Arista Networks: Why its AI Revenue Expected to Grow in 2025

Arista Networks (ANET), a computer networking developer, is trading just below a conventional buy point. So far ANET shares are up 46% in 2023, and Arista's Q2 earnings report showed a big jump. Just like chipmaker Nvidia (NVDA), ANET stock is seen by tech giants as an investment in the highly acclaimed artificial intelligence domain. With the rise of "generative" artificial intelligence, Internet data centers will require more computing power and network bandwidth.

The question for ANET stock investors eyeing the high valuation is whether AI-driven equipment orders will accelerate sales growth again in 2025. Arista sells computer networking switches that speed communications between racks of computer servers in "hyperscale" data centers. These internet data centers are designed to increase computing capacity as demand increases. Arista's largest customers are Facebook parent company Meta Platforms (META) and Microsoft (MSFT).

However, this stock hasn’t been an easy deal for investors. Thus, after the company announced financial results covering its Q1 2023 fiscal year, shares plunged over 13%. Nevertheless, on the revenue side, the company has been outperforming expectations. Sales of $1.46 billion came in 38.7% higher than the $1.05 billion in revenue the company generated one year earlier. Revenue was also $80 million higher than what Wall Street analysts predicted. Product revenue for the company jumped 42.4% YoY, soaring from $885.8 million to $1.26 billion, so that is a win. And we are only left to spare extra patience to wait until the market notices this winning story.