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In the past week, Arista Networks reported third-quarter results with revenue of US$2.31 billion and net income of US$853 million, as well as guided fourth-quarter revenue between US$2.3 billion and US$2.4 billion.
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While the company continues to see substantial demand for its AI networking solutions, management pointed to ongoing supply chain constraints and longer lead times as major growth hurdles in the near term.
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We’ll examine what the supply chain challenges highlighted by management could mean for Arista Networks’ long-term growth narrative.
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To believe in Arista Networks, you must have conviction in the company’s leadership in AI-driven networking and its ability to capture share as hyperscalers and enterprises upgrade their infrastructure. The latest quarterly results confirm customer demand remains robust, particularly for AI infrastructure, but supply chain delays and component shortages continue to be the single most important near-term headwind. For now, this challenge appears to be limiting growth but has not altered the core demand catalyst central to Arista’s story.
Among recent announcements, management’s updated revenue guidance for the fourth quarter, US$2.3 billion to US$2.4 billion, directly aligns with how supply constraints are tempering near-term growth, even as demand outpaces current delivery capabilities. This guidance makes clear that Arista’s strongest catalyst, the AI networking cycle, is being held back in the short term by execution risks surrounding supply chain and inventory management.
By contrast, some investors may be surprised at how even healthy backlog isn’t a guarantee of smoother profitability if…
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Arista Networks’ outlook anticipates $13.6 billion in revenue and $5.4 billion in earnings by 2028. This scenario implies a 19.5% annual revenue growth rate and a $2.1 billion increase in earnings from the current $3.3 billion level.
Uncover how Arista Networks’ forecasts yield a $163.87 fair value, a 25% upside to its current price.
While consensus views highlight current supply chain hurdles, the most optimistic analysts were projecting US$15.4 billion in revenue by 2028 before the recent news. If you focus on rapidly growing recurring software revenue and believe these high targets are realistic, your outlook may be much more upbeat than others’. As recent announcements evolve, it’s important to remember your perspective can shift as narratives and numbers change.