Arista Network Tests Key Trend Line following Earnings

Arista Networks (ANET) reported strong fourth-quarter earnings, surpassing expectations on both earnings per share (EPS) and revenue. The company posted adjusted EPS of $0.65, beating the consensus estimate of $0.57, while revenue came in at $1.93 billion, exceeding the expected $1.90 billion and marking a 25% year-over-year increase. Product revenue grew 23% to $1.61 billion, while service revenue surged 40% to $322.3 million. However, Arista’s Q4 adjusted operating margin declined to 47% from 48.3% a year ago, with an adjusted gross margin of 64.2% compared to 65.4% last year.

Despite these strong results, investor focus remains on Arista’s FY25 guidance, which was modestly raised to 17% year-over-year growth, up from 16% in the prior quarter but below consensus expectations of 19%. Management reaffirmed its target of $750 million in AI-related revenue for the year, with most of it coming from Ethernet networking in AI data centers. However, analysts at RBLT remain skeptical, noting that Arista will need additional AI-related GPU deployments to fully achieve this goal. The firm lowered its price target from $80 to $85 but maintained a Sell rating, citing concerns over the AI back-end opportunity.

Arista continues to benefit from the industry shift towards Ethernet in AI networking, with three major Cloud Titan customers set to deploy a cumulative 100,000 GPUs in 2025. However, a fourth Cloud Titan is still deciding between Ethernet and InfiniBand, and a fifth non-Cloud Titan customer is seeking funding. Analysts at Barclays view Arista’s FY25 outlook as conservative, believing management may raise guidance throughout the year. Needham also remains optimistic, highlighting AI-driven networking demand and the company’s strong execution as key factors supporting its long-term growth trajectory.

From a technical perspective, ANET stock is testing key trend line support at the psychologically important $100 level. A breakdown below this level could open the door for a decline toward the $85-$90 range. The stock fell 4.7% in early trading following the earnings release, reflecting investor disappointment with the lack of a significant upward revision to guidance. Nonetheless, Arista’s dominant position in cloud networking, expanding Tier 1 customer base, and continued investment in AI infrastructure suggest long-term tailwinds remain intact, even as near-term volatility persists.