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Financial data on TradingView ↗Reported statements, ratios and ownership, alongside this research.
Arista designs high-speed Ethernet switches and routers, runs them on its own EOS operating system, and sells management software and support. Its buyers are large cloud and AI operators such as Microsoft and Meta, AI and specialty providers, and enterprises. [S3][S4]
Most revenue comes from selling switching and routing hardware (84% of 2025 revenue); the rest is recurring support and subscription software. In 2025, 48% of revenue came from Cloud and AI Titans, 32% from enterprise and 20% from AI and specialty providers. [S3][S4]
Explore the research to see how business evidence informs assumptions and valuation.
Start with the business evidence, then follow the assumptions through to scenarios and valuation.
Financial data on TradingView ↗Reported statements, ratios and ownership, alongside this research.
Valuation and assumptionsArista is an exceptional business growing 40% in 2026, but at $206 the price assumes growth near that pace continues for most of a decade, while the company's two largest customers and Nvidia's bundled networking make the post-2027 path uncertain.
A valuation model that works backward from a share price to find combinations of growth, margins, and other assumptions consistent with that price.
In this report: Solving for the growth that justifies $206 shows the price needs revenue near $44 billion by 2030 at a 10.5% discount rate.
Valuation compression: a normal slowdown after 2027 could cut the earnings multiple sharply even if the business performs well.
Arista sells high-speed switches running its EOS software, mainly to large cloud and AI operators; Microsoft and Meta were 42% of 2025 revenue. It outsources chips and manufacturing, so capital needs are tiny and GAAP operating margin is 44%.
Switching chips bought from a third-party chip vendor rather than designed in-house.
In this report: Arista relies predominantly on one merchant vendor, while Cisco and Nvidia own their silicon; this is Arista's main structural dependency.
At a 10.5% discount rate the price needs revenue near $44 billion by 2030 at 44 to 45% margins; at 9% it needs the bull case of $35 billion. Revenue in 2026 is guided at $12.6 billion.
A valuation model that works backward from a share price to find combinations of growth, margins, and other assumptions consistent with that price.
In this report: Solving for the growth that justifies $206 shows the price needs revenue near $44 billion by 2030 at a 10.5% discount rate.
The weighted average required return of a company's debt and equity providers, used to discount cash flows to the firm.
In this report: Arista has no debt, so WACC equals its cost of equity; with the 10-year near 5%, each 50 bps changes base value by about $5.
Avoid. Base value is about $82 and the probability-weighted value about $91. Base-case fundamentals support roughly 10% annual earnings growth, but only a persistent 40x-plus multiple turns that into a satisfactory return.
Growth duration after 2027 creates the widest range because it compounds into the terminal value and no current data settles it.
Operating margin: large-customer discounts and component costs press gross margin while a fixed cost base amplifies volume changes.
The sensitivity of operating profit to changes in revenue when some operating costs are fixed.
In this report: Incremental GAAP operating margin of about 45% explains margin gains in the boom and the margin decline in the bear case.
Share at Microsoft and Meta: moving one network tier to Nvidia or white box would remove billions of revenue.
Generic switch hardware from contract manufacturers, run with the customer's own or open-source software instead of a vendor's operating system.
In this report: Large cloud customers can shift a network tier to white box, which is the main route to losing share at Microsoft or Meta.
Hyperscalers digest capacity in 2028 and one moves a tier elsewhere; revenue falls two years, commitments become excess inventory, and margins drop to the low 30s.
Contractual obligations to buy components from suppliers in future periods, not recorded as liabilities on the balance sheet.
In this report: They tripled to $9.7 billion, securing supply now but creating inventory writedown risk if demand slows.
Strong 2027, then growth slows to about 10% as the cloud cycle matures and competition trims margin to 40%.
Power limits keep AI builds distributed, Arista holds about a fifth of a fast-growing market, wins new large customers, and keeps 45% margins while tripling revenue by 2030.
Networks that link AI clusters located in different data centers or regions so they can work on one job.
In this report: Arista targets about $1.2 billion here in 2026 and cites a $15 to $20 billion 2030 market; it underpins the bull case.
Initial 2027 revenue guide: above 35% growth would support the market's path; below 20% would support the Avoid view.
Deferred revenue and free cash flow versus net income: a falling balance means revenue without new cash.
Cash or billings received for products whose revenue cannot yet be recognized, often because the customer must formally accept the deployment.
In this report: Arista's balance reached $6.9 billion; its growth made trailing free cash flow about $2.8 billion higher than it would otherwise have been.
Price versus volume split of revenue growth is not disclosed. Post-Q2 2026 consensus for 2027 was not verified. The 2026 proxy (compensation structure, exact ownership) was not read directly; ownership figures rely on a secondary summary. Gross margin for 2020 to 2023 and historical valuation multiples were not verified. Composition of prepaid and other assets (supplier deposits versus deferred costs) is not established. Nvidia networking segment margins and HPE/Juniper data-center metrics were unavailable. Several secondary sources and older filings carry approximate publication dates.
These model scenarios depend on their inputs. Review the assumptions and supporting evidence alongside the implied values.
earnings multiple v2 · as of 2026-10-18
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