to generate and manage cash effectively.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
7.00B	5.86B	4.38B	2.95B	2.32B
	Gross Profit
4.49B	3.63B	2.68B	1.88B	1.48B
	EBIT
2.94B	2.26B	1.53B	924.74M	699.68M
	EBITDA
3.01B	2.33B	1.59B	975.07M	734.84M
	Net Income Common Stockholders
2.85B	2.09B	1.35B	840.85M	634.56M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
8.30B	5.01B	3.02B	3.41B	2.87B
	Total Assets
14.04B	9.95B	6.78B	5.73B	4.74B
	Total Debt
0.00	0.00	43.96M	56.53M	72.40M
	Net Debt
-2.76B	-1.94B	-627.74M	-564.29M	-820.82M
	Total Liabilities
4.05B	2.73B	1.89B	1.76B	1.42B
	Stockholders Equity
9.99B	7.22B	4.89B	3.98B	3.32B
Cash Flow		Free Cash Flow
3.68B	2.00B	448.17M	951.12M	719.73M
	Operating Cash Flow
3.71B	2.03B	492.81M	1.02B	735.11M
	Investing Cash Flow
-2.46B	-687.45M	216.33M	-925.56M	-608.80M
	Financing Cash Flow
-421.81M	-83.75M	-654.60M	-360.88M	-346.34M

Arista Networks Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price86.45

Price Trends

50DMA

80.20

Positive

100DMA

96.38

Negative

200DMA

94.92

Negative

Market Momentum

MACD

2.62

Negative

RSI

58.75

Neutral

STOCH

83.56

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ANET, the sentiment is Neutral. The current price of 86.45 is above the 20-day moving average (MA) of 77.96, above the 50-day MA of 80.20, and below the 200-day MA of 94.92, indicating a neutral trend. The MACD of 2.62 indicates Negative momentum. The RSI at 58.75 is Neutral, neither overbought nor oversold. The STOCH value of 83.56 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ANET.

Arista Networks Risk Analysis

Arista Networks disclosed 58 risk factors in its most recent earnings report. Arista Networks reported the most risks in the “Ability to Sell” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Arista Networks Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ANET	84 Outperform	$113.97B	40.78	33.14%	―	19.50%	34.64%
PSTG	72 Outperform	$15.60B	155.54	8.29%	―	11.92%	74.08%
SMCI	71 Outperform	$19.66B	14.37	21.02%	―	124.51%	87.78%
NTAP	70 Outperform	$19.04B	17.23	114.33%	2.25%	5.46%	23.49%
DELL	70 Outperform	$65.56B	14.80	-179.12%	1.97%	7.84%	42.63%
HPQ	63 Neutral	$24.16B	9.31	84.33%	4.41%	1.03%	-18.56%
Sector *	60 Neutral	$10.78B	10.47	-6.71%	2.99%	7.58%	-12.08%

* Technology Sector Average

Performance Comparison

ANET

Arista Networks

86.45

13.53

18.55%

HPQ

25.85

-2.59

-9.11%

NTAP

NetApp

93.02

-14.38

-13.39%

SMCI

Super Micro Computer

32.48

-49.78

-60.52%

PSTG

Pure Storage

47.64

-5.81

-10.87%

DELL

Dell Technologies

95.79

-33.55

-25.94%

Arista Networks Earnings Call Summary

Earnings Call Date:May 06, 2025

(Q1-2025)

% Change Since: -4.76%|

Next Earnings Date:Aug 04, 2025

Earnings Call Sentiment Positive

Arista Networks demonstrated strong financial performance and growth, with record revenue and gross margin achievements, significant customer wins, and a strategic stock repurchase program. However, uncertainties related to tariffs, deferred revenue volatility, and inventory management pose notable challenges. The company remains cautious about future impacts from trade and macroeconomic factors.

Q1-2025 Updates

Positive Updates

Record-Breaking Revenue Achievement

Arista achieved its first $2 billion revenue quarter in Q1 2025, doubling revenue just 11 quarters after its first billion-dollar quarter. The revenue was up 27.6% year-over-year, surpassing the upper end of the guidance.

Strong Gross Margin Performance

Non-GAAP gross margin was 64.1%, influenced by an efficient supply chain and strong customer mix. This exceeded the guidance of approximately 63%.

Cloud and AI Momentum

Arista’s cloud and AI momentum continues with a confident goal of $750 million in AI back-end revenue for 2025. They are progressing well with major customers and plan to be the premier network for NVIDIA's GPU and AI accelerators.

International Revenue Growth

International revenues for Q1 were $406 million, or 20.3% of total revenue, up from 16% in the last quarter, showing strong international expansion.

Significant Stock Repurchase Program

Arista repurchased $787.1 million of common stock in Q1, the largest repurchase in its history, with an additional $100 million repurchased in April. A new $1.5 billion stock repurchase program was authorized.

Positive Customer Wins

Arista secured significant customer wins across federal, high-tech, and Web 3.0 sectors, indicating strong market penetration and customer trust.

Negative Updates

Tariff and Trade Uncertainty

There is significant uncertainty concerning tariffs and trade restrictions, which could impact future financial performance and gross margins. The company is absorbing some tariffs and may need to pass costs to customers.

Deferred Revenue Volatility

Product deferred revenue increased significantly, reflecting volatility and customer-specific acceptance clauses, partly due to uncertainty around tariffs.

Challenges in Inventory Management

Inventory levels increased to approximately $2 billion, reflecting an intentional action regarding tariffs and new product ramp-up, creating potential challenges in inventory turns and working capital optimization.

Potential Leadership Changes

Arista faces leadership transitions with some executives considering retirement or new ventures, which may impact its cohesive leadership team.

Company Guidance

During the first quarter of fiscal year 2025, Arista Networks reported its first $2 billion revenue quarter, driven by robust growth across sectors including generative AI, data center cloud, and campus enterprises. Software and service renewals constituted 17.1% of revenue. The company achieved a non-GAAP gross margin of 64.1%, influenced by efficient supply chain management and a favorable mix of enterprise and cloud customers. International revenues contributed 20%, with the Americas accounting for 80%. Arista's strategy includes a $750 million goal for AI infrastructure in 2025, supported by strong partnerships with cloud titans and emerging NeoCloud customers. The company is also expanding its presence in the federal sector, displacing incumbents with its campus switching solutions. Financially, Arista reported $2.005 billion in revenue for Q1, a 27.6% year-over-year increase, with net income of $826.2 million. The company repurchased $787.1 million in common stock and announced a new $1.5 billion stock repurchase program. Despite macroeconomic uncertainties, Arista maintains a positive outlook, aiming for $10 billion in revenue sooner than expected.

Arista Networks Corporate Events

Executive/Board Changes

Arista Networks Appoints Greg Lavender to Board

Neutral

Mar 17, 2025

On March 14, 2025, Arista Networks, Inc. announced the appointment of Greg Lavender as an independent member of its Board of Directors, expanding the board to nine members. Dr. Lavender, currently the Chief Technology Officer at Intel Corporation, brings extensive experience from previous roles at VMware, Citigroup, Cisco Systems, and Sun Microsystems. His appointment includes a position on the Audit Committee and standard non-employee director compensation. Additionally, John McCool, Arista’s Chief Platform Officer, Senior Vice President of Engineering and Operations, announced his resignation effective April 7, 2025, to take a personal leave of absence, though he will remain a senior advisor to the CEO. His responsibilities will be managed by Alex Rose and Mike Kappus during his absence.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.