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Are NVIDIA's Ethernet Wins Signs of Hope or Horror for Arista?
NVDANvidia(NVDA) MarketBeat·2025-06-06 14:45

Core Insights - Arista Networks has seen a significant decline of approximately 27% from its all-time high closing price of nearly 130onJanuary21,buthasexperiencedarecoverysincetheendofMarch[1][2]−DespitecompetitionfromNVIDIA,analystshaveraisedtheirpricetargetsforArista,indicatingconfidenceinthecompany′slong−termsuccess[2][11]FinancialPerformance−Arista′sfinancialresultsfor2025havebeenstrong,withsalesandadjustedearningspershare(EPS)exceedingexpectationsinbothreportsreleasedthisyear[3]−Salesgrowthexceeded25130 on January 21, but has experienced a recovery since the end of March [1][2] - Despite competition from NVIDIA, analysts have raised their price targets for Arista, indicating confidence in the company's long-term success [2][11] Financial Performance - Arista's financial results for 2025 have been strong, with sales and adjusted earnings per share (EPS) exceeding expectations in both reports released this year [3] - Sales growth exceeded 25% in both reports, significantly outpacing any report from 2024, while adjusted operating margins remain around 47% to 48% [4] - Analysts forecast full-year sales growth of just under 20% for 2025, with adjusted operating margins expected to drop from 47.5% to around 45% [4] Tariff Uncertainty - The decrease in margin expectations is partly due to potential tariffs on Arista's supply chain in Vietnam and Malaysia, which are currently paused but may be imposed if trade deals are not reached by July 9 [5][6] - The tariff situation creates significant uncertainty around Arista's near-term prospects, although both countries are prioritized for tariff talks by the Trump administration [5][6] Competitive Landscape - NVIDIA's launch of Spectrum-X Ethernet switches poses a competitive threat to Arista, as it may attract some of Arista's major customers like Meta and Google [7][8] - Despite this competition, Arista's revenue growth has not slowed, suggesting continued strength in its customer base [8] - NVIDIA's entry into the Ethernet market may validate Arista's technology, potentially benefiting the company as the Ethernet market expands [9] Strategic Partnerships - Arista benefits from its partnership with Broadcom, which supplies Tomahawk chips for its switches, enhancing its competitive position in the market [10] Analyst Outlook - Analysts have a 12-month stock price forecast for Arista at 107.47, indicating a potential upside of approximately 13% from the current price [11][12] - The average updated price target from analysts is just under $106, suggesting moderate buy sentiment despite tariff uncertainties [11][12]