- Buy Cisco Stock Ahead of Q3 Earnings? Here's What to Know
May 11, 2026
Cisco Systems CSCO is set to release its third-quarter fiscal 2026 results on May 13.
The company anticipates third-quarter fiscal 2026 revenues between $15.4 billion and $15.6 billion. Non-GAAP earnings are expected between $1.02 per share and $1.04 per share.
The Zacks Consensus Estimate for revenues is pegged at $15.58 billion, indicating growth of 10.1% from the year-ago quarter’s reported figure. The consensus mark for earnings has been steady at $1.04 per share over the past 30 days, suggesting year-over-year growth of 8.3%.
Consensus Estimate TrendZacks Investment Research
Image Source: Zacks Investment Research
CSCO’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 2.89%.
Cisco Systems, Inc. Price and EPS SurpriseCisco Systems, Inc. Price and EPS Surprise
Cisco Systems, Inc. price-eps-surprise | Cisco Systems, Inc. Quote
Let’s see how things are shaping up prior to this announcement.
Key Factors to Note for CSCO’s Q3 Earnings
Robust demand for AI infrastructure and campus networking solutions is expected to have driven CSCO’s top-line growth in the to-be-reported quarter. The company’s networking portfolio, powered by Silicon One, AI-native security solutions and operating systems, is expanding CSCO’s AI footprint. Networking product orders grew 20% in the second quarter of fiscal 2026, which marked the sixth consecutive quarter of double-digit growth driven by hyperscale infrastructure, enterprise routing, campus switching, wireless, industrial IoT and servers. The trend is expected to have continued in the to-be-reported quarter.
Increasing AI workloads at the network edge and the emergence of physical AI are benefiting the industrial IoT portfolio. Product orders in the second quarter of fiscal 2026 grew more than 18% year over year, with product orders from service providers and cloud customers surging 65%. Campus networking is benefiting from strong demand for next-gen solutions, including smart switches, secure routers and wireless products. Rapid acceleration in the capacity requirements of the network due to unprecedented levels of network traffic and an ever-evolving threat landscape bodes well for Cisco’s prospects. The aforesaid trends are expected to have continued in the to-be-reported quarter.
However, Cisco is suffering from stiff competition from Arista Networks ANET, Dell Technologies DELL, and Hewlett Packard Enterprise HPE across AI networking and enterprise security domains. Hewlett Packard Enterprise benefits from the Juniper Networks acquisition that has elevated HPE’s competitive stance by expanding its networking domain in AI, cloud and hybrid solutions. The versatility of Arista Networks’ unified software stack across various use cases, including WAN routing, campus and data center infrastructure, is setting ANET apart from its competitors, including CSCO. Dell Technologies benefits from strong demand for AI servers as well as robust enterprise demand for AI-optimized servers.
Story Continues
CSCO Shares Outperform Sector
Cisco shares have appreciated 25.4% year to date (YTD), outperforming the Zacks Computer & Technology sector’s return of 16.8%.
CSCO shares have underperformed Dell Technologies and Hewlett-Packard Enterprise YTD, while outperforming Arista Networks. Shares of Dell Technologies, Arista Networks and Hewlett-Packard have appreciated 106.9%, 8.2% and 30.6%, respectively.
CSCO Stock’s Price PerformanceZacks Investment Research
Image Source: Zacks Investment Research
However, the Value Score of F suggests a stretched valuation for Cisco at this moment.
In terms of the forward 12-month price/sales, CSCO is trading at 5.98X, higher than the Zacks Computer Networking industry’s 5.73X, Dell Technologies’ 1.18X and Hewlett Packard Enterprise’s 1X but lower than Arista Networks’ 14.43X.
CSCO’s ValuationZacks Investment Research
Image Source: Zacks Investment Research
Cisco Rides on Strong Portfolio & AI Demand
Cisco expects more than $3 billion in AI infrastructure revenues from hyperscalers in fiscal 2026. The company plans to deploy the Silicon One architecture across high-performance networking systems by fiscal year 2029. An expanding portfolio with the introduction of a 102.4 terabit per second G300 chip and two new pluggable optics, a 1.6 terabit per second OSFP and an 800-gig LPO (both built with Cisco silicon photonics technology), is driving CSCO’s footprint in high-performance AI infrastructure.
