Stock of the week - Arista Networks (07.08.2025)

• Sensational results for the second quarter.
• Development strategies
• Market environment
• Optimistic forecast for the whole of 2025.
• A look at the valuation
• A look at the chart

Arista Networks (ANET.US) is an American technology company specializing in providing advanced solutions for data centers, network infrastructure, and cloud computing in the business sector. The company designs and manufactures high-performance Ethernet switches, its own network management operating system (EOS – Extensible Operating System), and cloud solutions that enable effective communication in high-data-traffic environments such as data centers, supercomputers, and artificial intelligence platforms.

Arista's flagship products are data center-class network switches with bandwidths ranging from 10G to as high as 800G, which form the foundation of the network infrastructure for the world's largest clouds and data centers. Arista recently introduced the Etherlink AI platform, which is aimed at the artificial intelligence and machine learning industry. Etherlink AI is designed to support the transfer of huge amounts of data and distributed processing, which are essential for training modern AI models.

Sensational results for the second quarter

• Revenues for the second quarter hovered around $2.11 billion, which was in line with analysts' expectations, while the quarterly result was the highest in the company's history.

• Earnings per share amounted to $0.65 and were also in line with analysts' expectations.

• Revenues from the software and subscription segment accounted for nearly 18% of total revenues.

• Non-GAAP gross margin of 65.6%, which was a slight improvement over previous quarters

• The company expects revenues in the range of $8.2–8.42 billion, representing a 17–20% year-over-year increase (compared to $6.97 billion in 2024).

• Estimated at $2.57, representing a 13 percent increase over the previous year.

The second quarter proved to be phenomenal for Arista Networks, which was reflected in revenues that grew by over 30% year-on-year to over $2.2 billion. It is worth emphasizing once again that this was the highest quarterly result in the company's history. Furthermore, net income (GAAP) amounted to $888.8 million, which translated into $0.70 per share. The main drivers of growth remain the dynamic development of artificial intelligence (AI) infrastructure and expansion in the cloud services segment.

Furthermore, net income (GAAP) amounted to $888.8 million, which translated into $0.70 per share, while non-GAAP income reached $923.5 million ($0.73 per share) – an increase of over 37% year-on-year.

The growing adoption of artificial intelligence technology and related investments in data centers had a key impact on these strong results. Arista strengthened its position as a provider of networking solutions for the world's largest technology companies, including Microsoft, Meta, and AWS, by supplying 400G/800G switches and intelligent EOS and CloudVision software.

The new platform also played a major role Etherlink AI, dedicated to network infrastructure optimized for AI tasks. The company has begun to implement strategic contracts in this area.

Development strategies

Arista Networks is consistently pursuing a strategy focused on expansion in the artificial intelligence sector and modern networking solutions that respond to the growing needs of global technology leaders. The company has ambitious plans to generate $1.5 billion in revenue from products and services directly related to AI infrastructure by 2025.

The core of the company's activities is providing advanced network solutions for major global players such as Microsoft and Meta Platforms. Both companies are intensifying their investments in AI infrastructure development, which creates enormous opportunities for Arista to grow and strengthen its market position. Thanks to close cooperation and partnership, the company can offer solutions perfectly tailored to the most demanding applications in the cloud and artificial intelligence.

In July 2025, the company significantly expanded its portfolio by acquiring Broadcom's VeloCloud SD-WAN technology. This strategic move allows Arista Networks to enrich its offering of advanced enterprise networking solutions, which are gaining importance in the context of the growing popularity of hybrid and remote working models.

Market environment

Arista Networks operates in the highly competitive and rapidly growing network technology sector, where innovation, performance, and scalability are key. The company has a strong position as a provider of modern network infrastructure for data centers, cloud computing, and artificial intelligence applications, although this market is dominated by a few powerful players. Arista's greatest strength is its rapid pace of innovation and its ability to deliver complex projects for key customers such as Microsoft, Meta, and Amazon Web Services. This not only enables the company to win new contracts, but also to build lasting business relationships that form the foundation for stable growth.

Optimistic forecast for the whole of 2025.

The year 2025 appears to be a breakthrough year for Arista Networks, which, thanks to the consistent implementation of its development strategy and favorable market trends, has the opportunity for dynamic growth and strengthening its position in the global network infrastructure market. Analysts emphasize that the key driver of the company's growth in 2025 will be the segment of products related to artificial intelligence infrastructure. The consensus among analysts points to stable, double-digit revenue growth and further strengthening of Arista Networks' market position in the cloud and AI infrastructure segment.

A look at the valuation

Let's take a look at the valuation of Arista Networks using the discounted cash flow (DCF) method. We would like to point out that the following valuation is for informational purposes only and should not be treated as an investment recommendation or a precise target price for the shares.

For Arista Networks, we have assumed an average annual revenue growth of around 30% over the forecast period, which is several percentage points above the current average growth rate. This assumption is based on strong demand for AI-dedicated network infrastructure and the growing importance of cloud solutions. It is worth noting that Arista's revenue growth rate remains high, often exceeding 25% year-on-year, especially in key segments related to AI and corporate networks.

An important element of the valuation was the estimation of the weighted average cost of capital (WACC). Based on current market data and the specific nature of the technology industry, we estimated the cost of equity capital at 11% . The company has a low level of debt, which results in a low share of debt costs in the total WACC. In the case of residual values, we assumed revenue growth of 4% , while the other parameters were based on the averages for the last five years.

The result of the above assumptions is a valuation of the company per share of 102.01 dollars, which means a value of over 26% lower than the closing price. However, it is worth noting that the market for artificial intelligence and related infrastructure is currently one of the fastest growing and most dynamic branches of technology. This means that the valuations of companies such as Arista Networks may differ significantly from the values resulting from traditional, average financial forecasts.

Investors often discount future growth potential, technological innovations, and the growing importance of AI, which translates into higher stock prices than suggested by models based on historical data. Therefore, Arista Networks' current market valuation reflects not only its financial results but also expectations for further expansion and accelerated growth in the coming years.

For this reason, although the DCF model is a solid analytical tool, when investing in AI companies, it is also worth considering market factors, innovation, and the dynamics of the entire sector, which often cause significant deviations from fundamental values.

The valuation is highly dependent on the assumptions made, hence we present below a matrix of sales dynamics and changes in WACC.

Source: XTB Research

A look at the chart

There is no trace left of the declines that occurred at the beginning of the year, and Arista Networks has clearly broken through the April consolidation, which was one of the drivers of growth. The historical results published for Q2 support the share price, which is approaching record levels of $140. If the price encounters resistance there and stops, a short-term correction towards support located around $108–110, i.e., at the 50 EMA moving average, is possible. However, breaking through this resistance could pave the way for new historical highs and continued growth.

Source: xStation 5