AI Networking Stocks See Mixed July, Strong YTD Gains

Arista Networks, Marvell Technology, and Credo Technology, key players in AI networking infrastructure, experienced varied stock performance in July, with Arista up 8.24%, Marvell down 31.04%, and Credo down 20.11% for the month, despite all three showing significant year-to-date returns [1]. This mixed short-term action comes as hyperscaler capital expenditure increasingly targets the connectivity layer of AI infrastructure, including switches, optics, and interconnects, which move data between GPUs and data centers [1].

Performance and Catalysts

Arista Networks (ANET), a provider of switching backbones for hyperscale AI data centers, closed July at $180.35, up 8.24% for the month and 37.64% year-to-date [1]. The company reported first-quarter fiscal 2026 revenue of $2.71 billion, a 35.1% year-over-year increase, surpassing estimates by 3.45% [1]. Non-GAAP EPS of $0.87 also beat the $0.81 consensus, marking the fourth consecutive quarter of exceeding EPS expectations [1]. Arista's deferred revenue reached $826.2 million in the March quarter, reflecting customer commitments [1]. Its AI fabric backlog nearly tripled to $9.7 billion by the end of Q2 2026, up from $3.6 billion a year prior [3]. Arista's Q2 FY26 revenue reached over $3 billion, up 37.7% year-over-year, with non-GAAP EPS of $1.02 against an $0.89 estimate [3]. Full-year revenue guidance was raised to $12.6 billion, representing 40% annual growth, and the AI fabrics goal moved to at least $3.5 billion [3]. Gross margin, however, compressed to 62.4% from 64.1% as the AI mix expanded [1].

Marvell Technology (MRVL) saw its shares fall 31.04% in July, from $271.98 to $187.56, despite a year-to-date return of 121.03% [1]. The company's first-quarter fiscal 2027 revenue reached $2.418 billion, up 27.6% year-over-year, with data center revenue accounting for 76% of the total at $1.833 billion [1]. Marvell's non-GAAP operating margin expanded to 35.0%, and free cash flow jumped 126.81% year-over-year [1]. The company is raising its revenue outlook for both fiscal 2027 and 2028 due to "exceptional AI-related bookings" [1]. Second-quarter guidance projects revenue of $2.700 billion, plus or minus 5%, implying roughly 35% year-over-year growth, with EPS of $0.93 plus or minus $0.05 [1]. Marvell's year-to-date gain reached 176.15%, with a 24.19% increase in the past month, trading at $234.33 [3].

Credo Technology (CRDO), the smallest of the three, finished July down 20.11% to $206.99, following a sharp June rally, but remains up 85.56% over the past year [1]. Fourth-quarter fiscal 2026 revenue reached $437.0 million, a 157.0% year-over-year increase, with non-GAAP EPS of $1.16 topping the $1.03 consensus by 12.17% [1]. Full-year revenue landed at $1.34 billion, up 205.68%, and non-GAAP net income increased more than five times to $662 million [1]. Credo's Active Electrical Cables are used by hyperscalers to connect GPU clusters [1]. First-quarter fiscal 2027 guidance calls for revenue between $465 million and $475 million [1].

Analyst Sentiment and Risks

Analyst consensus for Arista is 97% bullish, with 29 buy or strong buy ratings and an average target of $192.31 [1]. For Marvell, analysts remain constructive with an 86% bullish consensus and a target of $256.91 [1]. Credo has 18 buy ratings against one hold, with an analyst target of $279.29 [1].

Key risks for Arista include customer concentration, with CEO Jayshree Ullal expecting "one, maybe two, 10% customers," meaning a pause in any major customer's capital expenditure cycle could be felt quickly [1, 3]. Its trailing P/E near 72 also suggests limited room for error [3]. Marvell's GAAP net income in the March quarter was only $34.5 million, impacted by a $331.8 million fair value charge related to acquisitions [1]. Integration challenges or further hyperscaler pauses could extend its pullback [1]. Credo faces an elevated valuation with a P/E near 71, and insiders have been net sellers in 231 recent transactions [1]. Inventory nearly tripled year-over-year, and new product categories are expected to compress gross margins as they scale [1].

What to watch

• Marvell Technology's fiscal second-quarter earnings report: This is a near-term catalyst; if CEO Matt Murphy reiterates accelerating bookings, the AI networking group may see a collective upward movement [1].
• Hyperscaler capital expenditure data: Arista, trading near its 52-week high, will depend on new data points regarding capital expenditure from its major hyperscaler customers [1].
• Credo Technology's beta and new product margins: Credo remains the highest-beta play in the interconnect surge, with a beta near 3.2, but watch for potential gross margin compression as its new product categories scale [1].

The connectivity layer of AI infrastructure is expanding rapidly, and August will be a test of whether the market continues to value these specialized networking providers at their current levels [1].