Tech & AI
Arista lifts its AI networking target for 2027
Arista Networks raised its AI networking target for 2027 and beat quarterly estimates, but its CEO said a newer product line may not add much revenue until 2028.
Quick Read
- Arista raised its AI networking target for 2027 and set a higher total revenue goal for that year.
- Third-quarter results and the fourth-quarter outlook both topped analysts' estimates, and the shares rose.
- CEO Jayshree Ullal said scale-up networking is unlikely to add a material amount until 2028.
- Arista is a small part of a broad index fund, so its move barely shifted one.
What did Arista report?
Arista Networks (NYSE: ANET) expects revenue of about $18.5 billion in 2027, the company said with its third-quarter results. It expects sales of its AI networking gear, which it calls AI fabrics, to reach about $7 billion.
Why it matters: Third-quarter earnings and revenue came in above analysts' estimates. The company's fourth-quarter outlook for earnings and revenue also topped estimates.
How did the stock react?
Shares rose 5.0% on Wednesday to close at $178.48. The gain added $11 billion to Arista's market value. The stock remains 17.7% below its 52-week high of $216.74.
For a broad fund, the effect was small. Arista accounts for 0.25% of the value of the 500 largest U.S. companies, so its gain added $13 to $100,000 spread across them by size.
Why might scale-up revenue wait?
Scale-out, scale-across and scale-up are different ways of wiring AI computers together. CEO Jayshree Ullal said scale-up will still be in early trials next year. She does not expect it to add a material amount in 2027, though she said it could contribute in 2028.
That leaves scale-out and scale-across as the main near-term drivers of the AI target. Ullal said scale-out makes up most of the current mix and that scale-across may take a larger share in 2027. On the exact split, she said, "I can't venture to guess."
Arista is spending ahead of that shift. Its adjusted research and development spending rose from the prior quarter, with management citing liquid cooling, high-radix switching and AI software.
What comes next?
What’s next: Arista's fourth-quarter report is the company's next checkpoint. It could show whether results match the outlook that topped estimates, and whether the 2027 targets hold. Progress in the trials could also test Ullal's comments on scale-up timing.
For readers
What it could mean for you: If you own Arista shares directly, the company's AI forecast carries straight into your holding, with no other stocks to offset it. The 2027 targets rest largely on scale-out and scale-across sales, since Ullal does not expect scale-up to add a material amount until 2028. Arista's fourth-quarter report could move the stock if it changes those targets or that timing. In a broad index fund, Arista is a small slice, so its swings may barely register.
Questions and answers
Why did Arista Networks stock rise?
The company's third-quarter earnings and revenue topped analysts' estimates, and its fourth-quarter outlook did too. It also raised its AI networking target for 2027.
When will Arista's scale-up networking add revenue?
CEO Jayshree Ullal said scale-up will still be in early trials next year and is unlikely to add a material amount in 2027. She said it could contribute in 2028.
What will drive Arista's AI sales in 2027?
Ullal pointed to scale-out and scale-across networking as the main near-term drivers. She said scale-across may take a larger share of the mix in 2027.
How much does Arista matter to an index fund?
Arista is a small slice of the 500 largest U.S. companies by value. Its daily moves shift a broad index fund only slightly.
The numbers
| Arista Networks (ANET) price | $178.48 |
|---|---|
| Arista Networks (ANET) change | +5.04% |
| Arista Networks (ANET) market value | $230 billion |
| Arista Networks (ANET) 52-week high | $216.74 |
| S&P 500 change | +1.58% |
| 10-year Treasury yield | 4.90% |
Wednesday’s close
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