Cisco sees a growing pipeline of more than $2.5 billion in orders for its high-performance networking products across sovereign, Neocloud and enterprise customers ($350 million worth of orders in the second quarter of fiscal 2026). The joint venture with AMD and HUMAIN plans to deliver up to 1 gigawatt of AI infrastructure by 2030. Sovereign solutions are gaining traction as rapid AI adoption is accelerating concerns related to privacy, data governance and regulatory compliance.
Conclusion
Cisco’s near-term results are expected to benefit from an expanding portfolio and an accelerating AI push. These factors justify a premium valuation.
Cisco currently carries a Zacks Rank #2 (Buy), which implies that investors should start accumulating the stock ahead of third-quarter fiscal 2026 earnings. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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- Can Arista Tide Over Supply-Chain Shortcomings to Revive Its Mojo?
May 11, 2026
Despite recording solid first-quarter 2026 results with both adjusted earnings and revenues beating the Zacks Consensus Estimate, Arista Networks, Inc. ANET witnessed a sharp downtrend post earnings release, as concerns related to supply constraints clouded the future performance. Management noted that industry-wide shortages across wafers, silicon chips, CPUs, optics and memory chips are expected to last for the next one to two years, leading to a demand-supply imbalance and pressuring margins.
To tide over the storm, Arista is engaging with vendors to strengthen its supply agreements for a seamless flow of raw materials. It is also entering into multi-year purchase commitments to secure supply. The company expects these measures to help cater to the increasing demand trends in the forthcoming quarters.
Portfolio Strength: ANET’s USP
Arista is witnessing solid demand trends among enterprise customers backed by its multi-domain modern software approach, which is built upon its unique and differentiating foundation, the single EOS (Extensible Operating System) and CloudVision stack. The versatility of its unified software stack across various use cases, including WAN routing and campus and data center infrastructure, sets it apart from other competitors in the industry. This has translated into solid revenue growth for the company over the years.
The company offers one of the broadest product lines of data center and campus Ethernet switches and routers in the industry. It provides routing and switching platforms with industry-leading capacity, low latency, port density and power efficiency. The company also innovates in areas such as deep packet buffers, embedded optics and reversible cooling. Arista holds a leadership position in 100-gigabit Ethernet switches for the high-speed data center segment and is increasingly gaining market traction in 200- and 400-gigabit high-performance switching products.Zacks Investment Research
Image Source: Zacks Investment Research
Solid Cloud Traction Buoys ANET
Arista continues to benefit from the expanding cloud networking market, which is driven by a strong demand for scalable infrastructure. As more business enterprises transition to the cloud, the company is poised for growth in the data-driven cloud networking business with proactive platforms and predictive operations. In addition to high capacity and easy availability, its cloud networking solutions promise predictable performance and programmability, enabling integration with third-party applications for network management, automation and orchestration.
With customers deploying transformative cloud networking solutions, the company has announced several additions to its multi-cloud and cloud-native software product family with CloudEOS Edge. It has introduced cognitive Wi-Fi software that delivers intelligent application identification, automated troubleshooting and location services that support video conferencing applications like Microsoft Teams and Zoom.
Story Continues
Price Performance
Arista shares are up 4.9% over the past three months compared with the industry’s growth of 0.4%. It has underperformed peers like Hewlett Packard Enterprise Company HPE and Cisco Systems, Inc. CSCO. While Hewlett Packard has gained 41.2%, Cisco is up 28.7% over this period.
