Why Arista Networks Stock Is Sinking Today

Core Viewpoint - Arista Networks' stock is experiencing a decline despite reporting strong fourth-quarter results, indicating that investor expectations may have been higher than the company's guidance [1][2]. Financial Performance - Arista reported non-GAAP earnings per share of $0.65 on revenue of$1.93 billion for Q4, surpassing Wall Street estimates of $0.57 EPS and$1.9 billion in sales [3]. - Revenue increased by 25.3% year-over-year in Q4, while adjusted earnings per share rose by 25% compared to the prior year [4]. - The company achieved an adjusted gross margin of 64%, attributed to a favorable product mix and supply chain efficiencies [4]. Future Guidance - For Q1, Arista is guiding for sales between $1.93 billion and$1.97 billion, with an adjusted gross margin of 63% and an adjusted operating margin of 44% [5]. - The midpoint target for sales growth in the current quarter indicates only a 1% sequential increase, following a 6.6% increase in Q4 [6]. AI Revenue Expectations - Arista anticipates approximately $1.5 billion in AI revenue for the year, including$750 million from AI back-end networking clusters [7].