Arista Earnings: Take the Opportunity to Buy After a Lighter Beat-and-Raise Than Usual

Key Morningstar Metrics for Arista Networks

• Fair Value Estimate
  : $190.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : High

What We Thought of Arista Networks’ Earnings

Arista Networks’ ANET first-quarter revenue and operating margin came in ahead of guidance, and management raised its full-year outlook for total revenue and artificial intelligence revenue. Shares dropped 13% after hours, likely due to full-year guidance missing even stronger expectations.

Why it matters: Arista’s fundamentals are excellent. First-quarter revenue rose 35% year over year, and second-quarter guidance implies 29% year-on-year growth. AI infrastructure spending is supporting robust networking demand, benefiting Arista in the medium term, in our view.

• Investors are used to beat-and-raises, as Arista guides conservatively. New guidance met our above-sell-side-consensus model, which was likely below buy-side investor “bogeys.” We focus on the long-term growth trend, which is highly positive, as we know AI sales can be lumpy quarter to quarter.
• Arista again noted supply constraints, with lead times reaching 52 weeks. We view 35% growth as extremely impressive amid supply constraints. We expect supply to undershoot demand for the foreseeable future, lengthening the current period of immense shipment growth for Arista.

The bottom line: We raise our fair value estimate for wide-moat Arista to $190 per share from $175, driven by a stronger forecast for high-speed data center revenue growth over the next three years. After the aftermarket selloff, we see shares as attractive.

• We forecast above management guidance, at 30% growth in 2026. Thereafter, we project 25% revenue growth in 2027 and 20% in 2028, followed by mid-teens growth. On top of this, we expect modest non-GAAP operating margin expansion to 49% by 2028, up from 48% in 2025.

Coming up: Specifically, Arista raised its 2026 sales guide to $11.5 billion (from $11.25 billion) and its 2026 AI sales guide to $3.5 billion (from $3.25 billion). The entire higher guide is generated by AI. We model $200 million above both these figures, and we view management’s outlook as conservative.