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Will Arista's VeloCloud Buyout to Boost SD-WAN Unit Aid ANET Stock?

Will Arista's VeloCloud Buyout to Boost SD-WAN Unit Aid ANET Stock?

Yahoo04-07-2025
Arista Networks, Inc. ANET has acquired the VeloCloud SD-WAN portfolio from Broadcom Inc. (AVGO) for an undisclosed amount. The buyout has offered Arista complementary products and services with a production-proven SD-WAN architecture, a dedicated customer base of more than 20,000 and a seasoned sales channel. The acquisition will enable Arista to offer end-to-end networking solutions to a wider range of customers and augment its secure access service edge (SASE) networking gear, which supports remote workers and branch offices. VeloCloud has been part of Broadcom since the latter's purchase of VMware in 2023. However, Broadcom considered VeloCloud as a non-core business with low-value offerings, given its focus on cloud enablement and infrastructure. While losing its importance within the company, VeloCloud was also gradually losing market share, forcing Broadcom to consider options to divest it. This is where Arista came into the picture, snapping up a business that filled the void in its WAN Routing System to better compete with Cisco Systems, Inc. CSCO and Juniper Networks, Inc. JNPR.With AI offerings like VeloRAIN and VeloBrain, which use AI to improve the security and performance of distributed AI workloads and help network engineers better manage their environments, VeloCloud is a strategic fit for Arista's business. It delivers converged cloud networking from the edge to the data center and cloud, with end-to-end automation, application continuity and branch transformation, which empowers enterprises to transform their data centers with modern, high-performance operations.
Arista continues to benefit from strong momentum and diversification across its top verticals and product lines, with an improved market demand supported by a flexible business model and solid cash flow. As more and more business enterprises transition to the cloud, the company is well-poised for growth in the data-driven cloud networking business with proactive platforms and predictive operations. The company holds a leadership position in the 100-gigabit Ethernet switching share in port for the high-speed data center segment. It is increasingly gaining market traction in 200-and 400-gig high-performance switching products. Additionally, Arista offers one of the broadest product lines of data center and campus Ethernet switches and routers in the industry. It provides routing and switching platforms with industry-leading capacity, low latency, port density and power efficiency. The company also innovates in areas such as deep packet buffers, embedded optics and reversible cooling.Arista is witnessing solid demand trends among enterprise customers, backed by its multi-domain modern software approach, which is built upon its unique and differentiating foundation, the single EOS (Extensible Operating System) and CloudVision stack. The versatility of Arista's unified software stack across various use cases, including WAN routing and campus and data center infrastructure, sets it apart from other competitors in the industry. This, in turn, has translated into solid revenue growth for the company over the years.
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Arista continues benefiting from the expanding cloud networking market, driven by strong demand for scalable infrastructure. In addition to high capacity and easy availability, its cloud networking solutions promise predictable performance and programmability, enabling integration with third-party applications for network management, automation and orchestration.With customers deploying transformative cloud networking solutions, the company has announced several additions to its multi-cloud and cloud-native software product family with CloudEOS Edge. It has introduced cognitive Wi-Fi software that delivers intelligent application identification, automated troubleshooting and location services. This supports video conferencing applications like Microsoft Teams and Zoom.
Arista has surged 8.3% over the past year compared with the industry's growth of 39.7%, lagging peers like Juniper and Cisco. While Cisco gained 46.8%, Juniper was up 9.9% over this period.
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Earnings estimates for Arista for 2025 have moved up 11.3% to $2.57 over the past year, while the same for 2026 has increased 8.9% to $2.95. The positive estimate revision depicts optimism about the stock's growth potential.
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With solid fundamentals and healthy revenue-generating potential driven by robust demand trends, Arista appears to be a solid investment option. Further, a strong emphasis on quality, diligent execution of operational plans and continuous portfolio enhancements through organic and inorganic growth are driving more value for customers. Steady improvement in lead times and easing of supply-chain woes are major tailwinds. The stock delivered a trailing four-quarter average earnings surprise of 11.8%. Arista currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.Riding on a robust earnings surprise history and favorable Zacks Rank, it appears primed for further stock price appreciation. Consequently, investors are likely to profit if they bet on this high-flying stock now.
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This article originally published on Zacks Investment Research (zacks.com).
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