Shares in Arista Networks tumbled on Thursday on 2024 capital spending guidance from Facebook-parent Meta Platforms. Third quarter earnings for ANET stock are due Monday.
Meta and Microsoft are the biggest customers of Arista, which sells computer network switches that speed up communications in internet data centers.
Meta updated its capital spending plans for 2024 when the social networking giant reported third-quarter earnings Wednesday. The company said it expects to spend in a range of $30 billion to $35 billion. At the midpoint of $32.5 billion, that was below consensus estimates of $33.8 billion. Also, Meta's Q3 capital spending came in at $6.54 billion, down 30% from a year earlier and below consensus of $7.19 billion.
"We believe networking investors have been split on Meta's 2024 capex outlook with bears anticipating flattish spending in the high $20 billion range and bulls expecting $35 billion to $40 billion, said Raymond James analyst Simon Leopold in a report.
ANET Stock: 2024 Growth To Slow
On the stock market today, ANET stock tumbled 8.7% to close at 169.82. META stock fell 3.7% to 288.35. Meta's Q4 revenue outlook, at the midpoint of guidance, came in slightly below consensus estimates.
A slowdown in data center spending by internet giants has been expected.
Arista's revenue boomed more than 48% in 2022. In 2023, ANET stock analysts predict revenue growth of 31%. For 2024, analysts currently model sales growth of only 11%.
But analysts with bullish views on ANET stock expect artificial intelligence-related investments to reaccelerate Arista's revenue growth.
With Thursday's sell-off, Arista stock has gained 42% in 2023.
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