Arista Networks Faces Supply Chain Challenges Amid AI Demand
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 39 minutes ago
0mins
Source: Fool
- Supply Chain Pressure: Arista Networks is currently facing significant supply chain challenges, unable to secure the chips and components necessary for its high-end networking equipment, which has pressured its gross margin and left supply unable to meet demand, negatively impacting market performance.
- Conservative Financial Outlook: Although management raised its full-year revenue guidance by $250 million in its first-quarter earnings report, projecting sales of $11.5 billion in 2026, up 28% year-over-year, investors were disappointed by this relatively conservative outlook, leading to a substantial drop in stock price.
- Market Share Growth: At the end of the first quarter, Arista reported deferred revenue of $6.2 billion, a 15% year-over-year increase, and purchase commitments of $8.9 billion, up 44% year-over-year, indicating that the company will continue to gain market share as demand for high-speed networking equipment in AI data centers grows.
- Long-Term Investment Opportunity: Despite the recent sell-off, Arista's stock trades at a premium with a 39 times earnings expectation; considering its growing backlog, revenue growth is expected to reaccelerate in the near term, and gross margin is likely to expand in the long term, ultimately driving strong earnings-per-share growth.
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Analyst Views on ANET
Wall Street analysts forecast ANET stock price to rise
10 Analyst Rating
9 Buy
1 Hold
0 Sell
Strong Buy
Current: 148.590
Low
159.00
Averages
172.88
High
200.00
Current: 148.590
Low
159.00
Averages
172.88
High
200.00
About ANET
Arista Networks, Inc. is a provider of data-driven, client-to-cloud networking for large artificial intelligence (AI), data center, campus and routing environments. Its platforms deliver availability, agility, automation, analytics, and security through an advanced network operating stack. Its platform is its Extensible Operating System (EOS), a modernized publish-subscribe state-sharing networking operating system. Its portfolio of products, services and technologies is grouped into various categories: Core (Data Center, Cloud and AI Networking), Cognitive Adjacencies (Campus and Routing), and Cognitive Network (Software and Services). It offers product portfolios of data-driven, high-speed, cloud and data center Ethernet switches. Its Cognitive Adjacencies include Cognitive Campus Switching, Cloud-Grade Routing and WAN Routing. Its software and services are based on subscription-based models and include various offerings: CloudVision, Arista A-Care Services, CloudEOS and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Arista Networks Faces Supply Chain Challenges
- Supply Chain Pressure: Arista Networks is grappling with supply chain issues related to chips and other components, which have pressured its gross margin, and management expects this situation to persist, impacting the company's short-term profitability.
- Conservative Revenue Guidance: In its first-quarter earnings report, Arista raised its full-year revenue guidance by only $250 million, projecting sales of $11.5 billion in 2026, a 28% year-over-year increase, with $3.5 billion coming from AI products, reflecting management's cautious outlook on the market.
- Growing Backlog: Arista ended the first quarter with $6.2 billion in deferred revenue, up 15% year-over-year, and $8.9 billion in purchase commitments, up 44% year-over-year, indicating that the company will continue to gain market share in AI-focused data centers.
- Investment Opportunity: Despite a significant drop in stock price, Arista's shares trade at a premium of 39 times earnings expectations, and with its growing backlog, revenue is expected to accelerate in the near term, ultimately driving strong earnings-per-share growth in the long run.
See More
Arista Networks Faces Supply Chain Challenges Amid AI Demand
- Supply Chain Pressure: Arista Networks is currently facing significant supply chain challenges, unable to secure the chips and components necessary for its high-end networking equipment, which has pressured its gross margin and left supply unable to meet demand, negatively impacting market performance.
- Conservative Financial Outlook: Although management raised its full-year revenue guidance by $250 million in its first-quarter earnings report, projecting sales of $11.5 billion in 2026, up 28% year-over-year, investors were disappointed by this relatively conservative outlook, leading to a substantial drop in stock price.
- Market Share Growth: At the end of the first quarter, Arista reported deferred revenue of $6.2 billion, a 15% year-over-year increase, and purchase commitments of $8.9 billion, up 44% year-over-year, indicating that the company will continue to gain market share as demand for high-speed networking equipment in AI data centers grows.
- Long-Term Investment Opportunity: Despite the recent sell-off, Arista's stock trades at a premium with a 39 times earnings expectation; considering its growing backlog, revenue growth is expected to reaccelerate in the near term, and gross margin is likely to expand in the long term, ultimately driving strong earnings-per-share growth.
See More
Arista Unveils Next-Generation Cognitive Campus Innovations
- Industry Leadership: Arista Networks has been recognized as a Leader in the 2026 Gartner Magic Quadrant for Enterprise Wired and Wireless LAN, highlighting its ongoing growth and innovation in the enterprise campus sector, thereby solidifying its market position.
