Arista Networks: A Rather Good Investment, Don’t You Think?

One gathers the larger technological concerns are presently preoccupied with spending – rather a lot, actually. Over $700 billion, if one is to believe the pronouncements, all destined for data centres. Most of it, naturally, for the acquisition of blinking lights and complicated chips to facilitate this artificial intelligence craze. The semiconductor chaps are, predictably, rather pleased with themselves.

However, it’s not merely a matter of silicon, you see. One requires a network, a sort of digital thoroughfare, to convey all this information. A surprisingly overlooked detail, really. And a company called Arista Networks (ANET 3.37%) has, rather quietly, established itself as a leader in the field. Its shares have been behaving with a regrettable lack of enthusiasm for the last six months, trading sideways. A most opportune moment, wouldn’t you agree? One can acquire shares for less than $150. A positively charming price.

Speed, My Dear Fellow, Is of the Essence

The demands for networking speed in this new age of large language models are, frankly, rather excessive. Traditional cloud computing simply won’t do. Enormous quantities of data, careening from server to server, necessitate a network capable of keeping pace. Congestion, naturally, is the enemy. Expensive chips, left idling, are a most depressing sight. AI data centres require, quite simply, a high-speed network.

Arista, bless its efficient little heart, has rather cleverly positioned itself as the provider of such networks. It has overtaken Cisco Systems in recent years, achieving a 39% market share of Ethernet switches operating at speeds of 100-gigabits-per-second and faster. And the market, one is reliably informed, is poised for an explosion. Dell’Oro estimates a growth from $20 billion this year to $100 billion by 2030, driven entirely by high-speed networking. Quite a tidy sum, wouldn’t you say?

Arista appears well-placed to capitalize on this expansion. It maintains its performance advantage as it introduces even faster equipment. Moreover, its software is remarkably adaptable, allowing large technological concerns to extract maximum value from its high-end offerings. A most sensible arrangement.

Management has revised its revenue growth forecast upwards, anticipating a 25% increase. Previously, they were expecting a mere 20%. Artificial intelligence spending, naturally, is the driving force. They’ve even set a goal for AI-related revenue to more than double to $3.25 billion this year. Ambitious, perhaps, but one suspects they’ll manage.

Currently trading around $133 per share, its forward price-earnings ratio is just below 43. Not exorbitant, considering the projected fivefold expansion of its primary growth driver by the end of the decade. Analysts anticipate another 20% jump in revenue and earnings per share in 2027, and that growth, one suspects, is sustainable.

Therefore, its valuation appears, shall we say, perfectly reasonable given the company’s potential. Investors with a mere $150 to spare – or any amount, really – should seriously consider Arista Networks. It’s a rather good investment, don’t you think?

2026-02-23 15:57

Speed, My Dear Fellow, Is of the Essence

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