Top-Ranked ALAB & ANET Set to Thrive on AI-Cloud Networking Growth

The chart below shows the price performance of our two picks year to date.

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Astera Labs Inc.

Astera Labs develops semiconductor-based connectivity solutions tailored for cloud and AI infrastructure. ALAB is benefiting from surging demand for PCIe (Peripheral Component Interconnect Express) solutions, particularly as AI infrastructure investments accelerate globally.  

In the second quarter of 2026, ALAB reported record revenues of $392.4 million, up 104% year over year, with PCIe 6 products representing more than 50% of total revenues compared with 33% in the first quarter. This growth is driven by the adoption of its Scorpio AI Fabric Switches and Aries Retimers, which are critical for high-speed, low-latency connectivity in hyperscale data centers and AI clusters.

Diversified Product Portfolio

In the last quarter, Aries signal conditioning products reached record quarterly revenue, while Taurus grew across AI and general-purpose platforms. Management expects the transition to continue as PCIe 6 adoption broadens and 800-gig Ethernet deployments expand along with next-generation 200-gig per lane solutions.

High-radix Scorpio X-Series is entering volume production with an initial customer, while additional X-Series customers are expected to begin revenue shipments by year-end. Scorpio P-Series is also expanding across hyperscalers and AI infrastructure providers, with several programs expected to ramp more materially in 2027. 

ALAB  expects future Scorpio X-Series content to exceed $1,000 per XPU as next-generation systems adopt more complex switching topologies, larger clusters and higher bandwidth. Hypercast and In-Network Compute also deepen COSMOS integration within customers’ AI fabrics.

Astera Labs’ COSMOS software platform, which enables dynamic traffic shaping and real-time performance management, adds a layer of differentiation by making its hardware solutions more integrated and stickier for customers. 

The company is also investing in optical interconnects, with plans to deliver near-packaged optics and co-packaged optics solutions in 2027 and beyond, unlocking new multi-billion-dollar market opportunities.

Strong Outlook

For the third quarter of 2026, revenues are expected to be between $540 million and $560 million. The midpoint implies sequential growth of approximately 40%. Management projects non-GAAP earnings between $1.16 and $1.21 per share. Non-GAAP gross margin and operating margin are projected to be approximately 72% and 43%.

Solid Estimate Revisions

Astera Labs has an expected revenue and earnings growth rate of more than 100%, each, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 33.7% over the last 30 days. 

ALAB has an expected revenue and earnings growth rate of 60.9% and 56.9%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 53.6% over the last 30 days. 

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Robust Price Upside Potential

The short-term average price target of brokerage firms represents an increase of 32.1% from the last closing price of $321.61. The brokerage target price is currently in the range of $310-$500. This indicates a maximum upside of 55.5% and a downside of mere 3.6%.

Arista Networks Inc.

Arista Networks provides cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.

ANET strengthens its position in AI networking as enterprises and hyperscale customers expand Ethernet-based AI infrastructure. During the second quarter of 2026, the company exceeded 100 cumulative AI fabric customers using Etherlink switches, compared with only a handful of early adopters in 2024.

The new 7060XE7 family introduces 1.6-terabit platforms with liquid-cooled options, while Smart System Upgrade, Multipath Reliable Connection and SRv6 enhance AI cluster efficiency and utilization. These developments reinforce ANET’s long-term competitive position as AI networking architectures become increasingly Ethernet-centric.

Broad Product Portfolio

Arista Networks broaden its networking portfolio to address evolving AI, cloud and enterprise infrastructure requirements. ANET now offers switching platforms spanning traditional Ethernet deployments through emerging 1.6-terabit AI fabrics while expanding liquid-cooled networking solutions for next-generation data centers.

ANET expand its software platform beyond cloud data centers through automation, campus networking, routing and AI networking capabilities. The company's unified EOS architecture enables programmable networking across client, campus, cloud and AI environments while supporting advanced routing, observability and operational automation.

Strong Outlook

For the third quarter of 2026, management expects revenues to be approximately $3.3 billion, driven by healthy growth momentum and solid demand trends. Non-GAAP operating margin is expected to be 48-49%, and non-GAAP earnings per share are expected to be between $1.06 and $1.08. Management also expects AI revenue to reach at least $3.6 billion in 2026, supported by scale-up, scale-out and scale-across deployments.

Solid Estimate Revisions

Arista Networks has an expected revenue and earnings growth rate of 37.7% 35.6%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 11.3% over the last 30 days. 

ANET has an expected revenue and earnings growth rate of 25.4% and 23.4%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 13.7% over the last 30 days. 

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Impressive Price Upside Potential

The short-term average price target of brokerage firms represents an increase of 20.7% from the last closing price of $198.82. The brokerage target price is currently in the range of $179.15-$289. This indicates a maximum upside of 45.3% and a downside of mere 9.9%.

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This article originally published on Zacks Investment Research (zacks.com).

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