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4w ago

Analysts Boost Arista on AI Networking as Supply Snags Cool Shares

They see shipment delays tied to scarce Broadcom chips as a timing issue that could unlock a stronger 2027.

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Arista Networks' scale-across opportunity is redefining Wall Street's view of the AI infrastructure leader.

Overview

  • Raymond James upgraded Arista to Outperform with a $164 target, citing gains in AI back-end and “scale-across” networking, which lets AI training clusters span multiple data centers.
  • Shares fell after the upgrade as investors focused on near-term supply and margin pressure rather than longer-term AI demand.
  • Arista reported Q1 revenue of $2.71 billion and adjusted EPS of $0.87, and it raised 2026 guidance to $11.5 billion with $3.5 billion expected from AI networking.
  • Management said shortages in Broadcom switch silicon, semiconductor wafers, memory chips, and CPUs are delaying shipments and weighing on gross margins.
  • Analysts say lowering reliance on Microsoft and Meta is pivotal, with Oracle or Google reaching 10% of sales viewed as a key trigger for a broader re-rating.