Arista Networks (ANET), a key supplier for artificial intelligence infrastructure, is maintaining a critical technical support level after its stock price declined from an all-time high. The company recently reported strong quarterly earnings and raised its sales forecast for the year, but investor concerns about its long-term growth projections have introduced some market uncertainty.
Key Takeaways
- Arista Networks stock is holding support at its 21-day exponential moving average, a key technical indicator for traders.
- The company reported a 38% increase in earnings and a 30% rise in sales for its second quarter, exceeding analyst expectations.
- Despite strong current performance, Arista's long-term revenue growth forecast in the mid-teens has raised concerns about a potential slowdown.
- Institutional ownership remains strong, with funds holding 39% of outstanding shares and net buying activity in recent quarters.
Technical Performance and Market Position
Shares of Arista Networks are currently being watched closely by investors as they hold steady at the 21-day exponential moving average. A rebound from this technical level could signal continued positive momentum and potentially offer a new entry point for investors. Market analysts are also observing the stock's chart for the formation of a new base, with a potential buy point identified at 156.32.
The company's stock has performed well this year, recording a gain of nearly 30% year to date. This growth is largely driven by the ongoing expansion of AI infrastructure, as Arista's network switches are essential components for modern data centers that power artificial intelligence applications.
What Arista Networks Does
Arista Networks is a leading provider of high-performance network switches and software. These products are crucial for building the large, complex networks inside data centers operated by cloud computing giants, large enterprises, and service providers. As demand for AI and machine learning grows, so does the need for the fast and reliable data transfer that Arista's technology enables.
Exceptional Second-Quarter Financials
Arista delivered strong financial results in its second-quarter report on August 5. The company announced that earnings grew by 38% to 73 cents per share, while sales increased by 30% to $2.2 billion. These figures surpassed the expectations of analysts surveyed by FactSet, who had predicted earnings of 65 cents per share on $2.1 billion in sales.
Following the positive results, Arista provided an optimistic outlook for the current quarter. The company projected sales of $2.25 billion at the midpoint, which is slightly above the consensus view of $2.12 billion. Furthermore, Arista raised its full-year revenue growth guidance for 2025 from 17% to a more robust 25%.
Accelerated Growth Milestone
Arista also announced it expects to reach the $10 billion annual sales milestone in 2026, a full two years ahead of its previous schedule. This acceleration highlights the significant demand for its networking products, particularly those related to AI.
Wall Street's full-year estimates reflect this confidence. For 2025, analysts anticipate earnings of $2.81 per share, representing a 24% increase from the previous year. Looking ahead to 2026, earnings are projected to climb another 17% to $3.29 per share. The stock reacted positively to the news, jumping 17% on August 6.
Analyst Day Brings New Scrutiny
Despite the strong earnings report, Arista's stock experienced a 9% drop during its analyst day on September 12. The decline was linked to the company's long-term financial projections. While Arista reiterated its 2026 revenue target, its forecast for long-term operating margins was viewed as a point of concern.
The company projected operating margins of 44% at the midpoint, which is slightly lower than its performance in 2025. This, combined with a forecast for revenue growth in the mid-teens from 2026 to 2029, signaled a potential deceleration from its current rapid expansion.
Following the second-quarter results, analysts at UBS had already cautioned about a potential slowdown, noting that the $10 billion sales target for 2026 implies a growth rate of only 14% to 15% next year, a significant decrease from the 25% guided for 2025.
However, the company's AI-related business remains a powerful growth engine. Arista forecast that revenue from its AI networking products would surge by 70% to approximately $2.75 billion this year alone.
Strong Investor Confidence and Ratings
Arista Networks continues to hold a leading position in the computer networking industry group, which itself ranks 21st out of 197 industry groups tracked by Investor's Business Daily. The stock maintains top-tier Composite and Earnings Per Share (EPS) Ratings of 99, indicating superior fundamental and technical performance.
Institutional investor confidence in Arista remains high. According to market data, large funds have been net buyers of the stock in six of the past seven quarters. These institutional investors now own 39% of the company's outstanding shares. This is further supported by an 'A' rating for Accumulation/Distribution, which shows that large investors have been actively adding to their positions over the last 13 weeks.
- Relative Strength Rating: 91 (up from 57 three months ago)
- Up/Down Volume Ratio: 1.6 (indicating higher demand over the past 50 days)
- Notable Fund Holders: Allspring Growth Fund (SGRAX) and Artisan Mid-Cap Fund (ARTMX)
The combination of strong current performance, a pivotal role in the AI boom, and solid institutional backing positions Arista Networks as a significant stock to watch, even as the market evaluates its long-term growth trajectory.
