The Ratings Game: ‘Cloud titans’ Meta and Microsoft bring growth and risk to Arista Networks, analyst says

by | Nov 1, 2022 | Stock Market

Arista Networks Inc. is enjoying revenue growth fueled by the so-called “cloud titans” led by Meta Platforms Inc. and Microsoft Corp. But at least one analyst warns that this could be a double-edged sword for Arista. Cloud-software and data-center supplier Arista
ANET,
+2.91%
reported third-quarter earnings and outlook that topped Wall Street’s relatively low consensus on Halloween. Meta
META,
+1.72%
and Microsoft
MSFT,
-1.07%
loomed large over the company’s numbers.

“Cloud Titans dominate the results,” wrote Raymond James analyst Simon Leopold, in a note released on Monday. Arista, he noted, expects the group to contribute 45% of its 2022 sales. However, the importance of such a small group of companies to Arista’s growth can also pose challenges. “This level of concentration presents risk,” Leopold added, noting that the Cloud Titans have risen from 30% of sales at the start of the year to 45% for the full-year. “The group has clearly over-shadowed the other verticals in terms of growth,” he said. See Now: Arista Networks stock muted as earnings clear analysts’ low bar But as things stand, the cloud titans look set to fuel more growth for Arista. “Last week, leading customer Meta offered a better than expected capital investment forecast for 2023,” Leopold wrote. “Further, our checks indicate that Google
GOOG,
-2.26%
has selected Arista, Cisco
CSCO,
-0.07%,
Juniper
JNPR,
+0.31%,
and Nokia
NOKIA,
-0.21%
to displace some white box platforms ramping in 2023.” “White box” refers to data center equipment that is not manufactured by a well-known company. Last week, Facebook pare …

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