Core Insights - Giverny Capital Asset Management's portfolio returned 0.01% in Q4 2025, underperforming the S&P 500's 2.66% return, and YTD returns were 12.58% compared to the Index's 17.88% [1] - The firm faced challenges due to underweighting in large technology companies and overweighting in smaller niche leaders, despite strong earnings growth and capital returns from portfolio companies [1] - The market's focus on AI investments has overshadowed the actual benefits of portfolio companies, impacting overall performance [1] Company Performance - Arista Networks, Inc. (NYSE:ANET) was highlighted as a leading contributor to Giverny Capital's performance, with a one-month return of 3.32% and a 52-week gain of 27.12% [2] - As of January 30, 2026, Arista Networks' stock closed at $141.74, with a market capitalization of $178.491 billion [2] - Arista Networks has been the best-performing stock for Giverny Capital since inception, providing high-quality routers and switches for major clients like Meta Platforms and Microsoft [3] Market Sentiment - Despite strong revenue growth of 27.5% year-over-year to $2.3 billion in Q3 2025, Arista Networks is not among the top 30 most popular stocks among hedge funds, with 92 hedge fund portfolios holding the stock at the end of Q3 [4] - There is a belief that certain AI stocks may offer greater upside potential and less downside risk compared to Arista Networks, despite its strong fundamentals [4]

Core Insights - Cisco Systems, Inc. (CSCO) is a leading technology company with a market cap of $304.3 billion, specializing in internet technologies including routers, switches, cybersecurity, cloud networking, and data center infrastructure [1] Performance Overview - Over the past 52 weeks, CSCO shares have increased by 32.2%, outperforming the S&P 500 Index, which gained 16% during the same period [2] - Year-to-date, CSCO's stock is up 1.4%, slightly trailing behind the S&P 500's 1.9% return [2] Sector Comparison - CSCO has also outperformed the First Trust NASDAQ Cybersecurity ETF (CIBR), which rose 10.7% over the past 52 weeks and 1.3% year-to-date [3] Analyst Ratings and Growth Expectations - On January 26, CSCO shares rose 3.2% following an upgrade from Evercore Inc. (EVR), which anticipates high single-digit revenue growth and low-teens EPS growth in the coming years, driven by strong demand in campus networking and potential AI-related revenues reaching $3 billion by fiscal 2026 [4] - For the current fiscal year ending in July, analysts project CSCO's EPS to grow by 7.5% year-over-year to $3.30, with a strong earnings surprise history [5] - The consensus rating among 24 analysts is a "Moderate Buy," with 14 "Strong Buy," one "Moderate Buy," and nine "Hold" ratings [5] Price Targets - The configuration of analyst ratings has become more bullish, with 13 analysts suggesting a "Strong Buy" rating [6] - Evercore Inc. upgraded CSCO to "Outperform" with a price target of $100, indicating a 28% upside potential from current levels, while the mean price target of $85.90 suggests a 9.9% premium from current prices [6]

Core Viewpoint - Cisco Systems, Inc. is experiencing significant growth and diversification, with strong earnings expectations and a bullish analyst outlook, driven by its expansion into software and services, particularly in AI infrastructure [1][5][6]. Financial Performance - Cisco is expected to report a fiscal second-quarter earnings per share (EPS) of $0.82, reflecting a 6.5% increase from $0.77 in the same quarter last year [2]. - For the fiscal year ending July 2026, analysts project an EPS of $3.30, up 7.5% from $3.07 in fiscal 2025, with further growth expected to $3.53 in fiscal 2027 [3]. Stock Performance - Cisco shares have increased by 25.4% over the past year, outperforming the S&P 500 Index's 18.6% gains but lagging behind the Technology Select Sector SPDR Fund's 27.1% gains [4]. - The stock recently reached a record closing price of $80.25, marking its first all-time high since the dot-com era peak in 2000 [5]. Analyst Sentiment - The consensus opinion on Cisco stock is moderately bullish, with a "Moderate Buy" rating from analysts. Out of 24 analysts, 13 recommend a "Strong Buy," one suggests a "Moderate Buy," and 10 give a "Hold" rating [6]. - The average analyst price target for Cisco is $85.90, indicating a potential upside of 15.4% from current levels [6].

Core Insights - Arista Networks and Cisco Systems represent two distinct investment opportunities in the networking infrastructure and software market, with Arista focusing on high-growth data centers and cloud-scale networks, while Cisco serves a broader range of sectors as a diversified market leader [1][2] Company Performance - Over the past five years, Arista's stock increased nearly 540%, while Cisco's stock advanced about 50%, compared to a 90% rise in the S&P 500 [2] - From fiscal 2019 to fiscal 2024, Cisco's revenue grew at a compound annual growth rate (CAGR) of less than 1%, while its adjusted EPS rose at a CAGR of nearly 4% [9][12] - In contrast, Arista's revenue rose at a CAGR of 24% and adjusted net income increased at a CAGR of 30% during the same period [12][13] Competitive Landscape - Cisco is the largest networking hardware company, known for its proprietary chips and software, creating a "sticky" ecosystem with integrated security and network observability services [4][8] - Arista utilizes Broadcom's chips and open-source software, providing flexibility that appeals to customers seeking alternatives to Cisco's ecosystem [5][6] - Cisco remains a leader in end-to-end deployments, while Arista primarily focuses on cloud and data center markets [7][8] Growth Prospects - Analysts expect Cisco's revenue and EPS to grow at a CAGR of 5% and 9%, respectively, from fiscal 2024 to fiscal 2027, driven by subscription expansion and AI tailwinds [15] - Arista's revenue and EPS are projected to increase at a CAGR of 19% and 15%, respectively, benefiting from cloud and AI market growth and expansion into enterprise markets [16] Investment Valuation - Cisco trades at 17 times forward adjusted earnings with a forward dividend yield of 2.5% [15] - Arista's stock is priced at 33 times its forward adjusted earnings and has never paid a dividend [16]