Arista Networks (ANET) experienced significant sell-offs on Thursday following the announcement of new tariff policies by the Trump administration. The company’s stock price dropped by 11.1% during a trading session where the S&P 500 fell by 4.9% and the Nasdaq Composite decreased by 6%.
The Trump administration revealed that a new 10% import tax on foreign-sourced products will become effective on April 5. Additionally, starting April 9, further reciprocal import taxes will be levied on goods from several companies with which the United States has substantial trade deficits. This announcement triggered widespread sell-offs in the market, particularly impacting the technology sector.
Investors are concerned that the newly introduced tariffs from the Trump administration could destabilize global trade and continue to lower valuation multiples across the stock market. Arista Networks, which depends on external manufacturers for assembling its networking hardware products, is likely to face increased costs. While the company has seen robust sales growth in line with artificial intelligence (AI) trends, there is a substantial risk that its business performance may fall short of previous expectations.
In its latest earnings update, Arista Networks projected sales to range from $1.93 billion to $1.97 billion for the first quarter. The company also anticipated achieving a non-GAAP (adjusted) gross margin of approximately 63%. Since the tariffs are set to be implemented after the first quarter concludes, there remains a possibility for the company to meet or exceed these targets.
However, the new tariff situation indicates that the company’s gross margin might decline considerably, and sales throughout the year could be lower than analysts’ expectations.