The Zhitong Finance App learned that Goldman Sachs released a research report stating that it gave Arista Networks (ANET.US) a “buy” rating, with a target price of 225 US dollars for 12 months, based on a 36x NTM+1Y forecast price-earnings ratio. At a closing price of $193.78 on September 4, this corresponds to a 16.1% upside. The bank pointed out that the company's reaffirmation of the 2026 revenue and profit margin guidelines is mainly supported by improved supply chain visibility and demand in two strategic key areas of AI infrastructure and enterprise park deployment.
According to the research report, Arista Networks management stated at the Communacopia+ Technology Conference that the company raised its 2026 revenue guidance to US$12.6 billion in the second quarter of 2026, mainly driven by easing supply chain restrictions and improving demand visibility. Management maintains a gross margin guideline of 62% to 64%. Despite the impact of inflation and product portfolio changes, tariff refunds of about 30 basis points this year, as well as targeted price increases aimed at offsetting rising component costs, have provided some support for gross margin.
Management said that in the second quarter of 2026, the company's multi-year procurement commitments reached 9.7 billion US dollars, reflecting strong demand, not just rising component prices. The company is willing to increase investment in components with long lead times, as product portfolio flexibility and visibility into customer product roadmaps help limit the risk of component obsolescence. Goldman Sachs believes that price increases and supply chain efficiency improvements may help the company maintain a gross margin level similar to 2026 in 2027, although 2027 will face a high base due to about 30 basis point tariff refunds in 2026.
At the product level, Goldman Sachs points out that Arista Networks' EOS operating system is an important differentiator. A unified software image can be used across the company's entire product portfolio, while different competitors' products often use different operating systems. EOS can provide high reliability and consistency in hyperscale cloud service provider routing, Neocloud and enterprise environments. For Neocloud and enterprise customers, the manageability and quality brought by a unified software stack across campus and cloud scenarios is one of its main values. The bank also notes that large-scale operations require best-in-class solutions, which enable ANET to outperform integrated alternatives usually aimed at low-volume customers.
In terms of AI networks, the company is seeing strong demand in many AI network fields, especially back-end networks connected to GPU accelerators. As customers are limited by power, cooling capacity, and data center space, and need to expand clusters to multiple locations, Scale-Across deployments are also showing significant demand. At the same time, management pointed out that deferred revenue conversion associated with newer AI deployments may continue to be uneven. Revenue recognition depends on customer acceptance and performance verification, and preparations such as data center construction, power, cooling, and wiring may also cause delays in deployment time.
For Neocloud customers, management notes that this customer group is an attractive growth area and values open, best-in-class AI networking solutions, but Arista is also concerned about customer credit risk.
In terms of scale-up Ethernet, the company believes it is still in its early stages of development, but as the market gradually shifts from proprietary interconnection to open standards, this field is expected to become an important new growth direction in the medium term. The company anticipates that the market will begin to expand in late 2027, and is expected to reach a more substantial scale by early 2028.
In the enterprise park market, the company is successfully extending data center networking capabilities to the enterprise park market, which represents an important growth opportunity. Its value proposition is consistent with the data center business, including product quality, as well as EOS software and CloudVision management software stacks developed by the same engineering team. Related growth is driven by two aspects. One is cross-selling to existing data center customers, and the other is driven by customers dissatisfied with traditional suppliers. The number of “campus-first” project wins continues to increase.
Goldman Sachs said that Arista Networks, as a leading brand switch supplier for hyperscale cloud service providers in the US, is expected to benefit from continued data growth, workload migration from local deployment to public cloud and hybrid cloud, and market demand for higher bandwidth, faster speed and lower latency. The bank indicated that within its coverage, ANET had the highest revenue exposure to cloud spending. 48% of revenue in 2025 came from the Cloud Titans business, with META and MSFT accounting for 16% and 26% of total revenue, respectively, and another 20% from second-tier cloud services and service providers. The company is also using its dominant position in data center switching to expand other network solutions, particularly enterprise networks such as campus switching, wireless, routing, and telemetry.
The bank anticipates that, driven by strong data center business growth and corporate market expansion, the company's revenue and EPS are expected to achieve strong double-digit growth in the next few years. At the same time, the company will continue to increase investment in R&D, sales and marketing, especially to build corporate market sales capacity.