21 November 2025 | 3:18AM EST Equity Research AMERICAS TECHNOLOGY: HARDWARE 2025 bus tour takeaways: ANET, SMCI, 650 Group, CSCO We hosted a hardware investor bus tour in California on November 20th, 2025 to meet with management teams from Arista Networks (ANET, Buy), Super Micro (SMCI, Sell), 650 Group (Private), and Cisco Systems (CSCO, Neutral). Going into the day, we were positive on networking in AI given the growing importance of GPU utilization and uptimes and the relative underinvestment in networki ...

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.

Financial Data and Key Metrics Changes - Total revenues for Q3 2025 were $2.3 billion, up 27.5% year-over-year, exceeding guidance of $2.25 billion [19] - Non-GAAP gross margin was 65.2%, down from 65.6% last quarter but up from 64.6% in the prior year [19] - Operating income for the quarter was $1.12 billion, representing 48.6% of revenue [20] - Net income for the quarter was $962.3 million, or 41.7% of revenue, with diluted earnings per share of $0.75, up 25% from the prior year [20] Business Line Data and Key Metrics Changes - Software and services contributed approximately 18.7% of total revenue [5] - International revenues were $468.3 million, accounting for 20.2% of total revenue, down from 21.8% in the prior quarter [19] - R&D spending was $251.4 million, or 10.9% of revenue, up from $243.3 million in the last quarter [20] Market Data and Key Metrics Changes - The Americas accounted for almost 80% of total revenue, while international markets contributed approximately 20% [5] - The company is experiencing momentum across cloud and AI titans, near cloud providers, and campus enterprises [6] Company Strategy and Development Direction - The company aims for $1.5 billion in AI aggregate revenue for 2025, with a new target of $10.65 billion in revenue for 2026, representing 20% growth [6][25] - The focus is on building a modern AI stack that includes compute, memory storage, and a solid network foundation [6] - The company is committed to partnerships with major players in the AI ecosystem, including NVIDIA, AMD, and OpenAI [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in demand despite shipment variability due to supply constraints [31] - The outlook for Q4 2025 is revenue guidance of $2.3-$2.4 billion, with continued growth expected across cloud, AI, enterprise, and provider markets [25] - The effective tax rate is expected to be approximately 21.5% for Q4 [25] Other Important Information - Cash, cash equivalents, and investments totaled $10.1 billion at the end of the quarter [21] - The company has a $1.5 billion repurchase program, with $1.4 billion remaining for future repurchases [21] - The total deferred revenue balance was $4.7 billion, up from $4.1 billion in Q2 [23] Q&A Session Summary Question: What are the underlying drivers for the deceleration in growth? - Management indicated that there is no concern regarding demand, attributing shipment variability to supply constraints rather than a decrease in demand [31] Question: Can you unpack the gross margin drivers for this quarter? - Management explained that a mix of product margins, particularly with cloud and AI customers, is influencing gross margins, which may be under 60% for products [34] Question: How is Arista positioned as it moves into more full rack solutions? - Management noted that Arista is involved in multiple projects with different accelerator options and is being sought for its expertise in networking solutions [36] Question: What is the status of partnerships with large language model providers? - Management confirmed that their market share remains stable and that decisions on networking hardware are a joint responsibility between software and cloud titans [40] Question: What is driving the variability in shipments? - Management stated that variability is largely supply-driven, with long lead times on components affecting shipment capabilities [43] Question: How does the convergence of front-end and back-end networks impact Arista? - Management believes that the convergence is advantageous, as it allows Arista to offer a consistent solution across infrastructure [64]

Investor Presentation November 2025 Safe Harbor Forward-Looking Statements - This presentation and accompanying oral presentation contain "forward-looking statements" regarding our future performance, including but not limited to estimates regarding revenue, non-GAAP gross margin, and non-GAAP operating margin for the fourth quarter and fiscal year 2025 and 2026, statements regarding Arista's addressable market, products and services, innovation and leadership in data-driven networking. Forward-looking stat ...

