Arista Networks Stock (ANET) Builds Momentum Ahead of Earnings

Arista Networks Inc. (ANET) is trading just above $153 per share in the pre-market session, down -2.77% from its previous close. Despite the minor dip, the stock is exhibiting underlying strength, fueled by positive moving averages and anticipation surrounding its earnings report scheduled for release after market close today. The question on everyone's mind: can Arista deliver and justify the recent rally?

Analysts are projecting earnings per share (EPS) of $0.71 for the quarter ending September 2025, a significant 18.33% increase compared to the same quarter last year. This optimistic forecast is contributing to the current upward momentum, as markets anticipate strong results. Positive earnings could act as a catalyst, pushing the stock even higher.

However, beneath the surface of this positive sentiment lie significant challenges. Recent developments in the AI and networking sectors highlight increasing competitive pressures that could impact Arista's future performance.

NVIDIA's recent expansion into AI networking solutions, with Meta and Oracle adopting its Spectrum-X Ethernet networking switches, poses a direct threat to Arista's market share. This move sent Arista's stock down 2.4% on the day of the announcement, a clear indication of the market's concern about NVIDIA's growing influence.

Analysts also point to increasing competition from low-cost whitebox vendors like Celestica and Accton as a significant threat. The potential shift from Ethernet to InfiniBand in AI networking, where NVIDIA's upcoming Quantum-X switches are expected to outperform comparable Ethernet products, presents additional hurdles for Arista's growth.

Despite these headwinds, Arista's participation in the ‘Stargate' AI project, a massive collaboration between OpenAI, SoftBank, Oracle, and Microsoft, provides a glimmer of hope. Analysts at Jefferies believe that Arista's existing relationship with Microsoft positions the company favorably to benefit from this substantial AI infrastructure investment. This project could be a significant driver of future revenue and offset some of the competitive pressures.

While the market seems cautiously optimistic about Arista's prospects, a more skeptical perspective might be warranted. The hype surrounding “Stargate” and its potential benefits for Arista could be overblown. Major AI projects are notoriously complex and often subject to delays and shifting priorities. Relying on a single, albeit large, project for future growth is a risky strategy.

Furthermore, the narrative that Arista is simply facing “growing pains” in the AI networking space might be too generous. NVIDIA's aggressive push into this market is not a temporary blip; it's a fundamental shift in the competitive landscape. NVIDIA possesses significant advantages, including its established relationships with major AI players and its superior technology in certain areas.

Arista needs to demonstrate a clear and sustainable competitive advantage beyond its existing Ethernet solutions to truly thrive in this evolving market. The upcoming earnings call will be critical in determining if they have a strategy to accomplish this, and if they can articulate it to instill market confidence.

One should also remember that insider selling, such as the sale of $95 million worth of stock by CTO Kenneth Duda earlier this year, can sometimes signal a lack of confidence in the company's future prospects, even if there are other possible explanations. While not necessarily indicative of impending doom, such transactions warrant careful consideration.