Arista Stock Reverses Down Amid Analyst Day Touting AI

Arista Networks (ANET) forecast 20% revenue growth in fiscal 2026 to $10.5 billion, slightly above consensus estimates, at its analyst day. Arista stock initially rose, then reversed down on Friday as Wall Street analysts mulled artificial intelligence-related guidance from the maker of computer networking gear as well as the company's three-year financial targets.

Amid a capital spending boom at cloud computing companies, Arista late Thursday predicted that its AI networking revenue will grow 70% in 2026 to around $2.75 billion, up from $1.5 billion this year. That outlook "could be conservative given the large product deferred revenue balance," Barclays analyst Tim Long said in a report.

For fiscal years 2026 to 2029, Arista said it expects "mid-teens" revenue growth, an outlook also deemed as conservative by many analysts. Arista predicted long-term operating margins in a range of 43% to 45%, about four points lower than in 2025.

Operating Margin Outlook Underwhelms?

On the stock market today, Arista stock tumbled 8.9% to close at 139.39. Shares initially traded up after the analyst day. Heading into the Arista analyst day, shares had advanced 37% in 2025, hitting a record high of 156.32 on Thursday amid market euphoria on Oracle (ORCL) financial results.

While the Nasdaq composite was up  on Friday, many tech companies pulled back, indicating some profit-taking could be under way. Arista's operating margin outlook also could be a factor in the retreat.

Several Wall Street firms raised price targets on Arista stock on Friday, including Goldman Sachs, JPMorgan, Morgan Stanley, Wells Fargo, Wolfe Research and Evercore ISI.

"Peaking growth trends in 2025 were a key concern following significant capex growth of cloud titans, but management discussed opportunities with new applications leading to large buildouts," said Tal Liani, a BofA analyst in a report.

He added: "A primary message of the analyst day was the superior innovation position vs. competitors.  While white boxes will continue to be deployed, we note  Arista operates in a different part of the market."

Meanwhile, Arista's AI revenue will come from both "front end" network switches as well as "back-end" Ethernet networking technology that connects the clusters of AI servers in cloud-computing data centers.

Cisco Systems, Juniper Are Rivals

Arista sells computer network switches that speed up communications in internet data centers. Further, its chief rivals are Cisco Systems (CSCO) and Hewlett Packard Enterprises (HPE) unit Juniper Networks. Another competitor is contract manufacturer Celestica (CLS).

In the AI Ethernet networking market, Arista competes with Nvidia (NVDA).

"Debates regarding (Arista) share shifts and technology evolution are overshadowed by an abundance of AI-related spending," Raymond James analyst Simon Leopold said in a report Friday.

Arista's two biggest cloud customers remain Microsoft (MSFT) and Facebook parent Meta Platforms (META). At the analyst day, Arista declined to discuss whether it's getting more business from Oracle (ORCL), which has projected strong data center growth.

Market At Highs With Fed Due; Nvidia, Meta Eye Buy Points

Enterprise Market Push

But Arista also has been gaining ground in the so-called "enterprise" market, which includes large companies, government agencies and educational institutions. To boost its enterprise product line, Arista recently acquired VeloCloud, which sells software-defined wide-area network (SD-WAN) technology.

"Despite the valuation (of Arista stock), we continue to like Arista for its multiple growth drivers across AI," William Blair analyst Sebastien Naji said in a report. "We also see a significant opportunity for accelerated share gains in the enterprise, supported by an expanded set of campus capabilities."

He added, "The debate between InfiniBand and Ethernet is largely settled, with Ethernet having emerged as the protocol of choice for AI data centers."

Arista is among AI stocks to watch. Meanwhile, Arista has its own formidable semiconductor ally in Broadcom (AVGO).

Arista Stock Technical Ratings

Further, ANET stock holds a best-possible IBD Composite Rating of 99, according to IBD Stock Checkup. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.

Meanwhile, Arista stock has an Accumulation/Distribution Rating of A, according to IBD MarketSurge analysis. That rating indicates heavy institutional buying of ANET stock.

Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.

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