Arista Networks (ANET) Stock Forecast & Price Target

Arista Networks has demonstrated a strong financial trajectory, with deferred revenues increasing significantly by $600 million quarter-over-quarter to reach $4.7 billion, indicating robust demand for Ethernet in AI data centers. The company also reported a substantial growth in purchase commitments, up $625 million, which reflects strong product traction and a growing backlog from major clients in the cloud and AI sectors. Furthermore, Arista's potential to maintain operating margins while controlling spending suggests that the company could exceed expectations, particularly with rising enterprise sales that may help counterbalance any deceleration in data center revenue growth.

Arista Networks experienced a significant decline in its stock price, falling approximately 10% after-hours due to revenue and product billings deceleration, alongside unchanged guidance for 2026 despite high expectations. The company's gross margins, while strong at 65.2%, are projected to decrease by around 250 basis points quarter-over-quarter, reflecting concerns about product margins dipping below 60% amid changing market dynamics. Furthermore, potential economic downturns could lead to reduced sales as customers may reassess spending priorities, particularly impacting Enterprise and Campus segments that have been critical to Arista's performance.