Why Is Arista Networks (ANET) Down 9% Since Last Earnings Report?

A month has gone by since the last earnings report for Arista Networks (ANET). Shares have lost about 9% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Arista Networks due for a breakout? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent drivers for Arista Networks, Inc. before we dive into how investors and analysts have reacted as of late.Arista Q3 Earnings Beat Estimates on Solid Top-Line ImprovementArista reported strong third-quarter 2025 results, with revenues and adjusted earnings soaring year over year, driven by robust demand trends. Innovative product launches and steady customer additions backed by the company’s best-in-class portfolio strength led to top-line expansion, while steady margin improvement contributed to earnings growth. Both the bottom and the top lines beat the respective Zacks Consensus Estimate. Net IncomeGAAP net income in the reported quarter increased to $853 million or 67 cents per share from $748 million or 58 cents per share in the year-ago quarter, propelled by higher revenues.On a non-GAAP basis, net income was $962.3 million or 75 cents per share compared with $769 million or 60 cents per share in the year-earlier quarter. The bottom line beat the Zacks Consensus Estimate by 3 cents.RevenuesRevenues surged to $2.31 billion from $1.81 billion in the prior-year quarter, driven by strength across the product portfolio. The company introduced various solutions for cloud, Internet service providers and enterprise networks to meet the rising demands of AI/ML-driven network architectures. These innovations enabled Arista to deliver a superior customer experience and increase customer engagement. The top line beat the consensus estimate of $2.24 billion. Net quarterly sales from Products totaled $1.91 billion compared with $1.52 billion in the year-ago quarter. Service revenues increased to $396.6 million from $287.1 million. Arista witnessed positive demand trends owing to its strong product portfolio, which is highly scalable, programmable and provides data-driven automation, analytics and world-class support services.Net sales from the Americas contributed approximately 80% to total revenues, while international revenues accounted for the remainder. Driven by its relentless pursuit of innovative products, Arista maintains a strong leadership position in the Data Center and Cloud Networking vertical.Other DetailsNon-GAAP gross profit rose to $1.51 billion from $1.17 billion for respective margins of 65.2% and 64.6%. The margin was above the company’s guidance and was buoyed by improved inventory management and supply-chain discipline.Total operating expenses were $512 million, up from $376.4 million in the year-ago quarter. Research & development costs rose to $326 million from $235.8 million. Sales and marketing expenses also increased to $151.2 million from $106.8 million due to a rise in headcount, new product introduction costs and higher variable compensation expenditures. Operating income for the quarter was $978.2 million, up from $785.3 million.Cash Flow & LiquidityIn the first nine months of 2025, Arista generated $3.11 billion of net cash from operating activities compared with $2.68 billion in the year-ago period. As of Sept. 30, 2025, the company had $2.33 billion in cash and cash equivalents and $309.6 million in other long-term liabilities. Arista has $1.4 billion worth of shares available for repurchase under its $1.5 billion share buyback program.OutlookFor the fourth quarter of 2025, management expects revenues to be between $2.3 billion and $2.4 billion, driven by healthy growth momentum and solid demand trends. Non-GAAP gross margin is expected to be 62%-63% and non-GAAP operating margin about 47%-48%.Revenues for 2025 are likely to grow 26%-27% year over year to approximately $8.87 billion, with a gross margin of 64% and an operating margin of 48%. Revenues for 2026 are expected to be roughly $10.65 billion, up 20% year over year. How Have Estimates Been Moving Since Then?It turns out, fresh estimates have trended upward during the past month.VGM ScoresAt this time, Arista Networks has a nice Growth Score of B, a score with the same score on the momentum front. However, the stock was allocated a score of F on the value side, putting it in the lowest quintile for value investors.Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Arista Networks has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Zacks' Research Chief Picks Stock Most Likely to "At Least Double"Our experts have revealed their Top 5 recommendations with money-doubling potential – and Director of Research Sheraz Mian believes one is superior to the others. Of course, all our picks aren’t winners but this one could far surpass earlier recommendations like Hims & Hers Health, which shot up +209%.See Our Top Stock to Double (Plus 4 Runners Up) >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Arista Networks, Inc. (ANET): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks