After Earnings, Is Arista Networks Stock a Buy, a Sell, or Fairly Valued?

Arista Networks ANET released its fiscal first-quarter earnings report on May 5. Here’s Morningstar’s take on Arista Networks’ earnings and stock.

Key Morningstar Metrics for Arista Networks Stock

• Fair Value Estimate

  : $190

• Morningstar Rating

  : ★★★★

• Morningstar Economic Moat Rating

  : Wide

• Morningstar Uncertainty Rating

  : High

What We Thought of Arista Networks’ Fiscal Q1 Earnings

Arista Networks’ 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 “bogies.” 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 these 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 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 midteens growth. On top of this, we expect modest non-GAAP operating margin expansion to 49% by 2028, up from 48% in 2025.

Coming up: 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 of these figures, and view management’s outlook as conservative.

Fair Value Estimate for Arista Networks Stock

With its 4-star rating, we believe Arista Networks’ stock is moderately undervalued compared with our long-term fair value estimate of $190. Our valuation implies a 2026 enterprise value/sales multiple of 20 times and a 2026 adjusted price/earnings multiple of 52 times. Against our estimate of 2027 and 2028 non-GAAP earnings, our valuation implies multiples of 42 times and 34 times, respectively. The greatest drivers to our valuation are growth in high-speed data center switching as well as broad-based market share gains.

We forecast 22% compound annual sales growth through 2030 for Arista. Sales into data centers are the biggest contributor to sales over our forecast, and we model a 24% compound annual growth rate. We expect Arista’s data center sales to increase faster than the market after 2026, with continued market share gains alongside Nvidia’s networking portfolio, and against all other peers. In particular, we see Arista leading a shift to Ethernet connectivity in artificial intelligence cluster networking, and we expect Arista to take share in this rapidly growing market. We expect Arista to outperform its 2026 target of $3.25 billion in total AI revenue, which we view as conservative.

Read more about Arista Networks’ fair value estimate.

Economic Moat Rating

We assign Arista Networks a wide Economic Moat Rating based on intangible assets in high-speed networking and customer switching costs. We view Arista’s high-speed switches and software-led approach as significantly differentiated from other networking competitors and very difficult to replicate. We expect strength in high-speed switching to generate economic profits for Arista, more likely than not, over the next 20 years.

Read more about Arista Networks’ economic moat.

Financial Strength

We view Arista’s balance sheet and cash flow generation as very strong. Going forward, we expect it to focus its cash flows on organic investment first, followed by opportunistic repurchases. Arista had a net cash position of $10.7 billion as of Dec. 31, 2025, with no debt on its balance sheet. It has consistently covered its obligations and organic needs with strong free cash flow. We forecast it to rapidly increase cash flow with the top line, rising from $4.3 billion (actual) in 2025 to $9 billion in 2030. Our model assumes free cash flow margin holding steady at 40% of revenue, and Arista converting more than 100% of its net income to cash flow. Though Arista has historically focused its cash wholly on organic investment, we believe its newfound acquisition and repurchase programs have been prudent.

Read more about Arista Networks’ financial strength.

Risk and Uncertainty

We assign Arista Networks a High Morningstar Uncertainty Rating. Arista’s sales are concentrated in the cloud networking market, which can exhibit cyclicality and lumpy spending patterns from customers. This lumpiness can be exacerbated by Arista’s concentration in customers like Microsoft MSFT and Meta Platforms META. Softer spending patterns at these customers can cause top-line performance to suffer. Arista is working to expand its presence in the larger enterprise market, both in on-premises data centers and campus environments. Arista’s market share in on-premises data centers trails its presence in high-speed cloud setups, and it has historically not been a participant in campus environments. We think its efforts to penetrate these markets create uncertainty. If it is unable to successfully make inroads, its performance could suffer.

On the environmental, social, and governance, or ESG, front, we foresee little risk for Arista. We view the biggest risk as a data or security breach via its equipment that could create permanent reputational harm for the firm, but we view this risk as low.

Read more about Arista Networks’ risk and uncertainty.

ANET Bulls Say

• Arista Networks has gained a top market share position in high-speed switching, resulting, in our view, from technology leadership, and it continues to gain share.
• Arista holds best-in-class profit margins and earns robust economic profits, reflecting its strong value proposition and wide economic moat.
• Arista earns heady free cash flow, which it can use for organic investment and shareholder returns.

ANET Bears Say

• Arista Networks has a weaker position in areas of networking outside high-speed switching and may struggle to expand into adjacent markets.
• We see higher competition for Arista within generative AI spending, with Nvidia holding a large incumbency via bundles of its proprietary networking equipment with its GPUs.
• Arista’s acquisition history is small and new, and it could risk destroying shareholder value with ill-advised deals.

This article was compiled by Jillian Moore.