- New Product Launch: The introduction of ruggedized switching platforms and internal directional antenna wireless access points is designed to meet the demands of industrial edges and high-density environments, ensuring high availability and security under extreme conditions, thus enhancing customer experience and market competitiveness.
- AI-Driven Network Operations: The upgrade of Arista AVA transforms it into a multi-domain agentic AIOps platform capable of autonomously analyzing data across various network environments and predicting potential issues, significantly reducing mean time to resolution and improving operational efficiency.
- Unified Management Platform: All campus wired and wireless solutions are managed via EOS and CloudVision, providing consistent security policies and deep telemetry, enabling enterprises to achieve comprehensive visibility and management of their networks, thereby enhancing overall operational capabilities.
See More
D1 Capital's Q1 Investment Moves in Tech Stocks
- Meta Stake Liquidation: D1 Capital completely exited its position of over 376,000 shares in Meta during Q1, previously valued at more than $240 million, reflecting concerns over the social media giant's ongoing decline, as Meta's stock fell over 13% in the quarter, marking its largest quarterly loss since 2022.
- Amazon Position Increase: Despite Amazon's stock dropping over 9% in Q1, D1 Capital increased its stake by more than 34%, making it the fund's eighth-largest holding with a current value of approximately $376.5 million, indicating confidence in the e-commerce giant's future growth potential.
- AI Investment Expansion: D1 Capital expanded its investments in AI stocks during Q1, including Broadcom and Nvidia, while also opening new stakes in Alphabet, ASML, and Taiwan Semiconductor, demonstrating a strategic focus on the AI sector to capitalize on future technological trends.
- Instacart Remains Leader: Instacart continues to be D1 Capital's largest holding in Q1, valued at $845 million, with Sundheim serving on its board since 2020, reflecting a strong commitment to the company's long-term investment potential.
See More
Institutional Investors Actively Buy AI Stocks
- Investor Enthusiasm: According to a Reuters report, nearly 6,000 hedge funds, pension funds, and other asset managers actively increased their holdings in AI infrastructure stocks during Q1 2026, with over 4,000 institutions adding positions, reflecting strong confidence in the AI market.
- Position Changes Analysis: Among the reported investors, only 146 (2.5%) sold AI-related stocks, indicating that the majority remain optimistic about the prospects of this sector, particularly for companies like Oracle, Arista Networks, and Vertiv.
- Data Center Investment Trends: Institutional investors also showed significant interest in data center companies, with filings revealing no institutions sold utility stocks in Q1, while nearly 3,500 reported net buying, reflecting ongoing demand for infrastructure.
- Active Semiconductor Market: Despite market volatility, over 4,100 investors added or initiated positions in the semiconductor sector, demonstrating confidence in the industry, especially as share prices began to rebound, indicating expectations for future growth.
See More
Arista Networks Upgraded to Outperform by Raymond James Amid AI Growth
- Rating Upgrade: Raymond James upgraded Arista Networks from Market Perform to Outperform, reflecting the company's growing market share in AI backend and campus applications, indicating strong performance in emerging application areas.
- AI Growth Potential: Analysts noted that the rise of inference and reasoning workloads, MoE/expert-parallel models, and larger AI clusters significantly enhance the value of Arista's network intelligence, particularly in traffic management and job observability.
- Price Target Set: Raymond James set a price target of $164 for Arista, indicating confidence in its future growth, especially with new collaborations with Meta and Google expected to drive company performance.
- Supply Chain Challenges: While supply chain issues may limit upside potential in 2026, analysts believe that 2027 could see better growth, particularly influenced by factors such as Broadcom chips, with management remaining silent on specific supplier issues.
See More
Arista Networks Faces Supply Chain Challenges
- Supply Chain Pressure: Arista Networks is grappling with supply chain issues related to chips and other components, which have pressured its gross margin, and management expects this situation to persist, impacting the company's short-term profitability.
- Conservative Revenue Guidance: In its first-quarter earnings report, Arista raised its full-year revenue guidance by only $250 million, projecting sales of $11.5 billion in 2026, a 28% year-over-year increase, with $3.5 billion coming from AI products, reflecting management's cautious outlook on the market.
- Growing Backlog: Arista ended the first quarter with $6.2 billion in deferred revenue, up 15% year-over-year, and $8.9 billion in purchase commitments, up 44% year-over-year, indicating that the company will continue to gain market share in AI-focused data centers.
- Investment Opportunity: Despite a significant drop in stock price, Arista's shares trade at a premium of 39 times earnings expectations, and with its growing backlog, revenue is expected to accelerate in the near term, ultimately driving strong earnings-per-share growth in the long run.
See More
Arista Networks Faces Supply Chain Challenges Amid AI Demand
- Supply Chain Pressure: Arista Networks is currently facing significant supply chain challenges, unable to secure the chips and components necessary for its high-end networking equipment, which has pressured its gross margin and left supply unable to meet demand, negatively impacting market performance.
