By Emily Dattilo

Arista Networks stock fell early Wednesday as concerns over Meta's contribution to its sales overshadowed strong quarterly results from the networking equipment company.

Arista stock dropped 5.7% to $104.74 in trading Wednesday.

Annual revenue jumped 20% to $7 billion in 2024 but Arista said Meta's contribution to sales fell to 15% from 21% the previous year. In contrast, sales to Microsoft rose to 20% from 18%.

Melius Research analysts led by Ben Reitzes, who rate Arista at Buy with a price target of $140, offered further insight on what Meta Platforms has to do with the stock decline.

"Meta was a 21% customer in 2023 and fell to 15% in 2024, meaning sales fell 17% y/y for the year," analysts wrote, adding that although sales to others including Oracle more than made up for that, investors had been concerned Meta was stepping away from the company.

"In response, management noted that Meta should be a 'strong double-digit' customer in 2025 (along with Microsoft, who grew 33% in 2024), implying Meta sales can be at least flat in 2025 and knowing Arista's conservatism -- that means growth," analysts continued. The team advises buying on weakness, citing opportunities for continued share gains and upside from artificial intelligence.

The quarterly results themselves were good.

For its fourth quarter, the company reported adjusted earnings of 65 cents per share, beating Wall Street's call for 57 cents, according to FactSet. Revenue of $1.93 billion was above the consensus estimate of $1.9 billion.

"Arista benefited from improved supply chain efficiency and inventory management as well as good contributions from enterprise customers," wrote William Blair analysts Sebastien Naji and Jason Ader, who rate shares at Outperform.

For the first quarter, the company forecasts revenue between $1.93 billion and $1.97 billion, while analysts had penciled in $1.9 billion.

For 2025, Arista now anticipates revenue growth at about 17%, compared to initial guidance of 15% to 17%.

Citi analysts led by Atif Malik highlighted the outlook, increasing their target for the price to $121 from $115 and reiterating a Buy rating. "Full year guide lift this early in the year is a a good sign for the things to come," they wrote.

Write to Emily Dattilo at emily.dattilo@dowjones.com

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February 19, 2025 09:51 ET (14:51 GMT)

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