Arista Networks dipped Friday following its investor day as Wall Street analysts mulled its financial outlook through 2027. Heading into the investor day, ANET stock had shot up 74% in 2023, partly due to buzz over artificial intelligence infrastructure investments.
The company hosted the investor day late Thursday. Arista sells computer network switches that speed up communications in internet data centers Also, Arista's biggest customers are Microsoft and Facebook-parent Meta Platforms.
"On the financial side, management provided 2024 revenue guidance of $6.5 billion that was roughly in line with street expectations (11% growth at the midpoint)," said William Blair analyst Sebastien Naji in a report.
Arista's revenue boomed more than 48% in 2022. In 2023, ANET stock analysts predict revenue growth of 31%. For 2024, analysts currently model sales growth of only 11%.
At Evercore ISI, analyst Amit Daryanani said in a report: "The longer-term guidance is likely the key driver of the sell-off in the stock. Arista indicated they expect a 15% CAGR (compound annual growth rate) from 2022-2027, which implies growth decelerates to around 10% after 2024. We think there could be an element of conservatism here as the deceleration is coming despite the expectation that AI adds $5 billion to the total addressable market by 2027."
ANET Stock: Artificial Intelligence Boost?
On the stock market today, ANET stock dipped 2.9% to 205.50. Shares could fall back in buy range after blasting out of a double-bottom base following earnings late on Oct. 30.
By 2025, some analysts expect ANET stock to get a boost from customer investments in artificial intelligence infrastructure. Internet data centers will need more computing power and network bandwidth to process AI workloads.
"Management reiterated its expectation for AI trials to start in 2024 and production deployments to become material in 2025 (resulting in $750 million in AI revenue in 2025)," said Naji.
Further, its chief rivals are Cisco Systems and Juniper Networks.
According to analysts, Arista is gaining ground in the so-called "enterprise" market — large companies, government agencies and educational institutions.
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