Arista Networks stock dropped over 10% after Q1 earnings on May 5, but the decline may not reflect strong fundamentals including 35.1% year-over-year revenue growth.

Arista Networks reported Q1 results on May 5 with revenue up 35.1% year over year and net income up 25.7%, yet the stock fell more than 10% the following day.

The company achieved a 37.8% net profit margin (down from 40.6% in the prior-year period) and 8.9% sequential revenue growth, with Q2 guidance implying $2.8 billion in revenue and 3.4% sequential growth.

Management projects 27% year-over-year revenue growth for Q2, but the stock trades at a P/E ratio of about 54—historically high for the company—which may appeal only to growth investors, not value investors seeking better returns elsewhere in the AI sector.