Financial Data and Key Metrics Changes - Total revenue for the third quarter was $197 million, representing a 30% increase year-over-year and a sequential increase of $11 million from the previous quarter [5][14] - Adjusted EBITDA reached $26 million, or 13% of revenue, marking an improvement of 840 basis points compared to the prior year [4][11] - Free cash flow was reported at $5 million, with total cash and available cash amounting to $260 million [12][14] Business Line Data and Key Metrics Changes - Surgical revenue was $177 million, up 31% year-over-year and 5% sequentially, driven by a procedural volume growth of 28% [5][8] - EOS revenue increased to $20 million, a 29% rise compared to the prior year, with strong demand in the U.S. market [8][9] - Same-store sales in the U.S. grew 30% year-over-year, indicating strong performance in established territories [8][9] Market Data and Key Metrics Changes - The company reported a 30% growth in same-store sales, reflecting strong demand in existing markets [8] - The increase in new surgeon users by 26% in the third quarter indicates a growing adoption of the company's products [5][6] Company Strategy and Development Direction - The company remains 100% spine-focused, emphasizing proceduralization and expanding its product offerings in lateral, cervical, and deformity markets [3][19] - The strategic focus includes leveraging technology integration to enhance surgical outcomes and democratize surgical techniques [20][25] - The company is positioned to meet its long-range plan commitments, aiming for $1 billion in revenue by 2027 [17][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver durable revenue growth and strong profitability improvements [11][17] - The company anticipates raising its full-year revenue guidance by $18 million to $760 million, driven by overperformance in case volume [14][15] - Management highlighted the importance of surgeon adoption and the long-term potential of the spine market, indicating a positive outlook for future growth [18][67] Other Important Information - The company has seen a significant improvement in its operating margin, with a 1,100 basis points expansion year-over-year [10][11] - The trailing 12-month adjusted EBITDA now stands at $81 million, reflecting the company's ability to generate cash flow [11][12] Q&A Session Summary Question: Cash flow expectations for next year - Management expects free cash flow for next year to be around $20 million, aligning with revenue growth and EBITDA drop-through [32][33] Question: Update on long-range plan - An update to the long-range plan is anticipated towards the end of next year as the company progresses through 2026 [34] Question: Competitive landscape and consolidation - The company welcomes market disruption and believes it can capitalize on the current dynamics in the spine market [37][39] Question: Role of Valence in lateral space - Valence is expected to enhance efficiency and democratize surgical techniques, benefiting both experienced and new users [40][44] Question: Health of the spine market and competitive dynamics - The spine market remains healthy, with the company taking share from multiple competitors, reflecting decisions made 18 to 24 months ago [48][50] Question: Balancing growth and profitability - The company aims to balance growth and profitability by investing in innovation while leveraging existing infrastructure [52][54] Question: Timing for deformity portfolio contributions - The company is in the early stages of influencing the deformity market, with several products in the design phase and a focus on expanding EOS availability [73][75]

Core Insights - EOS founder BM (Daniel Larimer) has deposited 6.79 million ASTER into Binance, valued at 9.72 million USD [1] - To date, BM has deposited a total of 31.6 million ASTER, worth 55.06 million USD, into Binance [1] - BM currently holds 32.93 million ASTER, valued at 47.75 million USD [1]

Group 1 - Arista Networks, Inc. (NYSE:ANET) is currently viewed as a strong investment opportunity, with multiple analysts reiterating a bullish stance and maintaining Buy ratings [1][2][3] - UBS analyst David Vogt set a price target of $155.00 for Arista Networks, while Citi has a higher target of $176.00 [2] - The analyst consensus rating for Arista Networks is a Strong Buy, with a median price target of $145.10, indicating a potential upside of 10.27% from current levels [3] Group 2 - Arista Networks develops and sells cloud networking solutions, including EOS and Gigabit Ethernet switching and routing platforms [3] - The company offers various product categories such as Core, Cognitive Adjacencies, and Network Software and Services [4]

Core Insights - Arista Networks is emerging as a significant player in the AI-driven data center ecosystem, with its stock rising 32.58% year-to-date, outperforming many larger AI companies [1] - The company has received a "Strong Buy" rating from Wall Street, indicating strong investor interest and confidence in its growth potential [1] Company Overview - Arista Networks specializes in cloud networking, developing high-speed switches, routers, and software tailored for modern data centers, particularly for cloud giants and AI workloads [2] - Key products include ultra-fast Ethernet switches, GPU clusters, and management software like CloudVision and EOS [2] Financial Performance - In Q2, Arista's total revenue increased by 30.4% year-over-year to $2.2 billion, surpassing its own target by $100 million [3] - Software and service renewals contributed 16.3% to total sales, indicating a growing recurring revenue stream [3] - Gross margin improved to 65.6%, and diluted EPS rose approximately 37.7% year-on-year to $0.73 [4] - International markets represented 21.8% of revenue, while the Americas accounted for 78.2% [4] - The company ended the quarter with $8.8 billion in cash and investments and repurchased $196 million of its stock, with $1.4 billion remaining under its buyback authorization [4] Growth Drivers - AI networking is the primary factor driving Arista's growth, as data centers evolve into AI centers [5] - The EtherLink portfolio and EOS operating system are gaining traction among customers investing heavily in AI accelerators from Nvidia and AMD [5] - Arista is projected to generate $750 million in back-end AI networking revenue by 2025, a significant increase from having no presence in this area three years ago [5]