Three-Month Stock Price PerformanceZacks Investment Research
Image Source: Zacks Investment Research
Estimate Revisions
Earnings estimates for Arista for 2026 and 2027 have moved up 1.4% to $3.56 and 3.4% to $4.27, respectively, over the past 60 days. The positive estimate revision depicts bullish sentiments about the stock’s growth potential.Zacks Investment Research
Image Source: Zacks Investment Research
End Note
With solid fundamentals and healthy revenue-generating potential, driven by robust demand trends, Arista appears to be a solid investment proposition. Further, a strong emphasis on quality, diligent execution of operational plans and continuous portfolio enhancements are driving more value for customers. Management initiatives to ease the supply bottlenecks are likely to bear fruit. The positive estimate revision further exudes confidence.
The company delivered a trailing four-quarter average earnings surprise of 8.3%. It has a VGM Score of B. Arista currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Riding on a robust earnings surprise history and favorable Zacks Rank, Arista appears primed for stock price appreciation in the long run. Consequently, investors are likely to profit if they bet on this stock now.
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- Can Arista Tide Over Supply-Chain Shortcomings to Revive Its Mojo?
May 11, 2026 · zacks.com
ANET beat Q1 expectations, but supply shortages could squeeze margins for 1-2 years as it locks in multi-year vendor commitments.
- Is ANET Overvalued? DCF Says Worth $99
May 11, 2026 · gurufocus.com
On May 11, 2026, we delve into the DCF analysis for Arista Networks Inc (ANET), a company that has shown a remarkable price performance over the past year with
- Jim Cramer on Arista Networks: “Time to Buy”
May 9, 2026
Arista Networks Inc. (NYSE:ANET) is one of the stocks Jim Cramer shared his thoughts on as he discussed Big Tech’s AI spending. Cramer explained why the company’s stock declined, as he stated:
Often, we miss these moves because it’s hard to pull the trigger on something when it’s down and out, which is exactly what you have to do. Look at the incredibly good Arista Networks getting pummeled today. This data center networker has always been in the winner circle under the excellent leadership of Jayshree Ullal. When you dig into why the stock plunged 13.6% today, you find that Arista beat the estimates but failed to raise its forecast, which is, of course, the kiss of death in a tech-driven market. But wait a second. Why didn’t Arista raise the forecast?
Why didn’t anyone look at this? It’s not because the demand isn’t there, that would be bad. It’s because company’s supply constraint. They said the problem could persist for one or two years… That’s a tough one, right? But I think having more demand than you can handle for multiple years is a pretty high-quality problem, especially because I think that Jayshree will solve this. I believe in Jayshree. I think Arista stock now reflects the fears, fears that I bet will prove to be wrong. Time to buy.
A stock market graph. Photo by energepic.com
Arista Networks Inc. (NYSE:ANET) sells cloud-based networking solutions and related software for data center, AI, and enterprise operations. In addition, it provides network services, support, and hardware solutions.
While we acknowledge the potential of ANET as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
READ NEXT: 33 Stocks That Should Double in 3 Years and 15 Stocks That Will Make You Rich in 10 Years
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- Jim Cramer Says “I Wish I’d Bought Dell for My Charitable Trust a Hundred Points Ago”
May 9, 2026
Dell Technologies Inc. (NYSE:DELL) is one of the stocks Jim Cramer shared his thoughts on as he discussed Big Tech’s AI spending. Cramer mentioned the company during the episode and said:
And look, it’s not just Meta. We all kick ourselves for missing out on winners that seem obvious in retrospect. I wish I’d bought Dell for my Charitable Trust a hundred points ago.
Photo by Its me Pravin on Unsplash
Dell Technologies Inc. (NYSE:DELL) provides storage systems, servers, networking gear, and consulting services, as well as laptops, desktops, workstations, and accessories. During the May 5 episode, Cramer highlighted the stock while discussing AI plays, as he remarked:
Then there’s the infrastructure. That’s all about Dell, which makes the servers, the AI factory, if you will. Vertiv for cooling. Corning for the connecting fiber, as well as Arista, Ciena, Cisco for the networking equipment.
