By Mackenzie Tatananni

Shares of Arista Networks slumped on Wednesday, even after the maker of hardware for data centers posted earnings that exceeded investors' expectations.

The networking company reported third-quarter results after the closing bell Tuesday. Adjusted earnings of 75 cents a share edged past the 72 cents a share analysts had projected, according to FactSet. Revenue jumped 27% to $2.31 billion and outstripped the $2.26 billion consensus on Wall Street.

However, shares began falling in after-hours trading once the report was released. They continued their descent on Wednesday, falling 8.4% to $139.20. Futures tracking the benchmark S&P 500 traded flat.

Raymond James analysts wrote that the decline may have "resulted from elevated expectations and no real fundamental shift." Coming into the results, the shares had surged nearly 40% in 2025.

"Perhaps the negative reaction reflects upside from services and a miss of product sales," the analysts continued. Product revenue, a category including Arista's flagship network switches, missed Raymond James's estimates while service revenue, comprising cloud solutions and software, came in 18% ahead of what its financial model suggested. Raymond James rates the stock at Market Perform with no target for the price.

Arista specializes in network switches that facilitate the transfer of data within data centers. The Santa Clara, Calif.-based company counts Microsoft and Meta Platforms among its largest clients.

While Arista is generally regarded as a leader in its category, shares have been battered by concerns over "whitebox" competition, or the potential for customers to save money by making their own equipment. But analysts should look beyond the "white noise," Evercore ISI analysts argued Wednesday.

"The negative stock reaction post close reflects the reality that forward estimates are not moving up in a material manner," the analysts wrote, citing the company's decision to maintain its forecast for 20% sales growth in 2026.

However, they believe the broader networking category is set to see "outsized growth" that will lift Arista's shares. The firm rates Arista at Outperform with a $175 price target.

Arista was named a Barron's sto c k pick in June, a few months after a steep drop-off in the share price resulted in a buying opportunity.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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November 05, 2025 09:07 ET (14:07 GMT)

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