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Stock Markets Are Soaring. These 2 Tech Stocks Are Leading the Charge

Find out where the Election Day optimism is coming from.

This article originally appeared on The Motley Fool, written by Dan Caplinger.

Many expected the stock market to tread water on Tuesday, with market participants anxiously awaiting today’s Election Day results to come in. Yet markets once again defied expectations, and investors found themselves in a huge rally. There were competing explanations for the surge. What seems most likely, though, is that investors are happy that at least one source of major uncertainty will probably be behind us in the next day or two. As of 11 a.m. EST, the Dow Jones Industrial Average (DJINDICES:^DJI) was up 637 points to 27,562. The S&P 500 (SNPINDEX:^GSPC) gained 73 points to 3,384, and the Nasdaq Composite(NASDAQINDEX:^IXIC) moved higher by 234 points to 11,192.

When the macroeconomic and political pictures are hazy, many investors turn to earnings for guidance. The tech sector has seen some pressure lately, but two companies in the space — Arista Networks (NYSE:ANET)and Gartner (NYSE:IT) — provided some clarity along with positive news for their respective businesses.

Arista soars as the network business bounces back

Shares of Arista Networks were up more than 15% on Tuesday morning. The cloud network provider kept making progress toward a full recovery from its growth hiccup during the COVID-19 pandemic.

At first glance, Arista’s numbers might not have appeared all that strong. Revenue was down 7.5% from year-ago levels. Adjusted net income was down an even sharper 12% year over year.

Yet those declines reflect the pause in network upgrade activity that happened during the worst of the pandemic-imposed shutdowns. Declines in key financials were smaller than anticipated, pointing to Arista’s success is navigating through tough conditions.

More importantly, Arista expects to return to top-line growth in the fourth quarter. Revenue projections of $615 million to $635 million would work out to revenue gains of 11% to 15% compared with the same period a year ago. If Arista can deliver on that guidance, then its turnaround will be largely complete, and shareholders will look to cash in on soaring demand for smarter cloud network infrastructure.

Delivering data is more important than ever

Elsewhere in tech, Gartner saw its shares rise 13%. Many think of the company merely as a provider of tech-related information rather than as an investment in its own right, but Gartner has seen considerable growth lately.

Gartner’s numbers were mixed, which is understandable given the challenging environment in the research and advisory industry. Total contract value rose more than 5% to $3.4 billion, with gains in both the global technology and global business segments. However, total revenue was down about 1% from year-ago levels. Net income plunged almost 60% year over year, but after factoring in some extraordinary items, adjusted earnings climbed at a 30% pace from the third quarter of 2019.

Moreover, Gartner sees better times ahead. The company boosted its full-year 2020 guidance, including a jump of $170 million in total sales to $4.05 billion and a nearly $1-per-share rise in adjusted earnings. Gartner expects its free cash flow to be $200 million higher than previously anticipated, providing $625 million for the year.

Gartner has been able to capitalize on the need for better information, especially as a host of businesses make moves to e-commerce in order to protect themselves from brick-and-mortar store shutdowns. That could prove to be a long-term positive for Gartner, especially if its new clients benefit from the data they’re getting and decide to stick with the tech research company long after the pandemic is history.


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