While we acknowledge the potential of DELL as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
READ NEXT: 33 Stocks That Should Double in 3 Years and 15 Stocks That Will Make You Rich in 10 Years
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- Trending stocks this week as Wall Street pushes higher amid chip rally, strong jobs data
May 9, 2026
[Wall Street in New York City]
JaysonPhotography/iStock via Getty Images
Wall Street ended the week sharply higher as investors reacted to a stronger-than-expected U.S. jobs report, solid semiconductor earnings, and rising geopolitical tensions in the Middle East.
Data from the U.S. Bureau of Labor Statistics showed nonfarm payrolls rose by 115K in April, well above economists’ expectations for 63K jobs, while the unemployment rate remained unchanged at 4.3%, reinforcing signs of resilience in the labor market despite ongoing economic uncertainty.
Geopolitical risks also stayed in focus after the U.S. military launched retaliatory strikes on Iranian military targets, following what Washington said was an Iranian attack on Navy vessels passing through the strategically important Strait of Hormuz.
Meanwhile, on Friday, several chip and AI-related stocks rallied after the U.S. said it expects a response from Iran today on a proposal to end the war despite the exchange of strikes.
For the week, the S&P (SP500 [https://seekingalpha.com/symbol/SP500]) added +2.3%, while the tech-heavy Nasdaq Composite (COMP:IND [https://seekingalpha.com/symbol/COMP:IND]) jumped +4.5%, and the blue-chip Dow (DJI [https://seekingalpha.com/symbol/DJI]) added +0.2%.
HERE’S WHAT CAUGHT INVESTOR ATTENTION THIS WEEK:
ADVANCED MICRO DEVICES (AMD [https://seekingalpha.com/symbol/AMD]) surged 26% after the semiconductor company reported first-quarter results and guidance that topped Wall Street expectations. AMD reported adjusted earnings of $1.37 per share on revenue of $10.25B for the quarter ended March 28, with revenue rising 38% year-over-year. The rally extends AMD’s sharp momentum run, with shares now up 112.5% YTD.
ARISTA NETWORKS (ANET [https://seekingalpha.com/symbol/ANET]) fell nearly 21% despite a first-quarter beat and analysts being largely positive but highlighting supply constraints. For the quarter ended March 31, the networking solutions company reported adjusted earnings per share of $0.87 versus the consensus estimate of $0.81. Revenue increased 35% year over year to $2.70B, which was more than the $2.62B consensus.
THE WALT DISNEY COMPANY (DIS [https://seekingalpha.com/symbol/DIS]) shares rose ~7% premarket after the entertainment giant reported better-than-expected quarterly results, driven by improved streaming profitability and stronger guest spending across its resorts and cruise business. Disney’s direct-to-consumer division, which includes the Disney+ streaming, delivered a double-digit operating profit margin for the first time, marking a major milestone in the company’s push to improve streaming profitability.
AMAZON (AMZN [https://seekingalpha.com/symbol/AMZN]) sent a shock wave across the freight delivery sector on Monday with the announcement of Amazon Supply Chain Services, which bundles offerings like freight, distribution and parcel shipping. The news put pressure on stocks like FedEx (FDX [https://seekingalpha.com/symbol/FDX]) and UPS (UPS [https://seekingalpha.com/symbol/UPS]).
IREN (IREN [https://seekingalpha.com/symbol/IREN]) jumped 32% over the week as the company announced its third quarter results, a partnership with Nvidia, and acquisition of Spain-based data center developer Ingenostrum. Q3 revenue of $144.8M missed the average analyst estimate as the average price of bitcoin declined. IREN (IREN [https://seekingalpha.com/symbol/IREN]) also secured a five-year AI cloud services contract worth about $3.4B with Nvidia to provide managed GPU cloud services for the chipmaker’s internal AI and research workloads.
PALANTIR TECHNOLOGIES (PLTR [https://seekingalpha.com/symbol/PLTR]) reported its highest ever year-over-year top-line growth rate in the first quarter. While the company posted Q1 revenue growth of 85% Y/Y to $1.63B and adjusted EPS of $0.33, the miss in U.S. commercial sales ($595M) weighed on sentiment, even as government revenue ($687M) topped estimates of $610.5M.
