Arista Networks (ANET) is slowly building momentum as a foundation enabler of artificial intelligence (AI) compute infrastructure. While Nvidia (NVDA) and Broadcom (AVGO) make the headlines, Arista’s networking hardware, supported by its software-centric EOS foundation, is gaining traction in the form of hyperscaler AI clusters. 

Redburn Atlantic started coverage with a “Buy” rating in a report citing the critical involvement of Arista in large-scale Ethernet-based AI clusters. While the larger market has turned skittish on generative AI infrastructure investment, Redburn suggests that exposure to internal and external hyperscaler workloads puts Arista on a path for enduring long-term expansion. 

Beyond short-term headwinds associated with cyclic IT budgets at the corporate level, the company’s differentiated technology stack presents a clean runway as AI uptake increases. Following a 6.9% decline on May 29, the stock now sits at a better-looking entry point. 

About Arista Networks Stock 

Arista Networks (ANET) is a premier provider of cloud networking solutions for campus environments and big data centers. Located in Santa Clara, California, Arista is a company famous for its Extensible Operating System (EOS), a programmable, open-platform software suite used in its high-speed routers and switches. With a market capitalization of $108 billion, the company generates more than $7 billion in revenue annually.

In the last 52 weeks, ANET stock has fluctuated between $59.43 and $133.57. It was trading at around $86, down 6.9% on May 29, and is now down 34% off its year-to-date high. For the year, the stock lags the S&P 500 Index ($SPX), which has gained about 0.4%, as a result mainly of fears about the cyclicality in the spending on the enterprise side of the networking business.

Valuations are high, but warranted by Arista’s leading presence in Ethernet-based AI architecture. ANET has a forward price-earnings multiple of 37.5x and a price-sales multiple of 15.49x, significantly higher than industry comparables. 

Its price-cash flow ratio is 41.37x, while the price-book rate is 10.72x, a testament to faith in its asset-light, high-margin business model. Its 40.73% profit margin and 30.48% return on equity make it one of the most profitable operating models in the industry. 

With zero debt and healthy liquidity, the company can continue to invest in research & development and strategic expansion. 

Arista Networks Falls Short on Earnings

Arista Networks exceeded the $2 billion quarterly revenue mark for the first time in company history during Q1 2025, posting strong top-line growth and maintaining industry-leading margins despite macroeconomic uncertainty.

The company reported Q1 2025 revenue of $2.005 billion, up 3.9% quarter-over-quarter and 27.6% year-over-year. Non-GAAP EPS came in at $0.65, up 30% from $0.50 in the year-ago period, while GAAP net income reached $813.8 million, or $0.64 per diluted share. Margins remained robust, with non-GAAP gross margin at 64.1% and GAAP gross margin at 63.7%, nearly flat from the prior quarter and year. The company also executed a record $787 million in stock repurchases, the highest quarterly or annual total in its history, signaling strong conviction in long-term shareholder value.

CEO Jayshree Ullal noted, “As we enter 2025, AI, cloud, and enterprise customers continue to drive network transformation. Arista’s trifecta of innovation, growth, and profitability is reflected in our results.”

Looking ahead, Arista guided for Q2 2025 revenue of approximately $2.1 billion, with a non-GAAP gross margin of around 63% and an operating margin of around 46%. Management emphasized continued strength in AI-centric innovations, including new Cluster Load Balancing (CLB) and observability tools designed to optimize large-scale AI workloads.

What Analysts Expect for Arista Networks Stock

Arista has a “Moderate Buy” rating from 22 analysts. Of these, 14 have “Strong Buy,” two have “Moderate Buy,” and six have “Hold” ratings, according to Barchart. Although the recent pullback has added caution, the overall sentiment remains positive. Redburn’s new “Buy” rating further boosts institutional confidence in Arista’s AI relevance.

The average price target for ANET is $112, representing nearly 30% upside potential. Redburn’s Mike Harrison reiterated that the Street underestimates the strategic value of the AI data center software stack offered by Arista. Nonetheless, he cautioned that near-term AI-related revenue streams for the company are subject to cyclic pressure since the company has exposure in internal and external hyperscaler workloads.