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Summary of Arista Networks FY Conference Call (November 18, 2025) Company Overview - **Company**: Arista Networks (NYSE: ANET) - **Industry**: Networking and Cloud Solutions Key Points Financial Performance and Guidance - Arista reported strong results for Q3, with deferred revenue growing by 87% [5] - The company provided a revenue guidance of 20% growth for FY2026, which is considered bold and optimistic [4][5] - The revenue guide for AI-related products is set at $2.75 billion for 2026, up from $1.5 billion for 2025, indicating significant growth expectations [24][30] Supply Chain and Product Availability - There are no specific supply chain constraints affecting Arista's revenue, as the company has made purchase commitments to ensure supply for 2025 and 2026 [4][73] - The company has a total of $7 billion in inventory and purchase commitments, which helps mitigate supply risks [75] - The average time for product deployment has shifted from 6-12 months to 18-24 months for larger AI data center projects [7][8] AI and Networking Opportunities - The networking opportunity is expanding as AI deployments grow, with a focus on large-scale data center build-outs [11][12] - Arista's Total Addressable Market (TAM) for networking has increased to $105 billion, up from $70 billion the previous year [32] - The company is actively engaged in the ESUN initiative, which focuses on Ethernet Scale-Up Networks, promoting vendor diversity and supply chain resilience [38] Competitive Landscape - Arista has surpassed its main competitor in market share for front-end networks and is optimistic about capturing market share in back-end networks as well [51][52] - The company differentiates itself through its blue box strategy, which allows customers to use Arista hardware with their own software, providing flexibility and investment protection [42][45] Campus Market Strategy - Arista aims to increase its market share in the campus market from 5% to a more significant portion, targeting $1.25 billion in revenue [66][68] - The company is leveraging its VeloCloud acquisition to enhance its campus portfolio and is focused on new logo acquisition and land-and-expand strategies [67][69] Challenges and Considerations - The company acknowledges that while it has a strong outlook, it does not assume 100% success in its guidance, allowing for optionality in its forecasts [60] - Gross margin fluctuations are primarily driven by customer mix, with hyperscalers typically having different purchasing power compared to enterprise customers [63] Investor Insights - Key points that investors may not fully appreciate include the importance of deferred revenue in understanding growth, the differentiation between blue box and white box strategies, and the impact of industry-wide announcements on the company's performance [78][79] Conclusion Arista Networks is positioned for significant growth in the networking and AI sectors, with strong financial guidance and a proactive approach to supply chain management. The company is focused on expanding its market share in both the AI and campus markets while navigating competitive dynamics and potential challenges in the industry.

Following my last article on Arista Networks Inc ( ANET ), the stock price has dropped by 10%. Although the volatility returned to the broader markets in the past few weeks, my bullish thesis remains unchanged.Dear Reader,I am a Senior Derivatives Expert with over 10 years of experience in the field of Asset Management, specializing in equity analysis and research, macroeconomics, and risk-managed portfolio construction. My professional background covers both institutional and private client asset managemen ...

Core Insights - Arista Networks (ANET) has not benefited from the current enthusiasm surrounding AI networking and connectivity companies, despite the overall market interest in AI technologies [1] Group 1: Company Overview - Arista Networks is positioned within the technology sector, specifically focusing on networking and connectivity solutions [1] Group 2: Analyst Background - The analysis is conducted by Uttam, a growth-oriented investment analyst with a focus on technology sectors such as semiconductors, artificial intelligence, and cloud software [1] - Uttam has prior experience in leading teams at major technology firms, including Apple and Google, which adds credibility to his insights [1]

Core Insights - Arista Networks (ANET) has not benefited from the current enthusiasm surrounding AI networking and connectivity companies, despite the overall market interest in AI technologies [1] Group 1: Company Overview - Arista Networks is positioned within the technology sector, specifically focusing on networking and connectivity solutions [1] - The company has been overlooked in the context of the AI bubble that has affected market sentiments this year [1] Group 2: Analyst Background - The analysis is conducted by Uttam, a growth-oriented investment analyst with a focus on technology sectors such as semiconductors, artificial intelligence, and cloud software [1] - Uttam has prior experience in leading teams at major technology firms like Apple and Google, enhancing the credibility of the research [1]

Core Viewpoint - Arista Networks Inc (NYSE:ANET) is recognized as a fundamentally strong stock, but Erste Group has downgraded its rating from "Buy" to "Hold" due to concerns over operating margins and stock valuation [1][2]. Financial Performance - In Q3 2025, Arista Networks reported approximately $2.31 billion in revenue, with software and services contributing around 18.7% of total revenue [3]. - Product revenue increased by $387.9 million, or 25.5%, compared to the same period in 2024, indicating strong demand for switching and routing platforms [3]. - The non-GAAP gross margin was reported at 65.2%, benefiting from a favorable product mix and inventory management [4]. - Non-GAAP net income reached $962.3 million, up from $769.0 million in Q3 2024, reflecting a 25% growth in non-GAAP EPS, showcasing healthy demand and effective execution of the strategic roadmap [4]. Strategic Initiatives - Arista Networks is developing a cross-vendor ecosystem to integrate AI networks with computing infrastructure, which is expected to drive revenue growth in the medium term, albeit at a slowing pace [1][2]. - The Etherlink portfolio is highlighted for its accelerated networking approach, providing a single point of network control for automation, security, traffic engineering, and telemetry [2].

