Key Takeaways
- Arista Networks stock jumped 6% today after third-quarter revenue rose 58.5% and management guided 2027 revenue to about $18.5 billion.
- That guide is roughly $2 billion above what analysts expected, which makes October’s selloff look premature.
- Gross margin slipped from a year ago, but operating margin rose.
- The guide is good news for chip supplier Broadcom and customer Microsoft, and a challenge to Nvidia.
Arista Networks (ANET) is up 6% today after a third quarter that Chairperson and CEO Jayshree Ullal said came in “surpassing even my high expectations.” Revenue rose 58.5% to $3.66 billion, its fastest growth since its IPO.
On the call, management guided 2027 revenue to about $18.5 billion, growth of 38% to 40%. That’s good news for Broadcom (AVGO), which makes most of the chips in Arista’s switches, and for Microsoft (MSFT), one of its two biggest customers. It’s a challenge to Nvidia (NVDA), which has passed Arista in data center Ethernet switches, by IDC’s count.
Wall Street wasn’t ready for $18.5 billion
Going into the report, analysts expected $16.4 billion of revenue in 2027:
The guide is roughly $2 billion above that, so I’d expect estimates to rise.
In October, the stock fell 18% from its record in a single week. Before the report, it traded at 35x forward earnings, just below its five-year average of 36x:
Today’s jump puts it around 37x.
TIKR tracks 30 analysts on Arista Networks. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Arista Networks, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Arista Networks’ Analyst Ratings
Good news for Broadcom, a test for Nvidia
Broadcom guided AI semiconductor revenue to $21.7 billion for its quarter ended Nov. 1, up 236%. With Arista guiding this high, I’d expect Broadcom’s networking chip sales to keep growing into 2027. Broadcom reports in early December.
Microsoft and Meta Platforms bought 42% of Arista’s 2025 revenue. Microsoft’s commercial remaining performance obligation just rose 73% to $677 billion. That’s a lot of contracted cloud capacity still to build, and it all needs networking.
Nvidia is harder to call. IDC counted its data center Ethernet switch revenue up 181.1% in the second quarter, against 37.6% for Arista. Ullal said Arista expects its networks to run with more than 10 types of accelerators by the end of 2027. Nvidia reports on Nov. 17, and IDC’s next count, around mid-December, will show whether Arista won back share.
Gross margin slipped again
Gross margin, which TIKR’s preview flagged as the number that mattered most, came in at 64.0% on a non-GAAP basis, down from 65.2% a year earlier. But costs grew far slower than revenue, so non-GAAP operating margin rose to 49.1% from 48.6%.
Giving up a point of gross margin for this kind of growth is a trade I’d take. At about its usual multiple, Arista looks like a buy to me.
Of course, a pause from Microsoft or Meta would hurt. The fourth-quarter report in February is the next check on that $18.5 billion.
So what is Arista Networks stock actually worth?
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