QS Research · Michael Burry's Scion Capital analyst template · 2006
Arista Networks, Inc. (ANET)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case 0% · downside -43% · upside +16%
ANET is a high-quality, cash-generative share-gainer - Q3 2026 revenue rose 58.5% to $3.66B and FY2026/FY2027 targets were raised - but the market already pays 45.2x TTM P/E and 40.1x EV/EBITDA, the top of the peer table, so the growth is not a hidden asset. Using section 13's TTM base ($4.75B net income and $5.30B EBITDA; N15, N14), the current 45.2x P/E gives roughly $170, the 28.4x CSCO P/E gives $106.78 (-37%), the 22.7x UI EV/EBITDA gives $97.04 (-43%), and the 52.6x EXTR P/E gives $197.76 (+16%). That is a base case of roughly flat value with much more downside than upside against peer multiples, so the stock fails both the long and short rules. It is a watch: the post-print de-rating may be forming a mispricing, but at $170.11 there is no deep-value margin of safety and the evidence does not support a short either.
Key numbers
- Share price: $170.11
- Market cap: $214.92B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $11.89B
- EV / EBITDA (TTM): 40.1x
- P/E (TTM): 45.2x
- Price / book: 13.07x
The 15 boxes
- ✓ 1. Long-form business notes
Arista sells high-speed Ethernet switching hardware built on merchant silicon, wrapped in its own EOS network operating system, CloudVision management software, NetDL data lake and A-Care support services, sold direct and through channel partners to three customer classes: Cloud and AI Titans, AI and Specialty Providers, and Enterprise. Revenue compounded from $2.32B in FY2020 to $9.01B in FY2025 with operating income of $3.86B and operating cash flow of $4.37B against capex of only $119.5M, so the model is software-like in cash conversion while shipping physical boxes. The business has changed character across the window: FY2020 was a 10GbE+ data center switch story plus bolt-on campus/wireless/monitoring/security acquisitions, while the latest 10-K is organized around AI Centers (Scale Up, Scale Out, Scale Across), 800G Etherlink platforms, SD-WAN from VeloCloud, and taking share from InfiniBand. Concentration is the standing risk: two customers were 26% and 16% of FY2025 revenue, and the silicon supply sits largely with one vendor, Broadcom.
- ✓ 2. Competitive advantage
Arista's margin and return history is strong: gross margin held near 64% from FY2020 to FY2025 while operating margin rose from 30.1% to 42.8%, and FY2025 net income was $3.51B on $12.37B equity with $4.37B operating cash flow against $119.5M capex. That is evidence of real operating leverage and a strong cost/scale position, but the 10-K frames the market as intensely competitive, Cisco-dominated, and exposed to white-box pricing, InfiniBand/NVLink, Broadcom silicon dependence and customer concentration. The sources support a strong scale/software and brand advantage, but not a clearly durable moat.
- ✓ 3. 10-Q takeaways
In Q3 2026 (quarter ended 2026-09-30), Arista reported total revenue of $3,657.6 million, up 58.5% from Q3 2025, with product revenue up 66.9% and service revenue up 17.9%. Gross margin was 63.6% vs 64.6%, and operating expenses rose 33.5%, led by R&D +49.4%. Cash and marketable securities were about $14.4 billion at 2026-09-30; 9M 2026 operating cash flow was $3,977.4 million, inventory rose $962.8 million, no shares were repurchased, and purchase obligations were $11.4 billion. The 10-Q flags elevated inventory/purchase commitments, memory/silicon supply pressure on gross margin, customer concentration, tariffs, and AI-infrastructure cyclicality; it gives no numeric forward guidance.
- ✓ 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
- ○ 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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