Arista Networks, Inc. (ANET)

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AI: Overvalued

Price checkThe shares demand years of exceptional growth, leaving too little room for disappointment.

At $198.82, 1.261 billion shares imply a $250.8 billion equity value. Over the four quarters through June, net income was $4.04 billion and free cash flow—cash left after operations and equipment spending—was $5.16 billion. The price is therefore about 62 times earnings and 49 times free cash flow, a thin 2.1% cash yield. My simplified ten-year test requires roughly 18% annual cash-flow growth for five years, then 10%, plus a 25-times ending value to earn 10% annually. That is possible, but too demanding for a value-investor margin of safety.

Big pictureFast growth and cash gains are real, but customer spending can swing sharply.

Revenue climbed from $2.32 billion in 2020 to $9.01 billion in 2025, while net income reached $3.51 billion. The latest four quarters produced $10.54 billion of revenue and $5.16 billion of free cash flow; the latter rose about 30% from the comparable period. Second-quarter revenue grew 37.7%, and the operating margin—profit before interest and tax as a share of sales—was 45.4%. Support-service revenue also grew 27.7% in 2025, improving durability. However, two customers supplied 42% of 2025 sales, making results sensitive to a few large spending cycles.

Business strengthHigh profits and a strong balance sheet give Arista unusual financial resilience.

At June 30, current assets were $20.16 billion against $6.82 billion of near-term bills and $8.92 billion of total liabilities; equity was $14.80 billion. This provides substantial downside protection at the company level, although investors pay far above that asset cushion. Arista repurchased $1.60 billion of shares in 2025 versus $439 million of employee share compensation, and year-end shares fell 0.4%. In 2026’s first half, buybacks stopped while share compensation reached $241 million; shares rose 0.4% from year-end. Capital returns offset dilution imperfectly and no dividend was paid.

What could change the storyArtificial intelligence demand can justify the price, while slower cloud spending would expose it.

The bull case is accelerating artificial intelligence networking: August guidance called for about $3.3 billion of third-quarter revenue, roughly 43% above the prior year, and new 1.6-terabit systems carry support from Meta, Microsoft, and Oracle. Sustained cash-flow growth above 20% and broader customer adoption could justify today’s valuation. The bear case is a cloud spending pause, component constraints, or purchasing changes at the two customers representing 42% of sales; these could cut growth and compress the premium price. Growth below roughly 15% would make the current 49-times cash-flow valuation especially hard to defend.

$198.82 price considered

AI: News

Record quarter and guidanceRecord results and stronger guidance confirmed booming demand, but also raised the future performance bar.

On August 4, Arista reported second-quarter revenue of $3.036 billion, up 37.7%, and diluted earnings of $0.95 a share, up from $0.70. It guided third-quarter revenue to about $3.3 billion and adjusted earnings to $1.06–$1.08 a share. Shares had closed at $190.51, opened the next day at $210.19, and finished at $197.31, up 3.6%. The timing supports an earnings-related reaction, but broader trading also contributed and exact causation cannot be isolated.

Faster networking systemsNew switches strengthen Arista’s artificial intelligence position, though commercial adoption still needs proof.

On June 9, Arista unveiled the 7060XE7 family for rack-scale artificial intelligence systems. Each platform supports 1.6-terabit connections, while linear optics can reduce interconnect power about 60% versus traditional plug-in optics. Meta, Microsoft, and Oracle supplied supportive statements, signaling customer validation but not purchase commitments. The shares fell 2.7% that day, so the launch cannot be credited with an immediate gain. The value mechanism is higher network capacity and lower power costs, which could protect Arista’s share as accelerator clusters expand.

Expectations triggered selloffStrong results still triggered a selloff because guidance and supply limits disappointed elevated expectations.

On May 5, Arista reported first-quarter revenue of $2.709 billion, up 35.1%, and $1.69 billion of operating cash. It raised 2026 revenue-growth guidance to 27.7% and its artificial intelligence networking target to $3.5 billion. Even so, the shares fell 13.6% on May 6. Contemporary reporting linked the drop to full-year growth guidance below the 28%–30% range investors expected and supply constraints. The episode shows that strong execution may not protect the stock when the valuation assumes even faster progress.

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Financial statements

	2025	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015	2014	2013	2012
Revenue	$9.01B	$7.00B	$5.86B	$4.38B	$2.95B	$2.32B	$2.41B	$2.15B	$1.65B	$1.13B	$837.6M	$584.1M	$361.2M	$193.4M
Gross profit	$5.77B	$4.49B	$3.63B	$2.68B	$1.88B	$1.48B	$1.54B	$1.37B	$1.06B	$723.1M	$543.6M	$392.1M	$238.5M	$132.2M
Research & development	$1.24B	$996.7M	$854.9M	$728.4M	$586.8M	$486.6M	$462.8M	$442.5M	$349.6M	$273.6M	$209.4M	$148.9M	$98.6M	$55.2M
Operating expenses	$1.91B	$1.55B	$1.37B	$1.15B	$956.0M	$782.2M	$738.6M	$1.10B	$591.5M	$479.7M	$394.3M	$266.6M	$172.4M	$92.3M
Operating income	$3.86B	$2.94B	$2.26B	$1.53B	$924.7M	$699.7M	$805.8M	$273.3M	$470.3M	$243.4M	$149.3M	$125.5M	$66.1M	$39.9M
EBITDAderived	$3.93B	$3.01B	$2.33B	$1.59B	$975.1M	$734.8M	$838.6M	$301.0M	$490.9M	$263.2M	$163.0M	$135.5M	$71.2M	$41.7M
Net income	$3.51B	$2.85B	$2.09B	$1.35B	$840.9M	$634.6M	$859.9M	$328.1M	$423.2M	$184.2M	$121.1M	$86.8M	$42.5M	$21.3M
Basic EPSper diluted share	$2.79	$2.27	$1.69	$1.10	$2.74	$2.09	$2.82	$4.39	$5.85	$2.66	$1.81	$1.42	$0.76	$0.39
Diluted EPSper diluted share	$2.75	$2.23	$1.65	$1.07	$2.63	$2.00	$2.66	$4.06	$5.35	$2.50	$1.67	$1.29	$0.72	$0.39

Review source filings at SEC.gov ↗

Insider buys & sells

Jul 1, 2024–Jun 30, 2026

Buys0$0.00 disclosed value

Sells (SEC code S)986$1.72B disclosed value

Transaction	Insider	Type	Shares	Price	Value	Owned after
Jun 22, 2026Form 4 · 10b5-1	Duda KennethPresident and CTO	SellCommon Stock · indirect	46	$175.04	$8.1K	472.4K
Jun 22, 2026Form 4 · 10b5-1	Duda KennethPresident and CTO	SellCommon Stock · indirect	2.2K	$174.37	$391.3K	472.4K
Jun 22, 2026Form 4 · 10b5-1	Duda KennethPresident and CTO	SellCommon Stock · indirect	1.3K	$173.69	$232.9K	474.7K
Jun 22, 2026Form 4 · 10b5-1	Duda KennethPresident and CTO	SellCommon Stock · indirect	531	$172.32	$91.5K	476.0K
Jun 22, 2026Form 4 · 10b5-1	Duda KennethPresident and CTO	SellCommon Stock · indirect	903	$171.49	$154.9K	476.6K

Review ownership filings at SEC.gov ↗

Arista Networks, Inc. (ANET)

Financial charts

Financial statements

Insider buys & sells