Arista Networks (NYSE:ANET) on Tuesday announced a Q2 top – and bottom-line beat, while issuing current quarter revenue guidance that was largely above expectations.
Arista’s two biggest clients are Microsoft and Meta for datacenter (over 35% of revenue) – now you know where Microsoft’s Capex went yesterday.
EPS – $2.10 per share V $1.94 expected on an adjusted basis for Q2 on revenue of $1.69B V $1.65B expected.
The EPS increase is 33% YoY because of strong revenue and better margins. For the June quarter Arista’s operating margin was 41% and cash flow margin was 59%! Microsoft and Meta are supposed to be strong bargaining giants, right? Doesn’t look like it.
Guidance is also higher – For Q3, Arista (ANET) sees revenue of $1.72B to $1.75B. V consensus revenue estimate of $1.72B. The Street has been raising long term estimates as well since morning.
Arista’s (ANET) has been eating Cisco’s lunch for several years now, no easy task beating a giant, working as partners with hyperscalers for AI. Ms Ullal, as many of you from Silicon Valley would know is absolutely top notch in executing projects of these large sizes and importance.
“The collective nature of AI training models relies on a lossless, highly available network to seamlessly connect every GPU in the cluster to one another and enable peak performance. Networks also connect trained AI models to end users and other systems in the data center such as storage, allowing the system to become more than the sum of its parts,” Arista (ANET) top boss Jayshree Ullal said in a blog post in May.
“As a result, data centers are evolving into new AI Centers where the networks become the epicenter of AI management,” Ullal added.
Holding on to the 80% I have left of my ANET for the long term. This company is a winner. I would have loved to add more, hesitating only because even with the new estimates for 2026 earnings at $11 a share at 35x earnings (In 2025-2026, growth slows to mid-twenties) valued it at $385 in two years.
More optimistic projections are for $12 EPS x 40 = $480 about 40% higher so that’s more interesting. Maybe I’m being conservative, but it would be very difficult to keep up these high margins and then there’s the customer concentration risk.
