Why Arista Networks Stock Rocketed 30% Higher in the First Half of 2026 and Why There's Likely More to Come
Key Points
Arista Networks is an industry-leading provider of Ethernet switches, routers, and other networking hardware used in data centers and cloud computing.
The company's components are in sharp demand thanks to the proliferation of AI.
Arista has raised its outlook twice in as many quarters, and the future looks bright.
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Shares of Arista Networks (NYSE: ANET) charged sharply higher in the first half of 2026, gaining 29.6%, according to data supplied by S&P Global Market Intelligence. That's more than three times the roughly 10% gains of the S&P 500.
The network specialist released back-to-back strong quarterly reports, and strong adoption of artificial intelligence (AI) sent its stock to new all-time highs.
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Second verse, same as the first
Arista Networks delivered its fourth-quarter report in early February, and the results were impressive. The company generated record quarterly revenue of $2.49 billion, which grew 29% year over year and 8% quarter over quarter. This drove adjusted earnings per share (EPS) of $0.82 up 24%. Furthermore, Airsta's strong operating margin -- at 47.5% -- helped the company surpass $1 billion in quarterly net income for the first time.
Management suggested its growth streak would continue, increasing its 2026 revenue outlook to $11.25 billion or 25% growth, fueled by an operating margin of 46%.
When Arista reported its first-quarter results just three months later, its growth accelerated. Record revenue of $2.7 billion climbed 35% year over year and 9% quarter over quarter, while adjusted EPS of $0.87 rose 32%. The company also delivered operating cash flow of $1.69 billion, the highest in its history. Arista said it expects its AI-related sales to more than double to $3.25 billion over the next year.
For the second time in as many quarters, management increased its full-year forecast, now guiding for revenue of $11.5 billion or 28% growth, with its operating margin potentially inching higher at 46% to 47%.
More to come?
During the Q1 earnings call, CEO Jayshree Ullal said that, in addition to two existing customers that generate 10% or more of revenue -- Microsoft and Meta Platforms -- Arista expects to add "at least one, maybe two" new 10% plus customers before the year is over. That suggests significant upside to the company's already rapid growth.
Arista has an almost unanimous blessing from Wall Street, as 97% of the analysts who cover the stock rate it a buy or strong buy, and none recommend selling. Furthermore, the average price target of $192 implies additional upside of 10%.
Moreover, Arista is a leader in the field of networking, but don't take my word for it. The company has made frequent appearances in Gartner's vaunted Magic Quadrant for data center switching, enterprise wired and wireless local area networks (LAN), and software-defined wide area networks (SD-WAN).
Given the company's crucial role in the data center industry, its continuing history of innovation, and its accelerating growth, I believe Arista Networks is an unqualified buy.
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Danny Vena, CPA has positions in Arista Networks, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Arista Networks, Meta Platforms, and Microsoft. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
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