Arista Networks (ANET) Drops 3.15% Amid Growth Concerns

On September 2, 2025, Arista Networks experienced a 3.15% drop in pre-market trading, reflecting investor sentiment and market dynamics.

Arista Networks has been riding the wave of significant investments in artificial intelligence (AI), which has driven strong demand for its networking solutions. The company reported solid financial performance, with a strong second quarter that beat consensus expectations across the board. This performance was driven by robust contributions from AI and cloud sectors, which are expected to continue fueling growth.

Arista Networks' strategic focus on AI and cloud sectors supports its growth trajectory. The company's revenue in the EMEA region saw a substantial increase of 58% year-over-year, highlighting impressive international growth. Additionally, the company's total remaining performance obligations (RPO) balance increased significantly to approximately $4.7 billion, indicating strong future revenue potential.

However, there are risks associated with growth deceleration expected in 2026, with management preliminary forecasting 14% growth to $10 billion versus 25% growth in 2025. Elevated risk levels are flagged, related to capex slowdown next year, competitive risks, limited margin upside, and a high valuation multiple of 40x 2026 P/E. The company guided a slight decrease in gross margins and operating margins in the third quarter, leaving room for potential tariff impacts as well as an uptick in expenses.