Arista Stock Falls On Small Q3 Beat, Underwhelming Guidance

Core Insights - Arista Networks reported third-quarter earnings and revenue that exceeded estimates, driven by increased capital spending in artificial intelligence, but the stock fell due to underwhelming revenue guidance [1][3][5] - The company anticipates a 2% sequential growth in fourth-quarter revenue, exceeding consensus estimates by $20 million [2][4] - Arista's management reiterated its long-term growth targets, expecting AI revenue to reach $1.5 billion in 2025 and $2.75 billion in 2026, with overall revenue growth projected at 20% for fiscal 2026 [3][4] Financial Performance - For the three months ending September 30, Arista's earnings rose 25% to $0.75 per share on an adjusted basis, while revenue increased 27% to $2.308 billion [3][5] - Analysts had estimated earnings per share of $0.72 on revenue of $2.26 billion, with the current quarter's revenue guidance set at $2.35 billion, slightly above estimates of $2.33 billion [4][5] Market Position - Arista's primary customers include major tech firms like Microsoft and Meta Platforms, and the company is expanding its presence in the enterprise market [6] - The company faces competition from Nvidia, which is also targeting the AI networking market, bundling its products with AI accelerators [7] Stock Performance - Following the earnings report, Arista's stock dropped nearly 6% to $144.55, despite a 38% increase in 2025 prior to the report [5] - Arista holds a Composite Rating of 99, indicating strong growth potential, and an Accumulation/Distribution Rating of C, suggesting neutral institutional buying activity [8][9]