The booming artificial intelligence (AI) market is bearing fruit for more companies than the obvious names like Nvidia and Google parent Alphabet. According to numbers from S&P Global Market Intelligence, shares of networking technology outfit Arista Networks (ANET 2.05%) are up 10.9% as of 1:16 p.m. ET Wednesday in response to an impressive second-quarter report, largely fueled by its role in the advent of AI.
AI is driving most of this healthy growth
For the three months ending in June, Arista Networks turned revenue of $1.69 billion into a per-share profit of $2.10 per share. Both are up from year-ago comparisons of $1.46 billion and $1.58 per share, respectively. But, perhaps more importantly, both numbers topped expectations for a top line of $1.65 billion and per-share profits of $1.94.
Artificial intelligence accounts for the bulk of the beat.
NYSE: ANET
Key Data Points
While Arista Networks is widely known as a maker of routers, switches, and other networking solutions -- much like rival and industry leader Cisco -- Arista is proving to be an important data center specialist, and AI data centers in particular. In fact, its new 7060X6 etherlink AI networking platform is built from the ground up specifically to handle heavy-duty artificial workloads, whether they're created by training (machine learning) processes or less-developed inference models. This tech effectively connects multiple computer-processing units, addressing one of the AI industry's bigger data-crunching bottlenecks.
Whatever the company's making, it's finding a market for it. Arista Networks' revenue guidance for the quarter now underway is a range between $1.72 billion and $1.75 billion, versus analysts' consensus estimate of $1.73 billion. That's nearly 17% better than the year-earlier comparison of $1.48 billion, underscoring Arista's opportunity within the AI hardware market that Mordor Intelligence predicts will grow at an average annualized pace of 26% through 2029.
Arista Networks is a long-term buy at this price
Any daily gain on the order of 10% is a tough act to follow, simply because it invites profit-taking soon thereafter. Arista Networks is no exception to this potential risk.
Even if profit-taking-driven correction in the near-term cards here, though, Arista is still a compelling growth prospect, before or after. For perspective, most of the 27 analysts following this ticker rate it as a strong buy despite the stock's two-year, 265% run-up that pushed it to a record high just earlier this month. Most of them are eyeing the company's growing role as a well-equipped solutions provider in the AI data center arena.
Just bear in mind that the stock's already proven it's volatile, and as such isn't for the faint of heart or the short-term-minded.
