Arista Earnings: We Raise Our Forecast After Blowout Quarter

Key Morningstar Metrics for Arista Networks

• Fair Value Estimate: $120.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of Arista Networks’ Earnings

Arista Networks’ ANET second-quarter results crushed management guidance, and the firm significantly raised its full-year 2025 outlook. Revenue rose 30% year over year to $2.2 billion. 2025 guidance now calls for 25% revenue growth to $8.75 billion, up from 17% growth.

Why it matters: Arista’s best-of-breed capabilities in Ethernet switching are firing on all cylinders as it continues to take market share. 2025 guidance beat our already-bullish estimates. Artificial intelligence and cloud spending are driving immense growth in 2025, which we expect to continue into the long term.

• Management now expects to beat its $1.5 billion AI revenue target for 2025, which we previously viewed as conservative. We model well above $2 billion in AI revenue in 2025. We liked to hear about a proliferation of enterprise and small-cloud AI customers, in addition to large public cloud vendors.
• Strong results and guidance align with our bullish expectations for Arista to take share and be a technology leader in AI networking. We see Arista as the primary beneficiary and driver of the transition to Ethernet from Nvidia’s proprietary Infiniband technology in generative AI networking.

The bottom line: We raise our fair value estimate for wide-moat Arista Networks to $120 per share from $82 after materially raising our long-term growth forecast. Shares rose 14% after hours due to the big guidance raise, and they look slightly overvalued.

• AI is a primary driver of our forecast for Arista. We expect 35% compound annual growth for Arista’s AI sales through 2029, approaching half of total sales by the end of the decade. In 2029, we model more than $7.5 billion in AI revenue, between back- and front-end infrastructure.
• We see high capital spending from marquee customers like Meta Platforms and Microsoft supporting our aggressive growth expectations for Arista. We expect Arista to be a preferred option in AI cluster networking where performance is the ultimate criterion.