UBS says expect beat and raise at AI-exposed companies in enterprise hardware and networking space in Q2

UBS said expect beat and raise at AI-exposed companies, but sentiment already leans bullish, while highlighting some U.S. companies in the enterprise hardware and networking space.

Analysts led by David Vogt said investor sentiment in the second quarter of 2025 has swung wildly intra-quarter from deeply pessimistic following the announcement of ‘Liberation Day’ tariffs in early April to currently aggressively optimistic just three months later.

“As such, in the near term, we see a slight risk to the downside for shares of Arista, Extreme, Lumentum, and Celestica as investor sentiment is already pricing in a significant beat and raise driven by hyperscaler capex at multiples in some cases at three-year highs,” stated Vogt and his team.

The analysts added that companies with AI related infrastructure exposure like Celestica (NYSE:CLS), Jabil (NYSE:JBL), Dell Technologies (NYSE:DELL) and Arista Networks (NYSE:ANET) have seen their respective Next Twelve Months Price-to-Earnings, or NTM PE, multiples expand by 134%, 84%, 75%, and 56%, respectively, compared to a 26% increase in the S&P 500 P/E multiple as investors tilted preference towards perceived “AI winners.”

Vogt and his team said they expect strong demand for infrastructure driven by the top five hyperscalers to drive a “beat and raise” at both Celestica and Arista when they report the June quarter, with valuations elevated both on an absolute and relative basis, expectations embed possible new program wins that are difficult to time.