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Arista Networks (ANET)
NYSE:ANET
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Arista Networks
(NYSE:ANET)
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Rating:82Outperform
Price Target:
$148.00
▲(13.63% Upside)
Action:ReiteratedDate:02/17/26
The score is driven primarily by exceptional financial strength (high margins, strong free cash flow, near debt-free balance sheet) and a positive earnings-call outlook with raised FY2026 and AI targets. These are tempered by a high valuation (P/E ~51) and only moderate, higher-volatility technical momentum.
Positive Factors
Near‑debt‑free balance sheet
Near-zero debt across recent years materially reduces financial risk and preserves flexibility. With low leverage the company can fund R&D, absorb cyclical demand swings, pursue opportunistic buybacks or M&A, and sustain operating spend through 2–6 month industry cycles without pressure from interest costs.
Strong cash generation and capital returns
High free cash flow that closely tracks net income and a very large cash stockpile underpin durable financial flexibility. Reliable cash generation funds R&D, supports aggressive share repurchases, and cushions against capex or supply timing delays, improving resilience over the medium term.
AI momentum and product leadership
Clear, structural demand from cloud/AI scale-ups and upgraded product portfolio (800G, 7000/7800 families, EtherLink, co‑designs) position Arista to capture prolonged AI-driven spend. Raised AI target signals durable market share gains as data center networking upgrades continue over many quarters.
Negative Factors
Memory and supply‑chain pressure
Sustained memory shortages and rising component costs compress gross margins and force higher purchase commitments that tie up capital. If elevated memory pricing persists, product margins and shipment cadence may be impaired for multiple quarters, limiting margin sustainability.
Customer concentration risk
High revenue concentration to a few cloud/AI titans increases exposure to single-customer procurement timing and renegotiation risk. Large-account spending shifts can cause pronounced revenue and cash-flow volatility across quarters and materially affect near-term growth visibility.
Deferred‑revenue lumpiness & working‑capital volatility
Large swings in deferred revenue, DSO and inventory indicate revenue recognition timing and working‑capital friction. Such structural timing variability weakens near-term cash visibility and can produce quarter-to-quarter earnings and free-cash-flow swings even if end-market demand remains intact.
Arista Networks (ANET) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$167.75B
Dividend YieldN/A
Average Volume (3M)8.55M
Price to Earnings (P/E)48.5
Beta (1Y)2.21
Revenue Growth27.75%
EPS Growth25.42%
CountryUS
Employees4,412
SectorTechnology
Sector Strength88
IndustryComputer Hardware
Share Statistics
EPS (TTM)0.82
Shares Outstanding1,256,538,000
10 Day Avg. Volume9,583,288
30 Day Avg. Volume8,552,366
Financial Highlights & Ratios
PEG Ratio2.05
Price to Book (P/B)13.32
Price to Sales (P/S)18.30
P/FCF Ratio38.76
Enterprise Value/Market Cap0.99
Enterprise Value/Revenue18.45
Enterprise Value/Gross Profit28.80
Enterprise Value/Ebitda40.31
Forecast
1Y Price Target
$182.14Price Target Upside39.84% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering17
EPS Forecast (FY)3.53
Revenue Forecast (FY)$11.42B
Arista Networks Business Overview & Revenue Model
Company DescriptionArista Networks, Inc. develops, markets, and sells cloud networking solutions in the Americas, Europe, the Middle East, Africa, and the Asia-Pacific. The company's cloud networking solutions consist of extensible operating systems, a set of network applications, as well as gigabit Ethernet switching and routing platforms. It also provides post contract customer support services, such as technical support, hardware repair and parts replacement beyond standard warranty, bug fix, patch, and upgrade services. The company serves a range of industries comprising internet companies, service providers, financial services organizations, government agencies, media and entertainment companies, and others. It markets and sells its products through distributors, system integrators, value-added resellers, and original equipment manufacturer partners, as well as through its direct sales force. The company was formerly known as Arastra, Inc. and changed its name to Arista Networks, Inc. in October 2008. Arista Networks, Inc. was incorporated in 2004 and is headquartered in Santa Clara, California.