GAMESTOP (GME [https://seekingalpha.com/symbol/GME]) submitted a nonbinding proposal to acquire online marketplace EBAY (EBAY [https://seekingalpha.com/symbol/EBAY]) as part of an effort to expand beyond traditional videogame retailing and deepen its e-commerce and collectibles business. GameStop (GME [https://seekingalpha.com/symbol/GME]), valued at nearly $11B, said Sunday it has built a 5% economic stake in eBay through derivatives and direct ownership of common shares. eBay’s market cap stands at about $47.81B.
DATADOG (DDOG [https://seekingalpha.com/symbol/DDOG]) jumped 42% in the week after it beat expectations and raised its full-year outlook. For the first quarter ended March 31, non-GAAP EPS surged about 30% year-over-year to $0.60, while revenue jumped around 32% year-over-year to about $1B. The company now expects full year 2026 revenue to be between $4.30B and $4.34B versus a prior forecast of $4.06B and $4.10B and non-GAAP net income per share to be between $2.36 and $2.44.
LUMENTUM (LITE [https://seekingalpha.com/symbol/LITE]) fell nearly 9% as the company reported its third-quarter fiscal 2026 financial results post-market on Tuesday. Revenue grew 90% year over year to a record $808M, but missed market expectations. Adjusted earnings per share were $2.37 versus the consensus estimate of $2.27. Gross margin improved by 540 basis points on quarter and operating margin by 700 basis points.
SUPER MICRO COMPUTER (SMCI [https://seekingalpha.com/symbol/SMCI]) shares soared 29% after the artificial intelligence server maker reported fiscal third-quarter results and guidance that were above Wall Street's estimates. For the period ending March 31, Super Micro earned an adjusted $0.84 per share as revenue came in at $10.24B, down from $12.7B in the prior quarter but up from $4.6B in the year-ago period. For FQ4, Super Micro expects to earn between $0.65 and $0.79 per share on an adjusted basis, above the $0.57 analysts expected.
SHAKE SHACK (SHAK [https://seekingalpha.com/symbol/SHAK]) fell 29% after the company’s Q1 financial results missed on both lines. Q1 loss per share of -$0.01 compares to earnings of $0.10 in the year-ago period. While same-store sales were up 4.6% in the quarter compared to Q1 2025, the Danny Meyer-founded fast-casual restaurant chain had an operating loss of $2.6M versus operating income of $2.8M in the year-ago period.
ROCKET LAB (RKLB [https://seekingalpha.com/symbol/RKLB]) reported first-quarter results that topped Wall Street expectations, sending shares up 34% on Friday. The space company posted revenue of $200.3M, surpassing the consensus estimate of $189.4M. Its loss narrowed to $45M, or $0.07 a share, better than the consensus estimate for a loss of $0.08, from a loss of $60.6M, or $0.12 a share, a year earlier.
MORE ON THE MARKETS
* April Jobs Report: Scratch This Surface [https://seekingalpha.com/article/4901925-april-jobs-report-scratch-this-surface]
* I Traced The AI Capex, And Found 6 Profit Pools (One Is An Asymmetric Bet) [https://seekingalpha.com/article/4901703-i-traced-the-ai-capex-i-found-6-profit-pools-one-is-an-asymmetric-bet]
* Weekly Indicators: AI Is Powering Corporate Profits, Stock Prices, And Consumer Spending [https://seekingalpha.com/article/4901734-weekly-indicators-ai-is-powering-corporate-profits-stock-prices-and-consumer-spending]
* S&P 500 records weekly gains following strong jobs report, defying geopolitical jitters [https://seekingalpha.com/news/4590160-s-and-p-500-records-weekly-gains-following-strong-jobs-report-defying-geopolitical-jitters]
* 3 things to look out for on Monday [https://seekingalpha.com/news/4590171-3-things-to-look-out-for-on-monday]
- Piper Sandler Raises Arista Networks (ANET) Price Target to $181 on AI Exposure
May 9, 2026
Arista Networks, Inc. (NYSE:ANET) is one of the Best American AI Stocks to Buy Now. According to a report by TheFly on May 6, Piper Sandler raised its price target on Arista Networks to $181 from $175 and maintained an Overweight rating on the stock, citing the company’s AI exposure.Jim Cramer on Arista Networks Inc (ANET) Stock: “I Don't Understand Why It's Down This Much”
Piper Sandler highlighted that Arista’s exposure to AI is driving its acceleration, noting that it is well-exposed for inference-based use-cases with hyperscalers, AI Titans, neo clouds, Edge Platforms, and large enterprises as its customers.
