Are These AI Stocks a Buy Before Earnings?

The AI story continues to grip investors, with many seeking exposure over the last year.Two stocks involved in the frenzy, Arista Networks ANET and Arm Holdings ARM, are on the reporting docket for this week. Both stocks have enjoyed bullish price action year-to-date, widely outperforming relative to the S&P 500.Image Source: Zacks Investment ResearchLet’s take a closer look at expectations for each heading into their respective releases.Arista Sees Profitability Boost Arista Networks, a Zacks Rank #1 (Strong Buy), is an industry leader in data-driven, client-to-cloud networking for large data centers, campus, and routing environments. Analysts have been bullish across all timeframes, with the $2.09 Zacks Consensus EPS estimate suggesting 14% growth from the year-ago period.Image Source: Zacks Investment ResearchRevenue revisions have also ticked higher over recent months, with the $1.8 billion expected reflecting 16% growth year-over-year. The company’s top line strength has been remarkable, posting sequential growth in each of its last ten periods.Below is a chart illustrating the company’s sales on a quarterly basis.Image Source: Zacks Investment ResearchThe company’s margin recovery has been a big focal point over recent periods, as we can see illustrated below. Higher profitability has provided a nice boost to the company’s results, helping lead to 33% EPS growth throughout its latest period.For the upcoming print, ANET has guided for a non-GAAP gross margin in a band of 63 – 64%. Please keep in mind that the chart below is on a trailing twelve-month basis.Image Source: Zacks Investment ResearchArm Posts Record Results Arm architects, develops, and licenses high-performance, low-cost, and energy-efficient CPU products and related technology, on which many of the world's leading semiconductor companies and OEMs rely to develop their products.The company’s quarterly results in its short public history have been notably positive, exceeding our consensus EPS estimates by an average of 22% across its four releases. Earnings and revenue expectations haven’t budged much at all over recent months, with ARM expected to post a 30% EPS decline alongside a marginal 0.4% sales improvement.Below is a chart illustrating the company’s sales on a quarterly basis.Image Source: Zacks Investment ResearchIts latest set of results saw a boost from record royalty revenue, with Armv9 (its most advanced technology) penetration growing rapidly. Notably, revenue from chips based on Armv9 technology contributed around 25% of royalty revenue in the period, up from roughly 20% in the period before and 15% in the period prior to that.Royalty revenue will again be a focal point in the release, particularly as the penetration of its Armv9-based chips continues to grow. Adoption of the technology in the mobile market helped lead to a 50% jump in smartphone royalty revenue throughout its latest period, another key aspect to watch in the release.Simply put, increasing chip complexity paired with the rapid deployment of AI will continue to provide bullish tailwinds for the company, particularly thanks to its cutting-edge technology and energy-efficient solutions.Bottom LineEarnings season continues to roll along, with a wide variety of companies unveiling quarterly results daily.And this week, we’ll hear from two companies – Arista Networks ANET and Arm Holdings ARM – that have benefited from Wall Street’s obsession with artificial intelligence.Concerning ANET, margins will be key in the release, with big growth expected in both earnings and revenue. The company’s quarterly releases have regularly brought post-earnings positivity in 2024, with shares up big year-to-date.Regarding Arm, royalty revenue will likely be a key factor driving sentiment surrounding the release, with increasing penetration of its Armv9 technology providing big tailwinds over recent periods. Penetration of the technology has continued to grow sequentially, with the mobile market picking up considerable steam.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report ARM Holdings PLC Sponsored ADR (ARM): Free Stock Analysis Report Arista Networks, Inc. (ANET): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks