What happened

Shares of network company Arista Networks (ANET -0.83%) gained 10.1% in February, according to data provided by S&P Global Market Intelligence. The company reported financial results that were universally celebrated by Wall Street. And the stock may even be riding on the coattails of the most buzz-worthy subject on the stock market right now, contributing to its market-beating performance during the month.

So what

On Feb. 13, Arista Networks reported financial results for the fourth quarter of 2022, capping off a great year. The company generated nearly $4.4 billion in full-year revenue, which was a 49% year-over-year increase. This was a massive acceleration from its 27% revenue growth in 2021.

Spending from the cloud titans, specifically Microsoft and Meta Platforms, drove these strong results for Arista Networks. The company's products are crucial for IT infrastructure, which has only become more important as everything becomes more data-intensive. And this led to the cloud titans more than doubling their spend in 2022 and accounting for almost half of Arista Networks' revenue.

As mentioned, Wall Street was particularly keen on financial results from Arista Networks and shared upbeat reports with investors, contributing to the upside for the stock. One of the most bullish analysts is Paul Silverstein of Cowen, who raised his price target for Arista Networks stock by 6% to $225 per share, according to The Fly. This implies over 50% more upside from where the stock trades right now, and the bullishness is being fueled by the company's profitability.

Indeed, Arista Networks' gross profit margin and net profit margin are starting to recover after supply chain challenges from the COVID-19 pandemic made things difficult for a time.

ANET Gross Profit Margin (Quarterly) Chart

ANET Gross Profit Margin (Quarterly) data by YCharts.

Now what

Conversations concerning artificial intelligence (AI) are all the rage on the stock market these days, and this might be another reason Arista Network stock was up in February; it's seen as a potential way to invest in AI in 2023 and beyond.

On March 1, CEO Jayshree Ullal penned a blog post, outlining the special considerations that go into AI infrastructure -- special considerations Arista Networks feels particularly qualified to address. Ullal says that 2023 is the start of Arista 2.0, of which AI is a component of what could drive future market-share gains in its space.

Arista Networks is expecting growth to slow in 2023 to a rate of 25%. However, that's still quite good considering how much it grew in 2022. Moreover, trading at 33 times trailing earnings, the stock trades at one of its cheapest valuations as a public company.

Between ongoing growth, a relatively cheap valuation, and the potential longer-term upside of AI, it's easy to see why the market was upbeat about Arista Networks stock in February even though the market was down.