- Conservative Financial Outlook: Although management raised its full-year revenue guidance by $250 million in its first-quarter earnings report, projecting sales of $11.5 billion in 2026, up 28% year-over-year, investors were disappointed by this relatively conservative outlook, leading to a substantial drop in stock price.
- Market Share Growth: At the end of the first quarter, Arista reported deferred revenue of $6.2 billion, a 15% year-over-year increase, and purchase commitments of $8.9 billion, up 44% year-over-year, indicating that the company will continue to gain market share as demand for high-speed networking equipment in AI data centers grows.
- Long-Term Investment Opportunity: Despite the recent sell-off, Arista's stock trades at a premium with a 39 times earnings expectation; considering its growing backlog, revenue growth is expected to reaccelerate in the near term, and gross margin is likely to expand in the long term, ultimately driving strong earnings-per-share growth.
See More
Arista Unveils Next-Generation Cognitive Campus Innovations
- Industry Leadership: Arista Networks has been recognized as a Leader in the 2026 Gartner Magic Quadrant for Enterprise Wired and Wireless LAN, highlighting its ongoing growth and innovation in the enterprise campus sector, thereby solidifying its market position.
- New Product Launch: The introduction of ruggedized switching platforms and internal directional antenna wireless access points is designed to meet the demands of industrial edges and high-density environments, ensuring high availability and security under extreme conditions, thus enhancing customer experience and market competitiveness.
- AI-Driven Network Operations: The upgrade of Arista AVA transforms it into a multi-domain agentic AIOps platform capable of autonomously analyzing data across various network environments and predicting potential issues, significantly reducing mean time to resolution and improving operational efficiency.
- Unified Management Platform: All campus wired and wireless solutions are managed via EOS and CloudVision, providing consistent security policies and deep telemetry, enabling enterprises to achieve comprehensive visibility and management of their networks, thereby enhancing overall operational capabilities.
See More
D1 Capital's Q1 Investment Moves in Tech Stocks
- Meta Stake Liquidation: D1 Capital completely exited its position of over 376,000 shares in Meta during Q1, previously valued at more than $240 million, reflecting concerns over the social media giant's ongoing decline, as Meta's stock fell over 13% in the quarter, marking its largest quarterly loss since 2022.
- Amazon Position Increase: Despite Amazon's stock dropping over 9% in Q1, D1 Capital increased its stake by more than 34%, making it the fund's eighth-largest holding with a current value of approximately $376.5 million, indicating confidence in the e-commerce giant's future growth potential.
- AI Investment Expansion: D1 Capital expanded its investments in AI stocks during Q1, including Broadcom and Nvidia, while also opening new stakes in Alphabet, ASML, and Taiwan Semiconductor, demonstrating a strategic focus on the AI sector to capitalize on future technological trends.
- Instacart Remains Leader: Instacart continues to be D1 Capital's largest holding in Q1, valued at $845 million, with Sundheim serving on its board since 2020, reflecting a strong commitment to the company's long-term investment potential.
See More
Institutional Investors Actively Buy AI Stocks
- Investor Enthusiasm: According to a Reuters report, nearly 6,000 hedge funds, pension funds, and other asset managers actively increased their holdings in AI infrastructure stocks during Q1 2026, with over 4,000 institutions adding positions, reflecting strong confidence in the AI market.
- Position Changes Analysis: Among the reported investors, only 146 (2.5%) sold AI-related stocks, indicating that the majority remain optimistic about the prospects of this sector, particularly for companies like Oracle, Arista Networks, and Vertiv.
- Data Center Investment Trends: Institutional investors also showed significant interest in data center companies, with filings revealing no institutions sold utility stocks in Q1, while nearly 3,500 reported net buying, reflecting ongoing demand for infrastructure.
- Active Semiconductor Market: Despite market volatility, over 4,100 investors added or initiated positions in the semiconductor sector, demonstrating confidence in the industry, especially as share prices began to rebound, indicating expectations for future growth.
See More
Arista Networks Upgraded to Outperform by Raymond James Amid AI Growth
- Rating Upgrade: Raymond James upgraded Arista Networks from Market Perform to Outperform, reflecting the company's growing market share in AI backend and campus applications, indicating strong performance in emerging application areas.
- AI Growth Potential: Analysts noted that the rise of inference and reasoning workloads, MoE/expert-parallel models, and larger AI clusters significantly enhance the value of Arista's network intelligence, particularly in traffic management and job observability.
- Price Target Set: Raymond James set a price target of $164 for Arista, indicating confidence in its future growth, especially with new collaborations with Meta and Google expected to drive company performance.
- Supply Chain Challenges: While supply chain issues may limit upside potential in 2026, analysts believe that 2027 could see better growth, particularly influenced by factors such as Broadcom chips, with management remaining silent on specific supplier issues.
See More
