Investments related to artificial intelligence should bring in big gains for Arista Networks , according to UBS. The investment bank upgraded the networking stock to buy from neutral and increased its price target to $115 from $112. That increase implies 34.5% upside from Tuesday’s close. “Our upgrade is supported by our view that investments in data center [capital expenditures] will remain strong growing at ~a 25% CAGR through 2027,” analyst David Vogt wrote in a note to clients. “In addition, an acceleration in key Arista metrics including ‘purchase commitments’, deferred revenue’, and ‘finished goods inventory’ last quarter provides revenue recognition support that the company’s CY25 revenue guidance of 17% is overly conservative relative to our 19% forecast and analysis that suggests growth could approach 25%.” The call comes as shares have meaningfully underperformed the S & P 500 this year. Year to date, Arista has plunged more than 22%, while the broad market index has fallen nearly 2%. ANET YTD mountain ANET, year-to-date Notably, Vogt believes that the AI infrastructure build-out is still in its early innings. Seeing hyperscalers “aggressively” invest in AI capacity over the next several years, he believes Arista’s revenue should line up with spending on the technology from key customers, like Meta Platforms , Microsoft and Oracle . In that area, the analyst forecast more than 40% data center capex growth from the hyperscalers in 2025, and then about 30% in 2026 and 2027. These investments should serve as a powerful tailwind for Arista in the years to come, he said. Moreover, while there is recent concern around white-box vendors – those that sell unbranded hardware – making inroads in areas where Arista has performed well, Vogt called the risk “manageable” at current valuations. A majority of analysts on Wall Street are also bullish on the name. Vogt’s stance joins 19 other analysts out of the 25 in total covering it that have a strong buy or buy rating. Arista also has a consensus target of roughly $117, reflecting more than 37% upside potential. Arista shares rose more than 3% in the premarket Wednesday following the call.
