Key insights
- Raymond James upgraded Arista Networks to Outperform, citing expanding AI applications and market share gains. Arista's network intelligence is increasingly valuable due to the growth of AI workloads. Meta and Microsoft account for a significant portion of Arista's sales, with Oracle potentially becoming a major customer. Supply chain constraints with Broadcom in 2026 could lead to stronger growth in 2027. This positive outlook suggests continued strength in the networking sector and AI-related tech.
Investing.com -- Raymond James upgraded Arista Networks to Outperform with a price target of $164 per share in a note on Friday, citing improving growth prospects in 2027 and beyond as the networking company expands into new AI applications and gains market share in both the AI back-end and enterprise campus segments.
Analyst Simon Leopold told investors that the upgrade reflects a broadening AI market that plays directly to Arista's strengths.
Inference and reasoning workloads, mixture-of-experts models, and larger distributed AI clusters are increasing the volume and unpredictability of east-west network traffic, raising the value of Arista's network intelligence capabilities, including congestion management and high-frequency telemetry, according to the firm.
Arista currently derives approximately 40% of sales from AI applications, with cloud customers accounting for a further 40% of revenue. Meta and Microsoft together represent more than 40% of total sales, while Raymond James said Oracle may be the next company to join Arista's 10%-or-above customer ranks.
“Scale-across is among the bigger drivers. Scale across adds complexity to extend a cluster across a Wide Area Network (WAN) for a training cluster,” wrote Leopold. “We believe Arista has secured wins with Meta and Google. Management forecast $1B, or nearly a third of its AI sales from this new use-case, and we believe this could double in 2027.”
On supply chain, Raymond James noted that management's reference to "de-commits" referred to delays and not cancellations, adding that Broadcom chip availability may present a constraint in 2026 but could set up better growth in 2027.