How the Company Makes MoneyArista Networks generates revenue primarily through the sale of its networking hardware and software solutions. The company's key revenue streams include the sale of Ethernet switches, which are integral to data centers and cloud networking infrastructures. Additionally, Arista offers software solutions, primarily through its Extensible Operating System (EOS), which provides network management and automation capabilities. The company also earns revenue from customer support and services, which include maintenance and upgrades. Arista's strong relationships with large-scale cloud service providers, enterprise data centers, and financial institutions also contribute significantly to its earnings, as these sectors require robust and scalable networking solutions.
Arista Networks Key Performance Indicators (KPIs)
Any
Revenue by Geography
Breaks down revenue across different regions, revealing where Arista Networks is strongest and where it may face risk or growth potential due to local economic conditions or market share shifts.
Breaks down revenue across different regions, revealing where Arista Networks is strongest and where it may face risk or growth potential due to local economic conditions or market share shifts.
Data provided by:
The Fly
The FlyArista Networks Earnings Call Summary
Earnings Call Date:Feb 12, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 04, 2026
Earnings Call Sentiment Positive
The call presented a strongly positive operational and financial story: record FY2025 revenue and profitability, robust cash generation, significant AI momentum with raised 2026 guidance (25% revenue growth and a $3.25B AI networking target), international expansion, and continued product/technology wins. Offsetting these positives are meaningful near-term headwinds: worsening memory shortages and higher component costs, deferred revenue lumpiness and recognition timing uncertainty, a sharp quarter-to-quarter services normalization, and working capital volatility (DSO and inventory dynamics). Management believes the guidance is achievable but flagged supply and timing risks that could affect the pace of shipments and margins.Q4-2025 Updates
Positive Updates
Record Revenue and Strong Top-Line Growth
Fiscal 2025 revenue reached $9,000,000,000, up 28.6% year-over-year; Q4 revenue was $2,490,000,000, up 28.9% YoY and above guidance. Company raised 2026 revenue guidance to approximately $11,250,000,000 (25% growth).
Robust Profitability and Margins
Fiscal 2025 non-GAAP gross margin was 64.6% and non-GAAP operating margin was 48.2%. Q4 operating income was $1,200,000,000 (47.5% of revenue). Q4 net income was $1,050,000,000 (42% of revenue), marking the first quarter with net income > $1B.
Earnings Per Share and Year-over-Year EPS Growth
Diluted EPS for Q4 was $0.82, up 24.2% YoY. Fiscal 2025 diluted EPS was $2.98, up 28.4% YoY.
Strong Cash Position and Share Repurchases
Cash, cash equivalents and marketable securities totaled approximately $10,740,000,000. The company generated ~$1,260,000,000 of cash from operations in Q4 and repurchased $620,100,000 of common stock in the quarter ($1.6B repurchased in fiscal 2025).
Accelerating AI Momentum and Raised AI Targets
AI networking momentum: raised AI centers target to $3,250,000,000 for 2026 (up from $2.75B), and guided AI networking revenue to $3,250,000,000 for 2026 (doubling from 2025). Cloud & AI titans accounted for ~48% of 2025 revenue.
Product and Technology Wins
Surpassed 150,000,000 cumulative ports shipped in Q4 2025; strong adoption of 800G with >100 customers for EtherLink; launched 7800R4 spine and continuing rollout of 7000 Series and EtherLink Spine/Leaf families; co-designs for AI rack systems and development toward 1.6T switching.
International and Customer Expansion
International growth 'north of 40%' annually in Asia and Europe; Q4 international revenue $528,300,000 (21.2% of total). Company is north of 10,000 cumulative customers and reported a Net Promoter Score of 93%.