Core Viewpoint - Arista Networks is experiencing strong demand for its networking solutions, particularly in the AI infrastructure sector, but this demand is not translating into improved growth rates due to supply chain constraints and high expectations from investors [2][3][13]. Financial Performance - Arista's Q3 revenue increased by 27.5% year-over-year to $2.31 billion, with non-GAAP earnings rising by 25% to $0.75 per share, slightly exceeding analysts' expectations [4]. - The company's guidance for Q4 indicates a revenue midpoint of $2.35 billion, which is marginally above the consensus estimate of $2.33 billion [4]. - Despite the positive revenue growth, the market is reacting negatively due to high valuations, with Arista trading at 20 times sales and 51 times earnings [6][7]. Market Position and Growth Expectations - Arista's AI offerings are projected to generate $1.5 billion in revenue in 2025, accounting for approximately 17% of the expected total revenue of $8.85 billion [8]. - The company anticipates a revenue increase of 20% to $10.65 billion in 2026, but this represents a slowdown from the 26% growth expected in 2025 [8]. Supply Chain Challenges - The company is facing significant supply chain issues, with lead times for components ranging from 38 weeks to nearly a year, impacting its ability to fulfill orders [10]. - Arista's deferred revenue increased to $4.7 billion, up from $2.5 billion year-over-year, indicating strong demand but also highlighting the challenges in delivering products [11][12]. - Purchase commitments doubled year-over-year to $4.8 billion, reflecting the demand that the company is currently unable to meet due to component shortages [12]. Investor Sentiment - The market's reaction to Arista's latest earnings report has been negative, with shares falling over 12% since the results were released, as investors were expecting stronger guidance to justify the company's high valuation [3][7]. - Analysts do not foresee a significant acceleration in Arista's growth in the near term, which may keep the stock under pressure due to its rich valuation and ongoing supply constraints [15].

Core Insights - Major stock indexes are near all-time highs, but leading companies in AI and quantum computing have experienced significant corrections, indicating a market rotation [1][2] - This correction may set the stage for future advances, as many innovative companies have reached major technical support levels, presenting favorable risk-reward opportunities for investors [2][4] Group 1: Company Analysis - IonQ has seen a 50% correction over the past month but is showing signs of stabilization after testing its 200-day moving average, suggesting a potential bottom formation [5][6] - Arista Networks has retraced into a buy zone, filling a prior gap, which often attracts institutional buyers and positions the stock for a potential upward movement [9][10][11] - AppLovin, while not traditionally categorized as an AI stock, has demonstrated strong growth driven by AI enhancements and is forming a bullish consolidation pattern, indicating a potential breakout opportunity [12][13][14] Group 2: Investment Opportunities - The recent pullbacks in the AI and quantum sectors have created technically attractive levels for IonQ, Arista Networks, and AppLovin, all of which are benefiting from strong long-term growth drivers [17][18] - Investors looking to accumulate shares in leading AI infrastructure, quantum computing, and AI implementation companies may find favorable risk-reward setups at current price levels [18]

Core Insights - Palantir Technologies Inc has experienced a recent pullback amid a broader sell-off in artificial intelligence stocks, primarily due to valuation concerns and macroeconomic uncertainty [1] Company Summary - The recent decline in Palantir's stock price is part of a larger trend affecting AI companies, indicating potential investor apprehension regarding high valuations in the sector [1] - Macroeconomic factors are contributing to the volatility in the AI market, impacting investor sentiment towards companies like Palantir [1]

Airbnb - Airbnb's management is focusing on integrating AI across its app to enhance user experience and service offerings, aiming for a fully AI-powered platform for trip planning and booking [2][3] - The company has launched an AI customer support assistant that has reduced the need for human agents by 15%, with plans to expand its capabilities to over 50 languages by 2026 [4][6] - AI search functionality is set to roll out in 2026, allowing users to interact with the app in a conversational manner to personalize their travel experiences [7][10] - Airbnb's approach to AI emphasizes real-world connections, aiming to attract users away from screens and towards authentic experiences [8][9] - The management believes that Airbnb's unique capabilities in travel will allow it to benefit more from AI compared to other travel companies, as it does not rely on standardized products [10][11] - The company is cautious about integrating with platforms like ChatGPT, preferring to maintain its unique brand identity and avoid being seen as a commodity [11][12] - Airbnb is delaying the introduction of an advertising business until after the successful implementation of AI search, indicating a strategic approach to new revenue streams [14][15] Arista Networks - Arista Networks is positioned to benefit from the growing demand for AI networking solutions, with a target of $2.75 billion in AI-related revenue for 2026 [19][20] - The company is actively involved in creating open ecosystems for AI networking, collaborating with major players like NVIDIA and Oracle [17][22] - Arista's Etherlink distributed switch fabric is designed to enhance the performance of AI accelerators, showcasing its strength in AI networking [16][19] - Management sees a significant market opportunity in AI build-outs, with a total addressable market exceeding $100 billion [20] - The company is experiencing strong demand for its networking solutions, particularly in large AI data center projects, and is involved in multiple AI accelerator projects [26][29] - Arista's management acknowledges the challenges of maintaining margins with cloud and AI customers but remains optimistic about overall growth [25][32] - The convergence of front-end and back-end networking is seen as advantageous for Arista, allowing it to offer comprehensive solutions across its infrastructure [34][35] Coupang - Coupang is focused on building its internal AI computing infrastructure to enhance operational efficiency and service quality [42] - The company is testing the potential for third-party usage of its AI infrastructure but is primarily concentrating on internal applications [42] - AI is delivering tangible benefits in areas such as demand forecasting and fulfillment automation, contributing to cost savings and improved customer satisfaction [42] Datadog - Datadog has seen strong revenue growth from AI native customers, with a notable increase in the number of companies spending significantly on its services [43][44] - The management is optimistic about the future growth of AI usage across various industries, indicating a broadening customer base [44] - Datadog's Bits AI agents are generating high customer interest, with positive feedback on their efficiency and effectiveness in operations [45][46]