Raymond James raised its rating on Arista Networks to Outperform and assigned a price target of $164 per share in a research note released on Friday. The upgrade reflects the firm's view that Arista is positioned to benefit from an expanding AI market and accelerating demand that should improve growth beginning in 2027.
Analyst Simon Leopold told investors the decision was driven by an enlarged AI addressable market that aligns with Arista's core strengths. Leopold pointed to inference and reasoning workloads, mixture-of-experts models, and larger distributed AI clusters as forces that are increasing both the volume and variability of east-west traffic across data-center networks. Those dynamics, Raymond James said, elevate the value of Arista's network intelligence features, including congestion management and high-frequency telemetry.
Raymond James noted that Arista currently derives roughly 40% of its sales from AI-related applications, while cloud customers account for an additional 40% of revenue. The firm highlighted that Meta and Microsoft together represent more than 40% of total sales and suggested Oracle may be on the verge of joining Arista's roster of customers that contribute 10% or more of revenue.
On emerging use-cases, Leopold emphasized scale-across deployments - extending a training cluster across a Wide Area Network (WAN) - as a significant growth driver. He wrote: "Scale-across is among the bigger drivers. Scale across adds complexity to extend a cluster across a Wide Area Network (WAN) for a training cluster. We believe Arista has secured wins with Meta and Google. Management forecast $1B, or nearly a third of its AI sales from this new use-case, and we believe this could double in 2027."
Regarding supply-chain considerations, Raymond James flagged management's comment that so-called "de-commits" referred to timing delays rather than outright cancellations. The note added that Broadcom chip availability could present a constraint in 2026, although this may set the company up for comparatively stronger growth in 2027.
Context and implications
- Raymond James views Arista's network-intelligence capabilities as increasingly valuable as AI training and inference create more unpredictable east-west traffic patterns.
- Large cloud and hyperscaler customers remain central to Arista's revenue mix, with Meta and Microsoft accounting for a significant share of sales.
- Supply timing for key components, specifically Broadcom chips, is a noted risk for 2026 but could support a stronger 2027 revenue cycle if constraints ease.
This assessment underpins the firm's Outperform rating and $164 target, reflecting expected acceleration in AI-driven demand for Arista's switching and telemetry products beginning in 2027.