Subscription & Software Contribution and Customer Additions
Subscription-based network software and services contributed approximately 17% of revenue for the year. Management highlighted continued CloudVision traction, noting an incremental add of CloudVision customers (aggregate CloudVision customers deployed cited at ~3,000 over the past decade) and ongoing subscription momentum.
Disciplined Operating Spend and Investment in R&D
Fiscal year 2025 R&D spend ~11% of revenue; sales & marketing at ~4.5% of revenue and G&A ~1% of revenue, reflecting high operating leverage and continued investment in product and scaling.
Negative Updates
Memory and Supply Chain Pressure
Management cited materially worsening memory shortages and sharply higher memory prices into 2026, describing prices as significantly elevated and likely to force one-time price increases on memory‑intensive SKUs; purchase commitments rose to $6.8B from $4.8B, reflecting planned chip/memory buys and increased supply risk.
Gross Margin Pressure and Mix Impact
Q4 gross margin was 63.4%, down from 64.2% year-over-year, driven by a higher mix of sales to cloud and AI titan customers. Guidance for FY2026 gross margin range of 62%–64% reflects mix and anticipated supply chain cost increases.
Deferred Revenue Volatility and Recognition Uncertainty
Total deferred revenue rose to $5,400,000,000 (up from $4.7B prior quarter) with product deferred revenue increasing by ~$469,000,000 versus last quarter; management warned of lumpiness due to customer acceptance clauses (6–18 months), creating near-term revenue recognition uncertainty.
Large Quarter-to-Quarter Swing in Services/Subscription Contribution
Services and subscription software contribution fell to ~0.1% of revenue in Q4 from 18.7% in Q3, reflecting normalization after a nonrecurring VeloCloud service renewal—this demonstrates one-off volatility in service-related revenue recognition.
Working Capital and DSO Spike
Days sales outstanding jumped to 70 days in Q4 from 9 days in Q3 (driven by renewals and shipment timing). Inventory increased marginally to $2,250,000,000 with inventory turns of 1.5x; accounts payable days rose to 66 from 55, indicating working capital variability.
Concentration Risk in Customer Base
Two customers each contributed 16%–20% of overall business in 2025, indicating notable customer concentration. Management expects some diversification but flagged the potential for 1–2 more 10% customers, which still leaves concentration risk.
Timing Risks for Some AI Scale-up Shipments
Management noted that network deployments can lag GPU/CapEx timelines (data center build, power, GPUs), and some scale-up production (1.6T) and larger scale-up adoption may be more prominent in 2027, implying potential timing-related revenue shifts.
Company Guidance
Arista raised its fiscal 2026 outlook on a non‑GAAP basis to 25% revenue growth to approximately $11,250,000,000, with AI networking revenue now targeted at $3,250,000,000 (up from $2.75B) and a maintained cognitive campus/branch goal of $1,250,000,000; it reiterated a full‑year gross margin range of 62%–64% (inclusive of mix and anticipated memory/silicon cost pressure), raised operating margin guidance to ~46%, expects a structural tax rate of ~21.5%, and provided Q1 guidance of roughly $2,600,000,000 revenue, 62%–63% gross margin, ~46% operating margin, ~21.5% tax rate and ~1,275,000,000 diluted shares.Arista Networks Financial Statement Overview
Summary
Excellent fundamentals: consistently strong profitability and margins, rapid multi-year revenue scaling, robust free cash flow that closely tracks earnings, and an exceptionally conservative (near debt-free) balance sheet. Main risks are periodic growth/cash-flow volatility and a few latest-year metric gaps.Income Statement
