Morningstar

Arista Earnings: Raising Fair Value Estimate Amid High-Speed Networking Growth

Arista stock popped more than 10% after hours, but it still looks materially undervalued to us. This is a top pick in technology hardware.

General view of the Arista logo on a building.
Securities in This Article
Arista Networks Inc
(ANET)

Key Morningstar Metrics for Arista Networks

  • Fair Value Estimate
    : $270.00
  • Morningstar Rating
    : ★★★★
  • Morningstar Economic Moat Rating
    : Wide
  • Morningstar Uncertainty Rating
    : High

What We Thought of Arista Networks’ Earnings

Arista Networks ANET posted blowout third-quarter results and provided a huge outlook for 2027. Sales rose 58% year on year to $3.66 billion, and fourth-quarter guidance calls for similar growth. 2027 sales guidance of $18.5 billion implies close to 40% annual growth.

Why it matters: Arista’s stellar guidance lends credence to our view that artificial intelligence investment is accelerating through 2027 and into 2028. Arista stands out as a major beneficiary of AI spending, with an open ecosystem, best-in-class performance, and a software-led wide moat in networking.

  • Arista expects to service 10 or more gigawatts of AI capacity in 2027, all from scale-out and scale-across networking. Scale-up remains a call option for 2028 and beyond. We like strong penetration in large customers Microsoft and Meta, and surmise Oracle and Anthropic are included too.
  • We see Arista as optics-agnostic, working with pluggable and near-packaged optics architectures alike. We agree with management that copper and optics are complementary, with attractive growth for both in the medium term. We see the bear thesis around Arista and optics fading.

The bottom line: We raise our fair value estimate for wide-moat Arista to $270 per share from $230, with a higher medium-term growth forecast. Shares popped more than 10% after hours, but still look materially undervalued to us. This is a top pick of ours in technology hardware.

  • We model about 5% above Arista’s 2027 target, given the firm’s conservative guidance record. After more than 40% growth in 2027, we model more than 20% growth again in 2028, tapering to the mid-teens by 2030. We see durable AI spending growth as the primary driver here.
  • Arista may look expensive, with our valuation implying it’s worth 42 times 2027 earnings. We see Arista growing quickly into this multiple through 2030, and believe investors have a strong entry point, even after the positive earnings reaction, ahead of surging results in 2027.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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