2025-07-01 19:34:18 by Investor's Business Daily

Arista Networks' (ANET) acquisition of VeloCloud from Broadcom (AVGO) on Tuesday won good reviews from analysts. Arista stock, though, dipped amid the news. Arista did not disclose financial terms of the VeloCloud purchase. The Information in May reported negotiations between Arista and Broadcom and said the asking price was "well under" $1 billion. ↑ X NOW PLAYING Inside Cathie Wood's 2025 Playbook: Disruption, Risk And A Massive Comeback For Speculative Growth Stocks A maker of cloud-computing networking gear, Arista's biggest customers have been Microsoft (MSFT) and Meta Platforms (META). But Arista has been gaining ground in the enterprise market, analysts say. On the other hand, Arista has lacked a broad offering in the enterprise market. Started in 2012, VeloCloud sells software-defined wide-area network (SD-WAN) technology. Arista Stock: VeloCloud Fills Product Gap Dell'Oro analyst Mauricio Sanchez in a report said the VeloCloud deal is a good move. "Arista, renowned for its data-center franchise and burgeoning campus, lacks an enterprise-class WAN," he said. "In 2023,  the  'Arista WAN Routing System' entered limited trials but never reached broad availability. Acquiring VeloCloud instantly fills that gap with a production-proven SD-WAN architecture, 20,000-plus customers, and a seasoned sales channel." Sanchez added that Arista could make another acquisition targeting a bigger SASE market. Secure access service edge, or SASE, networking gear supports remote workers and branch offices. On Tuesday, Arista stock fell 3.3% to close at 98.91. Broadcom stock fell 4% to 264.74. Arista stock has retreated about 10% in 2025. Meanwhile, the Nasdaq composite retreated on Tuesday. The tech-heavy index closed at an all-time high on Monday. "We are positive on the acquisition and see VeloCloud as filling an important hole in Arista's campus offering, which has lacked a robust enterprise-class WAN offering," said Raymond James analyst Sebastien Naji in a report. "VeloCloud brings a proven SD-WAN architecture, more than 18,000 customers, and a strong relationship with the service provider channel to Arista." VeloCloud Struggled Under Broadcom Broadcom acquired VeloCloud as part of its purchase of VMware in 2023. In 2017, VMware acquired VeloCloud for roughly $449 million, said Sanchez. He said VeloCloud has been losing market share since the Broadcom acquisition. He estimated that VeloCloud's share of the SD-WAN market has dropped to the "single digits" from a peak of 20% in 2020. Meanwhile, Arista's enterprise revenue will grow 15% to $1.75 billion in 2025 and 20% in 2026, estimated Morgan Stanley in a report. "With the integration of VeloCloud's WAN solutions, Arista believes it will have the ability to interconnect any type of customer site, branch to cloud, and better manage and secure complex traffic flows — essential with greater adoption of artificial intelligence," said Citigroup analyst Atif Malik in a report. In the three months ended March 31, Arista earnings per share rose 30% to 65 cents on an adjusted basis. Revenue jumped more than 27% to just over $2 billion. Arista's chief rivals are Cisco Systems (CSCO) and Juniper Networks (JNPR). In 2025, Arista has been projecting $750 million in artificial-intelligence-related revenue. Most of that is expected to come from Ethernet networking technology that connects the clusters of AI servers in cloud-computing data centers. Arista Stock Technical Ratings Further, Arista stock holds a Relative Strength Rating of 80 out of a best-possible 99, according to IBD Stock Checkup. Meanwhile, Arista stock has an Accumulation/Distribution Rating of B+, according to IBD MarketSurge analysis. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing. YOU MAY ALSO LIKE: Want To Trade Options? Try Out These Strategies Monitor IBD's "Breaking Out Today" List For Companies Hitting New Buy Points IBD Digital: Unlock IBD's Premium Stock Lists, Tools And Analysis Today Build Custom Stock Screens With MarketSurge Join IBD Live For Stock Ideas Each Morning Before The Open