On May 5, Arista reported a 35.1% increase in total revenue for the first quarter of the year at $2.709 billion. Arista CFO Chantelle Breithaupt said the company is proud of its strong start to Fiscal 2026. She added:
“While the macro and supply chain environments remain dynamic, our results are a testament to our team’s disciplined execution. Delivering 35% revenue growth alongside $0.87 non-GAAP EPS demonstrates our ability to drive high-quality growth while maintaining a rigorous focus on the bottom line.”
In an earnings call, Breithaupt said the company is raising its 2026 fiscal year outlook to 27.7% revenue growth, resulting in approximately $11.5 billion in revenue. She added that the company is maintaining its 2026 campus revenue goal of $1.25 billion, and is raising its AI fabrics goal from $3.25 billion to $3.5 billion.
According to analyst ratings compiled by CNN, Arista has an average target price of $180, a 5.75% upside from the current price of $170.22.
Arista Networks, Inc. (NYSE:ANET) is an industry leader in data-driven, client-to-cloud networking for large AI, data center, campus, and routing environments.
While we acknowledge the potential of ANET as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
READ NEXT: 8 Best Digital Infrastructure REITs to Buy According to Analysts and 10 Best AI Stocks to Watch in May
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- Arista Networks (ANET) Valuation After Strong Q1 AI Momentum And Supply Chain Driven Share Price Volatility
May 8, 2026
Get insights on thousands of stocks from the global community of over 7 million individual investors at Simply Wall St.
Arista Networks (ANET) has been in focus after reporting first quarter 2026 results, with revenue of US$2,709m and net income of US$1,022.9m, alongside guidance pointing to about US$2.8b in second quarter revenue.
See our latest analysis for Arista Networks.
The stock has swung sharply around these results, with a 1-day share price return of a 3.61% decline and a 7-day share price return of a 17.93% decline. The 1-year total shareholder return of 62.43% reflects stronger longer term momentum despite current volatility.
If Arista’s AI-driven story has your attention, it can be useful to see what else is moving in related areas and scan 40 AI infrastructure stocks
So after a sharp pullback following strong Q1 numbers, with the stock trading below some analyst price targets and a modest intrinsic discount estimate, are you looking at an entry point here, or is the market already pricing in future growth?
Most Popular Narrative: 11.6% Overvalued
Tokyo’s fair value estimate of $127.06 sits below the last close of $141.75, setting up a clear gap between the narrative and the current market price.
Young company (founded 2004, IPO 2014), disrupting CISCO in the High Speed Switch Market (for Datacenter, Cloud and AI)
Very successful introduction of Fast Internet Switches for Brokerage (High Speed Trading)
Read the complete narrative.
Curious how this disruptor label translates into that higher fair value line in Tokyo’s model? The narrative leans on brisk revenue expansion, firm margins and a premium earnings multiple. The interesting part is how those ingredients are combined across the forecast years, and how that feeds into the discount rate used. If you want to see exactly which assumptions have to hold to justify $127.06, the full narrative spells it out in detail.
Result: Fair Value of $127.06 (OVERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, this narrative can be tested if AI infrastructure spending slows, or if competitors pressure Arista’s 37.64% profit margin and premium future P/E of about 49.6x.
Find out about the key risks to this Arista Networks narrative.
