Arista Networks vs. ServiceNow: Which Technology Stock Is a Better Buy for 2027?

Investors looking for growth often weigh specialized hardware against enterprise software. Comparing Arista Networks Inc.(NYSE:ANET) and ServiceNow Inc. (NYSE:NOW) helps determine which infrastructure giant is better positioned to lead your portfolio into 2027.

Arista Networks provides the physical and software backbone for high-speed data centers, while ServiceNow offers a cloud-based platform to automate complex business tasks. Both companies are riding the wave of artificial intelligence adoption, making them essential components of the modern tech stack for large organizations and cloud providers.

The case for Arista Networks

Arista Networks designs high-performance networking platforms and software for massive data centers and artificial intelligence environments where high speed is critical. It primarily serves "cloud titans" and large enterprises that require immense bandwidth and low latency for their complex operations. In its latest annual report, the company noted that customer concentration adds risk, as two specific clients accounted for approximately 16% and 26% of revenue in 2025.

In FY 2025, revenue reached about $9.0 billion, which represents an increase of approximately 28.6% compared to the previous year. The company reported net income of roughly $3.5 billion, resulting in a net margin of about 39%. This indicates the company is effectively converting a large portion of its sales into actual profit, even as it scales rapidly to meet the global demand for AI infrastructure.

As of its December 2025 balance sheet, the company reports a debt-to-equity ratio of 0.0x, meaning it carries virtually no debt relative to its shareholder equity. Its current ratio, which measures the ability to cover short-term liabilities with short-term assets, stands at approximately 3.0x. For the fiscal year ended in 2025, free cash flow was about $4.3 billion, and this liquidity is a standout feature among tech stocks.

The case for ServiceNow

ServiceNow operates a comprehensive platform that uses artificial intelligence to automate workflows across IT, human resources, and customer service departments. According to its latest annual report, the company serves roughly 8,700 enterprise customers and scales its reach through partners like Accenture Ltd. (NYSE:ACN) and Infosys Technologies Ltd. (NYSE:INFY). Its goal is to act as a "platform of platforms" that connects disparate systems into a single efficient interface for modern employees.

During FY 2025, the company generated approximately $13.3 billion in revenue, reflecting growth of about 21% over the prior year. Net income for the period was roughly $1.7 billion, with a net margin of about 13.2%. While growth remains robust, its net margin is currently lower than its hardware-focused counterpart in this comparison, reflecting different reinvestment strategies.

The December 2025 balance sheet shows a debt-to-equity ratio of approximately 0.2x, indicating a conservative level of total debt relative to shareholder equity. The current ratio is roughly 1.0x, suggesting its short-term assets just cover its upcoming obligations. Free cash flow for FY 2025 reached around $4.6 billion, though note that stock-based compensation represented roughly 35.9% of operating cash flow, which inflates reported cash generation since stock-based compensation is a non-cash expense.

Risk profile comparison

Arista Networks faces significant risks from high customer concentration, as a few large cloud providers dominate its revenue stream. It relies heavily on Broadcom Inc. (NASDAQ:AVGO) for critical silicon components and must compete with massive rivals like Hewlett Packard Enterprise (NYSE:HPE). Geopolitical trade restrictions and supply chain volatility also pose ongoing threats to its ability to deliver physical networking hardware.

ServiceNow must navigate the operational and legal complexities of integrating rapidly evolving artificial intelligence technologies into its software platform. It faces intense competition from established software leaders such as Microsoft Corp. (NASDAQ:MSFT) and Salesforce.com Inc. (NYSE:CRM). Additionally, any cybersecurity breaches could damage the trust customers place in its cloud-based services and impact its growing public sector business.

Valuation comparison

ServiceNow appears cheaper based on its lower Forward P/E, using future earnings estimates, and P/S ratio measuring sales over the past twelve months.

Metric	Arista Networks	ServiceNow
Forward P/E	43.1x	27.9x
P/S ratio	18.9x	7.4x

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.

Turning to ServiceNow, its shares have experienced a volatile 2026 because of fears that generative AI will replace Software-as-a-Service (SaaS) businesses. That's a vague worry right now and probably overstated in the long run.

Management sees a unique opportunity to leverage its core information technology strength in operations applications through rolling out new GenAI tools, especially its new agentic AI services. ServiceNow expects GenAI to be an accelerator for business, increasing its total available market and boosting average selling prices.

For the current fiscal year, consensus estimates project the business to grow sales by 22% to $16.2 billion, although net income is expected to drop by about $300 million to $1.4 billion.

Which stock is the better pick? Arista Networks comes at a premium, based on its forward P/E and P/S ratios compared to ServiceNow, but the huge leap in revenue and net income along the lines of 40% is strong growth-stock expectations. Assuming Arista can execute on expectations, it's the stock for 2027.

Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Accenture Plc, Arista Networks, Broadcom, Hewlett Packard Enterprise, Microsoft, Salesforce, and ServiceNow. The Motley Fool recommends the following options: long January 2028 $260 calls on Accenture Plc and short January 2028 $280 calls on Accenture Plc. The Motley Fool has a disclosure policy.