Arista Networks vs. Okta: Which Technology Stock Is a Better Buy for 2027?
As enterprise technology shifts toward artificial intelligence, choosing between networking hardware and security software is a pivotal decision for investors. Comparing Arista Networks Inc.(NYSE:ANET) and Okta Inc.(NASDAQ:OKTA) reveals two distinct ways to play the digital transformation.
Arista Networks provides the physical backbone for massive data centers, while Okta secures the digital identities of the people and machines accessing those networks. Both companies benefit from the growing complexity of modern IT environments. This comparison examines their financial health and market positions to determine which stock offers the more compelling outlook over the next few years.
The case for Arista Networks
Arista Networks designs high-performance networking systems for massive cloud providers and artificial intelligence environments. The company is a prominent player among tech stocks that serve a global customer base across segments like cloud titans, specialty providers, and large enterprises. Customer concentration like this adds a layer of risk to the business, as large purchases by a limited number of clients drive a substantial portion of revenue. Its core offerings, including the EOS operating system and Network Data Lake, allow clients to manage complex traffic flows with high efficiency.
In the fiscal year ended Dec. 31, 2025, revenue reached around $9.0 billion, representing growth of approximately 28.6% compared with the prior fiscal year. This expansion was accompanied by robust profitability, as the company reported net income of roughly $3.5 billion. Its net margin of approximately 39% highlights the company's ability to convert a significant portion of its sales into profit while scaling its operations to meet the demands of the AI infrastructure boom.
As of its December 2025 balance sheet, the debt-to-equity ratio was 0.0x, meaning the company carries no total debt relative to its equity. Its current ratio, which measures the ability to cover short-term liabilities with short-term assets, was approximately 3.0x. For the fiscal year ended Dec. 31, 2025, free cash flow was about $4.3 billion, calculated as cash from operations minus capital expenditures. This strong cash generation provides the company with significant flexibility to reinvest in its research and development initiatives.
The case for Okta
Okta specializes in identity and access management, helping organizations secure their workforce and customer interactions. It serves more than 20,000 customers globally through its workforce and customer identity platforms, which are sold via subscription models. The company utilizes an expansive partner ecosystem to reach diverse markets ranging from small businesses to major government agencies and Fortune 50 enterprises. Its recent focus on identity for AI agents suggests the company is evolving to meet the needs of automated software environments.
In the fiscal year ended Jan. 31, 2026, revenue reached about $2.9 billion, an increase of roughly 11.8% compared with the prior fiscal year. The company reported net income of approximately $235.0 million during this period, with a net margin of around 8.1%. This performance represents a significant shift toward more consistent profitability compared to its performance in previous fiscal years. The growth is driven by the steady adoption of its cloud-based identity solutions across a broad customer base.
According to its January 2026 balance sheet, the debt-to-equity ratio was approximately 0.1x, indicating a very low level of total debt relative to shareholder equity. The current ratio stands at approximately 1.4x, which shows the company maintains a healthy cushion to meet its immediate financial obligations. Note that stock-based compensation, or SBC, for short, accounted for roughly 61.5% of operating cash flow, inflating reported cash generation, since SBC is a non-cash expense added back in the cash flow statement. Free cash flow for the period was roughly $863.0 million.
Risk profile comparison
Arista Networks faces significant risk from revenue concentration, as fluctuations in the capital spending of its largest customers can heavily impact financial results. It relies on a limited number of suppliers, particularly Broadcom Inc.(NASDAQ:AVGO) for merchant silicon, which leaves it vulnerable to supply chain disruptions or pricing shifts. Furthermore, intense competition from established vendors like Nvidia Corp.(NASDAQ:NVDA) and Cisco Systems Inc.(NASDAQ:CSCO), along with the uncertain trajectory of AI infrastructure investment, creates long-term forecasting challenges.
Okta must contend with intense competition from Microsoft Corp.(NASDAQ:MSFT), which remains its principal rival in the identity and access management space. The company also faces cybersecurity risks, where past unauthorized access to its systems or customer data has harmed its reputation and required costly remediation efforts. Additionally, its reliance on third-party providers like Amazon.com Inc.(NASDAQ:AMZN) for platform delivery means any service outages could result in contractual service credits and customer dissatisfaction.
Valuation comparison
Okta appears more affordable based on its P/S ratio , while Arista Networks carries a lower Forward P/E relative to future earnings estimates.
| Metric |
Arista Networks |
Okta |
|---|---|---|
| Forward P/E |
37.1x |
43.6x |
| P/S ratio |
16.9x |
9.3x |
Valuation metrics include those sourced from Financial Modeling Prep (FMP) and may differ from those of other data providers.
Which stock would I buy for 2027?
Arista Networks is experiencing strong demand for its Ethernet solutions as AI drives growth in cloud networking. Cloud Titans, a term for the largest AI operations, increased their spending by 30% in 2025 after a 30% increase in 2024. Arista is a big beneficiary of their spending and should continue to be. In addition to double-digit revenue growth for Arista from Titans, the company is seeing strong momentum in the Arista campus and mainstream switching and routing markets as it introduces and updates a slew of product offerings targeting those operations.
For fiscal 2026, revenue is expected to jump nearly 40% to $12.6 billion, with net income rising by a similar margin to $4.9 billion.
Okta, meanwhile, should enjoy revenue growth of about 10% this fiscal year to $3.2 billion, with a roughly 50% improvement in net income to more than $350 million, according to consensus analyst estimates.
Longer-term, enterprise agentic adoption is making companies think more about the importance of identity security as a critical piece of their corporate defenses. Analysts also see AI-driven opportunities from Okta's agentic products, as well as strong traction with newer products such as Okta Identity Governance and Okta Privileged Access. Deal sizes for AI-specific deals are larger than the company's average, and management says such deals are increasingly the topics of conversation with new and existing clients. That bodes well for the future.
On a P/E basis, Arista is more affordable and brings with it faster sales growth than Okta. That combination makes it a good choice for long-term investors seeking a tech stock to add to their portfolio.
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Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Arista Networks, Broadcom, Cisco Systems, Microsoft, Nvidia, and Okta. The Motley Fool has a disclosure policy .
Arista Networks vs. Okta: Which Technology Stock Is a Better Buy for 2027? was originally published by The Motley Fool
