Arista Networks Stock Falls Hard After Earnings. What’s Ailing the Data-Center Darling.

Arista Networks stuck with a forecast for 20% sales growth in 2026. (Bloomberg)

Key Points

• Arista Networks’ shares fell 8.4% to $139.20 despite exceeding third-quarter earnings and revenue expectations.
• Adjusted earnings were 75 cents per share on revenue of $2.31 billion, surpassing analyst projections.
• The stock decline may stem from elevated expectations and product sales missing estimates, while service revenue was 18% higher.

Shares of Arista Networks slumped on Wednesday, even after the maker of hardware for data centers posted earnings that exceeded investors’ expectations.

The networking company reported third-quarter results after the closing bell Tuesday. Adjusted earnings of 75 cents a share edged past the 72 cents a share analysts had projected, according to FactSet. Revenue jumped 27% to $2.31 billion and outstripped the $2.26 billion consensus on Wall Street.

However, shares slipped in after-hours trading once the report was released, and they continued their descent on Wednesday, falling 7.3% to $142.34. The benchmark S&P 500 traded slightly higher.

Raymond James analysts wrote that the decline may have “resulted from elevated expectations and no real fundamental shift.” Coming into the results, the shares had surged nearly 40% in 2025.

“Perhaps the negative reaction reflects upside from services and a miss of product sales,” the analysts continued. Product revenue, a category including Arista’s flagship network switches, missed Raymond James’s estimates while service revenue, comprising cloud solutions and software, came in 18% ahead of what its financial model suggested. Raymond James rates the stock at Market Perform with no target for the price.

Arista specializes in network switches that facilitate the transfer of data within data centers. The Santa Clara, Calif.-based company counts Microsoft and Meta Platforms among its largest clients.

While Arista is generally regarded as a leader in its category, shares have been battered by concerns over “whitebox” competition, or the potential for customers to save money by making their own equipment. But analysts should look beyond the “white noise,” Evercore ISI analysts argued Wednesday.

“The negative stock reaction post close reflects the reality that forward estimates are not moving up in a material manner,” the analysts wrote, citing the company’s decision to maintain its forecast for 20% sales growth in 2026.

Guidance for the current fourth quarter also came in a bit light. Arista said it expects revenue in the range of $2.3 billion and $2.4 billion, or $2.35 billion at the midpoint, compared with analysts’ calls for $2.33 billion.

Regardless, the Evercore team believes the broader networking category is set to see “outsized growth” that will lift Arista’s shares. The firm rates Arista at Outperform with a $175 price target.

Arista was named a Barron’s stock pick in the summer, a few months after a steep drop-off in the share price created a buying opportunity. Shares have surged nearly 50% since we published the pick on June 5, when they closed at $95.18.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com