Erste Group Downgrades Arista Networks (ANET) Stock to Hold from Buy

Core Viewpoint - Arista Networks Inc (NYSE:ANET) is recognized as a fundamentally strong stock, but Erste Group has downgraded its rating from "Buy" to "Hold" due to concerns over operating margins and stock valuation [1][2]. Financial Performance - In Q3 2025, Arista Networks reported approximately $2.31 billion in revenue, with software and services contributing around 18.7% of total revenue [3]. - Product revenue increased by $387.9 million, or 25.5%, compared to the same period in 2024, indicating strong demand for switching and routing platforms [3]. - The non-GAAP gross margin was reported at 65.2%, benefiting from a favorable product mix and inventory management [4]. - Non-GAAP net income reached $962.3 million, up from $769.0 million in Q3 2024, reflecting a 25% growth in non-GAAP EPS, showcasing healthy demand and effective execution of the strategic roadmap [4]. Strategic Initiatives - Arista Networks is developing a cross-vendor ecosystem to integrate AI networks with computing infrastructure, which is expected to drive revenue growth in the medium term, albeit at a slowing pace [1][2]. - The Etherlink portfolio is highlighted for its accelerated networking approach, providing a single point of network control for automation, security, traffic engineering, and telemetry [2].