Arista Networks shows strong and consistent profitability with very high gross margins (~61%–64%) and net margins (~27%–41%) across the period. Revenue has compounded meaningfully from 2020 to 2025, with growth re-accelerating sharply in 2021–2023 and remaining solid in 2024–2025, supporting continued earnings expansion. The main weakness is some growth volatility year-to-year (including a small decline in 2020 and a slower growth rate in 2024 vs. prior years), suggesting results can be cyclical or demand-timing sensitive.92
Very Positive
Balance Sheet
The balance sheet is exceptionally conservative: total debt is effectively zero in 2023–2025 and minimal in 2020–2022, while equity and total assets have expanded materially over time. This low leverage profile reduces financial risk and gives the company flexibility to invest through cycles. A limitation in the provided data is that 2025 return on equity is shown as 0.0 (likely missing/erroneous), so profitability-on-equity cannot be cleanly assessed for the most recent year.97
Very Positive
Cash Flow
Cash generation is strong and improving: operating cash flow and free cash flow rise substantially from 2022 through 2025, and free cash flow closely tracks net income (roughly ~91%–99% over the years shown), indicating high earnings quality. Free cash flow growth is generally positive, though it was pressured in 2020 and 2022, highlighting that cash conversion can fluctuate at times.90
Very Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 9.01B | 7.00B | 5.86B | 4.38B | 2.95B |
| Gross Profit | 5.74B | 4.49B | 3.63B | 2.68B | 1.88B |
| EBITDA | 3.90B | 3.01B | 2.33B | 1.59B | 975.07M |
| Net Income | 3.51B | 2.85B | 2.09B | 1.35B | 840.85M |
Balance Sheet | |||||
| Total Assets | 19.45B | 14.04B | 9.96B | 6.78B | 5.73B |
| Cash, Cash Equivalents and Short-Term Investments | 10.74B | 8.30B | 5.01B | 3.02B | 3.41B |
| Total Debt | 0.00 | 0.00 | 0.00 | 43.96M | 56.53M |
| Total Liabilities | 7.08B | 4.05B | 2.74B | 1.89B | 1.76B |
| Stockholders Equity | 12.37B | 9.99B | 7.22B | 4.89B | 3.98B |
Cash Flow | |||||
| Free Cash Flow | 4.25B | 3.68B | 2.00B | 448.17M | 951.12M |
| Operating Cash Flow | 4.37B | 3.71B | 2.03B | 492.81M | 1.02B |
| Investing Cash Flow | -3.58B | -2.46B | -687.45M | 216.33M | -925.56M |
| Financing Cash Flow | -1.60B | -421.81M | -83.75M | -654.60M | -360.88M |
Arista Networks Technical Analysis
Neutral
130.25
Price Trends
133.74
Negative
136.32
Negative
127.10
Positive
Market Momentum
-0.99
Positive
48.35
Neutral
34.40
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ANET, the sentiment is Neutral. The current price of 130.25 is below the 20-day moving average (MA) of 136.17, below the 50-day MA of 133.74, and above the 200-day MA of 127.10, indicating a neutral trend. The MACD of -0.99 indicates Positive momentum. The RSI at 48.35 is Neutral, neither overbought nor oversold. The STOCH value of 34.40 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ANET.
Arista Networks Risk Analysis
Arista Networks disclosed 60 risk factors in its most recent earnings report. Arista Networks reported the most risks in the "Ability to Sell" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Arista Networks Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
82 Outperform | $167.75B | 48.48 | 31.40% | ― | 27.75% | 25.42% | |
74 Outperform | $313.86B | 27.95 | 24.34% | 2.09% | 8.91% | 14.53% | |
67 Neutral | $28.53B | ― | 0.23% | 2.17% | 14.17% | -102.25% | |
62 Neutral | $98.13B | 19.75 | ― | 1.45% | 10.81% | 31.67% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
54 Neutral | $1.88B | 209.28 | 12.43% | ― | 14.31% | ― |
* Technology Sector Average
ANET
Arista Networks
133.50
47.49
55.21%
CSCO
Cisco Systems
79.46
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28.22%
EXTR
Extreme Networks
13.98
-0.79
-5.35%
HPE
Hewlett Packard Enterprise
21.47
2.94
15.87%
DELL
Dell Technologies
148.08
54.26
57.84%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.