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Morgan Stanley raises Arista stock price target for 2026

By Hillary Remy TheStreet

Updated May 6, 2026 1:36 PM

Arista Networks spent the first quarter of 2026 in an unusual position. Investor conversations had gone quiet. Questions about customer concentration and margins were dominating the narrative. The stock was underperforming.

That tone has shifted. And Morgan Stanley just put a number on how much it has shifted.

Morgan Stanley raised target on Arista Networks

Morgan Stanley raised its Arista Networks price target to $180 from $165 on May 1, maintaining an overweight rating, Morgan Stanley noted. The stock closed at $172.71 on April 30, giving the company a market cap of approximately $219 billion, according to Yahoo Finance.

The note, authored by analyst Meta Marshall, also raised the firm's FY27 EPS estimate to $4.02 from $3.84 and its FY28 EPS estimate to $4.69 from $4.42, Morgan Stanley noted.

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The new $180 base case represents approximately 45x Morgan Stanley's FY27 EPS estimate of roughly $4.10, an expansion from the prior 40x multiple the bank was applying.

The rationale behind the multiple expansion is deliberate. Morgan Stanley is giving Arista credit for its positioning in the AI opportunity, arguing the stock deserves to trade in line with optical and AI infrastructure peers rather than at a discount to them, Morgan Stanley noted.

Why the Arista customer narrative is changing

The most important shift Morgan Stanley describes is not in the numbers. It is in how investors are thinking about Arista's customer base.

For much of early 2026, the conversation was centered on concentration risk around Microsoft and Meta. Those two accounts represent a significant share of Arista's revenue, and investors were discounting the stock for its dependence on them. That framing has started to change, Morgan Stanley noted.

Investors are increasingly giving credit to Oracle and Google as incremental customers that could each approach 10% of revenue, particularly through Google's Virgo Fabric deployment.

The shift in focus toward front-end and inference networking, where Arista's market share is higher, has further broadened the investment case, Morgan Stanley noted. North America accounts for 70% to 80% of Arista's revenue, with the company's global diversification still developing, the note confirmed.

What Arista's Q1 print is expected to show

Morgan Stanley's note is built around an earnings-preview framework with specific expectations for the quarter. The bank expects approximately a 2% topline beat, with revenue growth of roughly 32% and bookings growth closer to 35%, Morgan Stanley noted.

Gross margins are expected to come in slightly above 63%, helping operating margins land in the range of 46.5% to 47%. The bank anticipates approximately a 5% EPS beat.

The bigger focus heading into the print is guidance. Bullish investors are expecting Arista to raise its 2026 revenue growth outlook to 30% or above, from the prior 25%-plus framework. Those who have followed the stock longer are expecting a more conservative raise to around 28%-plus, given the company's historical pattern of measured guidance, Morgan Stanley noted.

Beyond the headline numbers, Morgan Stanley flags four things to watch: how the four large customers are progressing and whether a fourth 10%-plus customer materializes, how AI-native customer relationships are developing, how Arista plans to monetize XPO following its introduction at OFC, and the impact of memory pricing on margins and product availability, Morgan Stanley noted.

Key verified figures from the Morgan Stanley note:

Price target: $180, raised from $165, Overweight rating maintained
Stock price at April 30 close: $172.71, market cap approximately $219 billion
52-week range: $77.80 to $179.79, Yahoo Finance confirmed
FY27 EPS estimate: Raised to $4.02 from $3.84; FY28 EPS raised to $4.69 from $4.42
Q1 expected revenue growth: Approximately 32%; bookings growth closer to 35%
Q1 expected gross margin: Slightly above 63%; operating margin 46.5% to 47%
2026 revenue growth guidance expectation: Bulls at 30%-plus, conservatives at 28%-plus
Base case valuation: 45x FY27 EPS of approximately $4.10
Bull case: $240, based on 40x roughly $6 EPS; bear case: $88, based on 25x roughly $3.50 EPS
North America revenue share: 70% to 80% of total revenue

Source: Morgan Stanley note

The risks Morgan Stanley is still watching for Arista

Despite the raised target, risks for Arista remain meaningful. Tariffs, macro weakness, and any pullback in cloud capital spending are the most visible external threats, Morgan Stanley noted.

Customer concentration has not disappeared as a concern, even though the narrative is broadening. Microsoft and Meta still dominate the revenue mix, and memory pricing and component availability are flagged as margin variables investors will scrutinize closely.

The bear case of $88 represents 25x a bear-case FY27 EPS of roughly $3.50. That scenario assumes AI takes longer to materialize in Arista's revenue, cloud customers face continued bottlenecks, and hyperscale investment levels flatten, Morgan Stanley noted.

The longer view Morgan Stanley is betting on

The note's most significant argument is that Arista is no longer best understood as a traditional networking vendor. Morgan Stanley is treating it as an AI infrastructure beneficiary that deserves a different multiple framework entirely. That framing is what justifies the move from 40x to 45x on FY27 earnings.

The bull case of $240 would require Arista to demonstrate that its back-end share can approach its front-end position, supporting years of 20%-plus growth with operating margins above 45%, Morgan Stanley noted.

For investors, the question Morgan Stanley is posing is whether the customer diversification story is real.

If Oracle and Google develop into 10%-plus accounts alongside Microsoft and Meta, the concentration risk argument weakens substantially. That is the bet embedded in the $180 target.

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This story was originally published May 6, 2026 at 1:17 PM.