Arista Networks (ANET) Stock Forecast & Price Target

Arista Networks demonstrates a robust financial outlook underpinned by significant demand for Ethernet in AI data centers, highlighted by a $600 million quarter-over-quarter increase in deferred revenues, totaling $4.7 billion. The company’s purchase commitments rose substantially, indicating strong traction in new products and a growing backlog with major cloud and AI customers. Furthermore, the potential for maintaining operating margin levels while managing expenses positions Arista favorably as it aims for a 20% sales growth by 2026.

Arista Networks is facing a negative outlook primarily due to a significant deceleration in revenue and product billings, leading to a nearly 10% decline in shares following recent earnings results. Although the gross margins for 3Q were reported at 65.2%, there is guidance for a reduction of approximately 250 basis points quarter-over-quarter, indicating potential challenges in maintaining product margins, particularly as the company competes in a growing capital expenditure environment. Furthermore, economic downturns and shifting business priorities may adversely impact Arista's sales, particularly as slowdowns in Enterprise and Campus spending become a concern amidst an overall focus on operating expense control.