Strong Gross Profit Margin
High Return on Equity
Strong Net Profit Margin
Healthy Operating Profit Margin
No Debt
Excellent Liquidity Ratios
Strong Revenue Growth
High Gross Margins
Diverse Customer Base
Strong Position in High-Speed Networking
Promising AI Revenue Outlook
Expansion into New Markets
Strong Innovation Pipeline
High Valuation Ratios
Exposure to Customer Dependencies
Market Volatility and Supply Chain Risks
Overall, Arista Networks demonstrated strong business quality with solid revenue growth, high margins, and a diverse customer base. Future prospects remain promising, driven by AI growth and product innovation, despite facing some market risks and dependencies on major customers.
Analysis Date: February 18, 2025
Last Updated: March 11, 2025
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Benjamin Graham's value investing approach focuses on finding stocks with a significant margin of safety between their intrinsic value and market price.
Intrinsic Value
Estimated fair value based on Graham's formula
$87.12
Current Market Price: $64.41
IV/P Ratio: 1.35x (>1.0 indicates undervalued)
Margin of Safety
Gap between intrinsic value and market price
26.0%
Graham recommended a minimum of 20-30% margin of safety
Higher values indicate a greater potential discount to fair value
Graham Criteria Checklist
Benjamin Graham's value investing checklist for ANET
Positive earnings (5+ years)
Dividend history (5+ years)
P/E ratio ≤ 20 (28.44)
P/B ratio ≤ 1.5 (8.12)
Current ratio ≥ 2.0 (4.36x)
Long-term debt < Net current assets (0.00x)
Margin of safety (26.0%)
ANET does not meet all Graham criteria
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
The net profit margin of 40.73% is impressive, indicating that a large portion of revenue translates into profit, which is a sign of effective cost management.
An operating profit margin of 42.05% indicates strong operational efficiency and the ability to manage costs effectively.
Profitability metrics measure a company's ability to generate earnings relative to its revenue, operating costs, and other relevant metrics. Higher values generally indicate better performance.
Return on Equity (ROE)
Measures how efficiently a company uses its equity to generate profits
32.11%
Higher values indicate better returns for shareholders
TTM (as of 2025-04-16)
Return on Assets (ROA)
Measures how efficiently a company uses its assets to generate profits
5.70%
Higher values indicate better asset utilization
TTM (as of 2025-04-16)
Gross Profit Margin
Percentage of revenue retained after accounting for cost of goods sold
64.13%
Higher values indicate better efficiency in production
TTM (as of 2025-04-16)
Net Profit Margin
Percentage of revenue retained after accounting for all expenses
40.73%
Higher values indicate better overall profitability
TTM (as of 2025-04-16)
With a debt-to-equity ratio of 0.0 and a debt-to-assets ratio of 0.0, ANET has no debt, indicating a very strong balance sheet and reduced financial risk.
Current ratio of 4.36 and quick ratio of 3.69 demonstrate exceptional liquidity, indicating that the company can easily cover its short-term obligations.
Financial health metrics assess a company's ability to meet its financial obligations and its overall financial stability.
Debt to Equity Ratio
Total debt divided by total equity
ANET: No data available
Current Ratio
Current assets divided by current liabilities
4.36x
Higher values indicate better short-term liquidity
Less than 1.0 is concerning, 1.0-2.0 is adequate, greater than 2.0 is good
Q4 2024
Arista Networks achieved a record revenue of $7 billion in 2024, with a growth rate of approximately 20%, significantly surpassing initial guidance of 10% to 12%. This growth is attributed to the momentum from generative AI applications.
The company reported non-GAAP gross margins of 64.2% in Q4 2024 and 64.6% for the fiscal year, showcasing efficient supply chain management and a strong mix of enterprise and software sales.
Arista has a well-diversified customer base with significant contributions from cloud and AI titans (48% of revenue), enterprises (35%), and service providers (17%), reducing reliance on any single customer or sector.
Arista leads the market with over 40% share in the high-performance switching category, particularly in 100, 200, and 400-gig ports, and has expanded its customer base significantly.
The company noted a concentration risk with major customers like Microsoft and Meta, which could impact revenue stability if these relationships weaken or if these customers reduce spending.
Arista is targeting $1.5 billion in AI-related revenue by 2025, driven by the increasing demand for AI back-end clusters and cloud infrastructure, which is expected to grow substantially.
The company is exploring new opportunities in routing and cognitive AI-driven campus solutions, which are expected to contribute significantly to future growth.
Arista continues to invest heavily in R&D, with $226.1 million spent in Q4 2024 alone, aimed at driving product innovation and maintaining competitive advantages across its offerings.
The company acknowledges potential risks related to supply chain constraints, inflationary pressures, and market volatility that could impact revenue growth and margins in the future.