Another View on Fair Value
Tokyo’s community model flags Arista as about 11.6% overvalued at $141.75 versus a $127.06 fair value, but the SWS DCF model sees something different. On that view, the stock trades at about a 4.9% discount to a $148.99 fair value, putting a small cushion under today’s pullback.
Story Continues
For readers who want to see exactly how those projected cash flows are used to reach that $148.99 figure, Look into how the SWS DCF model arrives at its fair value.ANET Discounted Cash Flow as at May 2026
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Arista Networks for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 51 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
With mixed signals on value and sentiment, it can help to move quickly, test each assumption against the latest data and come to your own view using 4 key rewards and 1 important warning sign
Looking for more investment ideas?
If Arista is already on your radar, do not stop there. Broaden your watchlist with other opportunities that fit different goals and risk levels.
Target potential mispricings by scanning 51 high quality undervalued stocks that combine quality fundamentals with price tags that may not fully reflect their financial profile. Strengthen your income focus by checking out 12 dividend fortresses that aim to pair higher yields with resilient cash generation. Prioritise resilience by reviewing 72 resilient stocks with low risk scores that show lower risk scores without giving up on fundamental quality.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include ANET.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
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- Is Arista Networks Stock a Buy on the Dip?
May 8, 2026
Shares of Arista Networks (NYSE: ANET) got slammed earlier this week after the networking company reported strong first-quarter results, but warned that supply constraints could affect revenue growth and gross margins moving the rest of the year and into 2027. The stock is still up about about 7.6% on the year and more than 55% over the past year, as of this writing.
Let's dig into Arista's results and guidance to see if this recent dip is a good opportunity to buy the stock.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »Image source: The Motley Fool.
Supply constraints to pressure margins
While Arista turned in strong Q1 results and raised its guidance, management's comments about supply constraints sent the stock tumbling. Management said it expects a shortage of several data center components that is likely to persist for the foreseeable future, including wafers, memory, central processing units (CPUs), and optical components. It hopes that this will ease in a year or two, but right now the shortages are leading to higher costs to attain these items, which will pressure its gross margins.
Overall, Arista saw its Q1 revenue climb 25% year over year to $2.71 billion. That was ahead of its $2.6 billion forecast. Adjusted earnings per share (EPS), meanwhile, jumped 32% to $0.87. However, Arista began to see its gross margin contract in the quarter. Gross margin fell 180 basis points in the quarter to 61.9%, while adjusted gross margin, which excludes stock-based compensation, fell 170 basis points to 62.4%.
Arista relies heavily on hyperscalers, or companies with massive data center operations, which it calls Cloud Titans. Microsoft is its largest customer, accounting for around 26% of its revenue last year, while Meta Platforms accounted for 16%. Given the revenue concentration, Arista is not well positioned to pass along all the price pressures it is experiencing, which is why management expects to see some continued gross margin pressure. Meanwhile, it thinks it will soon be adding another one or two large customers.
Nonetheless, the company raised its full-year revenue forecast. It now expects revenue to grow by 27.7% this year to $11.5 billion, up from a prior outlook of 25% growth, or $11.25 billion. The growth is being driven by AI "fabric sales," which are now projected at $3.5 billion, up from its prior $3.25 billion guidance.
Story Continues
Is Arista stock a buy on the dip?
In essence, Arista is a networking middleman that assembles components into a nice package and layers its Extensible Operating System (EOS) software on top to make everything easier to manage. While the company should continue to benefit from strong AI data growth, right now, it is getting a bit squeezed in the middle, between large hyperscaler customers that want to keep costs down and rising component costs.
Even after the dip in its share price, the stock still trades at a forward price-to-earnings (P/E) ratio of 39.5 times 2026 analysts' estimates. Given the pressure it is under and its valuation, I think there are better AI stocks to own.
Should you buy stock in Arista Networks right now?
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Geoffrey Seiler has positions in Meta Platforms. The Motley Fool has positions in and recommends Arista Networks, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy.
Is Arista Networks Stock a Buy on the Dip? was originally published by The Motley Fool
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