Arista Networks Stock (ANET) Rallying Into Earnings – What To Expect

Arista Networks stock (ANET) has added 14% over the past month, with earnings on deck after market close. One of the biggest questions is whether AI-driven data center demand from hyperscale customers sustained momentum through year-end.

Consensus sits at $2.27B revenue and $0.71 EPS, below the company’s guided midpoint of $2.35B for revenue, creating a setup where beating the Street requires exceeding management’s own framework.

The stock has declined 13% over the past week despite strong fundamental positioning, reflecting pre-earnings profit-taking after a multi-year run that delivered 7x total returns over five years. The pullback leaves the shares trading at 53.5x trailing P/E and 40.8x forward earnings, a premium to the sector average of 29.1x that prices in continued AI infrastructure spending growth.

Management guided Q4 revenue to $2.3B–$2.4B with non-GAAP gross margin of 62%–63% and operating margin of 47%–48%, down from Q3’s 65.2% and 48.6% respectively. The margin compression signals either a shift toward larger, lower-margin cloud orders or less favorable product mix. Consensus revenue of $2.27B sits $80M below the guided midpoint, an unusual gap that suggests analysts have already discounted some risk.

Consensus Estimates

Consensus revenue of $2.27B sits $80M below management’s guided midpoint of $2.35B, a 3.4% gap that is unusual for a company with Arista’s execution track record. The discount suggests analysts have already incorporated some risk that hyperscaler orders came in at the lower end of expectations, or that the product mix shifted unfavorably. EPS estimates of $0.71 reflect year-over-year growth of 19.1%, consistent with the revenue expansion but below the 25% revenue growth rate due to the guided margin compression.

The guided gross margin decline from 65.2% in Q3 to 62%–63% in Q4 represents the largest sequential compression in recent quarters. Management attributed this to product mix dynamics, which typically signals a higher proportion of large cloud orders that carry lower margins than enterprise or campus networking sales.

Management Guidance & Commentary

“We are pleased with our third quarter results and continued momentum in AI networking. Our fourth quarter outlook reflects strong demand across our cloud, enterprise, and AI customers, with revenue expected in the range of $2.3 billion to $2.4 billion.”

Management’s Q4 revenue guidance of $2.3B–$2.4B, issued with Q3 results on November 4, 2025, established a midpoint of $2.35B that exceeded the then-prevailing Street estimate of $2.32B. The guidance represented sequential growth of 1.7% at the midpoint from Q3’s $2.31B, a deceleration from the 4.7% sequential growth delivered in Q3.

The guided gross margin range of 62%–63% marked a notable step-down from Q3’s 65.2% and represented the lowest guided level since fiscal Q1 2025. Management attributed the compression to product mix, specifically a higher proportion of sales to cloud customers where competitive dynamics and order size drive lower unit margins.

Analyst Price Targets & Ratings

Wall Street remains overwhelmingly bullish, with 86% of analysts rating shares a Buy or Strong Buy. The consensus target of $165.99 implies 18% upside from current levels, though targets range widely based on assumptions about AI networking demand sustainability and margin trajectory.

Sector & Peer Comparison

Arista trades at a 124% premium to Cisco on forward P/E (40.8x vs 18.2x), reflecting the market’s view that Arista’s AI networking exposure and growth trajectory justify a significantly higher multiple. The company’s 39.7% profit margin stands nearly double Cisco’s 22.1%, demonstrating superior business model economics driven by software-defined networking and a focus on high-performance data center applications.

Earnings Track Record

Arista has beaten consensus EPS estimates in 18 of the last 19 quarters, a 94.7% beat rate that establishes strong execution credibility. The average surprise of 6.4% demonstrates consistent ability to exceed Street models, though the magnitude has moderated from the 15%–20% beats delivered in fiscal 2023 and early 2024 to the 5%–12% range in recent quarters.

Post-Earnings Price Movement History

Post-earnings price movement over the past five quarters has averaged 1.0%, with a median of 0.6%, indicating relatively muted reactions despite consistent beats. The pattern shows no correlation between beat magnitude and next-day price movement, confirming that forward guidance drives the stock reaction more than the reported quarter’s arithmetic.

Expected Move & Implied Volatility

The options market is pricing a 10% move in either direction, significantly exceeding the 1.0% average historical next-day reaction over the past five quarters. Implied volatility of 52% sits at the 78th percentile of the past year’s range, suggesting the market is pricing above-average risk despite the company’s consistent execution track record.

Expert Predictions & What to Watch

Key Outlook: Guidance Will Drive the Trade

The quarter tests whether Arista can deliver revenue above the $2.35B guided midpoint while holding gross margins at 63% or better, validating that AI networking demand from hyperscalers remained robust through year-end. The $80M gap between the Street’s $2.27B estimate and management’s $2.35B midpoint creates a scenario where exceeding consensus still leaves the result at or near guidance.

Key Metrics to Watch

The Q1 2026 revenue guide carries more weight than the Q4 result because it will signal whether the margin compression in Q4 was a one-quarter mix issue or the start of a sustained trend. Guidance above $2.5B would imply sequential growth of 6%+ and validate that hyperscaler AI buildouts are accelerating rather than normalizing.

The ability to exceed $2.35B revenue while holding margins at the high end of guidance will determine whether the stock sustains its valuation premium or reprices lower on evidence that AI networking demand is normalizing. Management’s commentary on hyperscaler order visibility and campus networking progress will be critical for the long-term investment thesis.