Core Insights - Cloud computing is driving innovation and digital transformation across various industries by enabling firms to access and store data over the Internet without managing physical servers, leading to widespread adoption at minimal operating costs [2][4] - The global cloud computing market is projected to grow from $752.4 billion in 2024 to $2,390.2 billion by 2030, reflecting a compound annual growth rate (CAGR) of 20.4% [6] Industry Overview - Cloud computing eliminates fixed capital expenses related to hardware and software purchases, reduces operating costs, and operates on a pay-per-use model, enhancing productivity and scalability [4] - The services are categorized into four main types: IaaS, PaaS, serverless, and SaaS, each offering varying levels of control and flexibility [5] Key Companies - **Microsoft Corporation (MSFT)**: A leading public cloud provider with its Azure platform, which offers a wide range of IaaS and PaaS solutions. Microsoft has expanded Azure's availability globally, enhancing its competitive position [9][10] - **Alphabet Inc. (GOOGL)**: Google Cloud has become a significant growth driver for Alphabet, with substantial investments in infrastructure and AI capabilities. Google Cloud is now the third-largest cloud provider globally [13][14] - **International Business Machines Corporation (IBM)**: IBM has strengthened its position in the hybrid cloud market through acquisitions like Red Hat and HashiCorp, focusing on analytics, cloud computing, and security for future growth [16][18] - **Arista Networks Inc. (ANET)**: Specializes in cloud networking solutions, offering high-capacity, low-latency products that support various cloud management frameworks. Arista's unified software stack distinguishes it in the industry [19][20][22]

Summary of Arista Networks 2025 Analyst Day Company Overview - **Company**: Arista Networks (NYSE: ANET) - **Event**: 2025 Analyst Day - **Date**: September 11, 2025 Key Industry Insights - **Market Position**: Arista Networks is positioned in the high-performance networking industry, focusing on low latency switches and optimized hardware designs to enhance performance and reduce costs [1][2] - **Growth Potential**: The total addressable market (TAM) for Arista is projected to exceed $100 billion by 2029, with a commitment to achieve $10.5 billion in revenue by 2026, representing a 20% growth [10][11] Core Business Strategies - **Product Differentiation**: Arista emphasizes the importance of power efficiency and optimized hardware designs, which can lead to significant cost savings, such as $15 million over four years [1] - **Feature Development**: The company is enhancing its Ethernet portfolio with features like cluster load balancing, high availability, and dynamic congestion control to support AI networks [2][3] - **Co-Development Approach**: Arista collaborates with customers for co-development strategies, enhancing product offerings through partnerships [3][4] Technological Innovations - **Blue Box Philosophy**: Arista's "blue box" concept integrates hardware and software diagnostics, providing a robust environment for network operations [4][5] - **Network Diagnostics Infrastructure (NetDI)**: This suite of features enhances troubleshooting and validation processes, crucial for maintaining network integrity [5][6] - **Autonomous Virtual Assist (AVA)**: AVA is designed to assist network operators by monitoring network conditions and providing troubleshooting support, significantly reducing resolution times for network issues [30][31] Market Trends and Opportunities - **Campus Networking**: The campus segment is identified as a rapidly growing market, with expectations of significant modernization driven by IoT and increased networking demands [37][38] - **Zero Trust Networking**: Arista is focusing on delivering zero trust operations and security solutions, which are becoming essential in today's network environments [39][40] - **Wi-Fi and SD-WAN Solutions**: The company has expanded its portfolio to include comprehensive Wi-Fi solutions and SD-WAN capabilities, enhancing its competitive edge in campus networking [41][42] Financial Projections - **Revenue Goals**: Arista aims to grow its revenue from $750-$800 million to $1.25 billion in the campus segment, driven by a 60% growth in the AI market [11][12] - **Investment in Technology**: Continuous investment in technology and partnerships is expected to sustain growth and innovation across all product lines [12][46] Conclusion - **Commitment to Quality**: Arista Networks emphasizes its commitment to delivering reliable and high-quality networking solutions, ensuring that customer networks remain operational without risk during upgrades [54] - **Future Outlook**: The company is optimistic about its growth trajectory, driven by technological advancements and a strong focus on customer needs in the evolving networking landscape [10][38]