TLDR
- Raymond James upgraded Arista Networks (ANET) to Outperform with a $164 price target on Friday.
- The upgrade is driven by expanding AI applications, including inference workloads, mixture-of-experts models, and distributed AI clusters.
- Arista earns roughly 40% of sales from AI, with Meta and Microsoft together making up over 40% of total revenue.
- Raymond James believes Oracle could become Arista’s next 10%-or-above customer.
- Supply chain constraints, likely from Broadcom chips, may limit 2026 upside but could set up stronger growth in 2027.
Raymond James upgraded Arista Networks to Outperform on Friday, setting a price target of $164 per share. Analyst Simon Leopold led the note, pointing to a broadening AI market as the key driver.
ANET stock was last trading down around 1.5% on the day at the time of writing.
Arista currently pulls in roughly 40% of its revenue from AI-related applications. Cloud customers account for another 40% of sales. Meta and Microsoft together represent more than 40% of total revenue — a concentration that reflects how deeply tied Arista is to the biggest names in tech infrastructure.
Raymond James says Oracle could be next in line to cross the 10%-or-above customer threshold, which would further strengthen that revenue base.
AI Workloads Driving the Upgrade
The firm points to a shift in the types of AI workloads hitting networks. Inference and reasoning tasks, mixture-of-experts models, and larger distributed AI clusters are all increasing the volume and unpredictability of east-west traffic — the kind of internal data center traffic that Arista’s hardware and software are built to handle.
That unpredictability raises the value of Arista’s network intelligence tools, including congestion management, RDMA-aware load balancing, and high-frequency telemetry. Leopold writes that this plays directly to Arista’s existing strengths.
One specific use case that stands out is “scale-across” — a way to extend an AI training cluster across a wide area network. It adds complexity but also creates new opportunities. Raymond James believes Arista has already won deals with Meta and Google on this front.
Management previously projected about $1 billion in sales from scale-across, representing nearly a third of its AI revenue. Raymond James thinks that figure could double by 2027.
AMD’s growth also works in Arista’s favor. The firm supplies network switches for AMD’s AI infrastructure, meaning AMD’s rising footprint translates into more demand for Arista’s gear.
Supply Chain a Near-Term Watch Point
The upgrade comes with a caveat on supply. Raymond James flagged that Broadcom chip availability could be a constraint through 2026. Management has not confirmed which suppliers are struggling, but used the term “de-commits” in recent communications — referring to delays, not cancellations.
Other potential bottlenecks include fab capacity, wafers, optics, and printed circuit boards. The firm views these as timing issues rather than structural problems.
Leopold framed it plainly: supply chain challenges may limit upside in 2026, but the same constraints could set up better growth heading into 2027.
Arista’s campus networking business is also gaining traction alongside its AI-backend work, giving the company more than one growth path to lean on.
Raymond James set the $164 price target alongside the Outperform rating, up from its prior Market Perform stance.
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