QS Research · Michael Burry's Scion Capital analyst template · 2006
Arista Networks, Inc. (ANET)
As of 2026-11-08 · 13/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction medium · base case none · downside -34% · upside +10%
The market is not missing ANET's growth: Q3 2026 revenue rose 58.5% to $3.66B, Q4 is guided to $3.9-4.0B, and management projects 2027 revenue of $18.5B with AI fabrics doubling to $7B (S31, S14). But at $170.80 the stock already trades at 45.4x TTM P/E and 38.0x EV/EBITDA (N28, N25), so the base case at today's multiple is essentially today's price: 45.4 x $4.75B TTM net income to common = $215.65B, or about $170.7/share (N16). A normalizing multiple gives poor asymmetry: 30x P/E = $142.5B / 1,263.4M = $112.8/share, -34%, while 50x P/E = $237.5B / 1,263.4M = $188.0/share, only +10% (N5, N16). I am not short because the operating momentum and $14.36B net cash pile make continued beats plausible, but I am not long because the valuation leaves no deep-value margin of safety; this is a watch.
Key numbers
- Share price: $170.80
- Market cap: $215.79B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $11.89B
- EV / EBITDA (TTM): 38.0x
- P/E (TTM): 45.4x
- Price / book: 13.12x
The 15 boxes
- ✓ 1. Long-form business notes
The latest FY2025 10-K describes Arista as selling data-driven, client-to-cloud networking-as-a-service built on EOS and NetDL across AI Centers, Data Centers, Campus Centers and WAN Centers, sold through direct and channel routes. FY2025 revenue was $9.01B with operating income of $3.86B and operating cash flow of $4.37B, but two customers were 26% and 16% of revenue. The oldest FY2020 10-K framed Arista around software-driven cognitive cloud networking for data center and campus, with Microsoft above 10% of revenue; the latest report adds AI Center/Etherlink and VeloCloud SD-WAN framing.
- ✓ 2. Competitive advantage
ANET's economics look advantaged: FY2025 gross profit was $5.77B on $9.01B revenue, operating income $3.86B, and operating cash flow $4.37B on only $119.5M capex. But the 10-K does not describe a clean structural moat: Cisco has historically dominated the market, white-box/open-source and InfiniBand/NVLink contest it, and Arista relies on Broadcom silicon and concentrated customers. The advantage looks like scale, software/execution, and high margins rather than lock-in.
- ✓ 3. 10-Q takeaways
Q3 2026 (quarter ended 2026-09-30) was a record: revenue of $3.66 billion, up 58.5% year over year and 20.5% sequentially, beating the $3.3 billion guide, with GAAP operating margin of 44.9% and non-GAAP of 49.1%. Gross margin slipped to 63.6% from 64.6% on higher product costs, memory/silicon tightness and tariffs, while R&D rose 49.4% on new product introduction costs. Cash generation stayed strong ($3,977.4 million operating cash flow for the nine months to Sep 2026) and the balance sheet holds roughly $14.4 billion of cash and marketable securities, but inventories ($3,209.8 million) and purchase obligations ($11.4 billion) are elevated, and no shares were repurchased in the nine months to Sep 2026.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ✓ 11. Impression of the shareholder letter
Filled; members read this box.
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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