Arista Networks (ANET)

Conclusion

Arista Networks designs and sells data-driven networking systems and software for AI, data center, campus and routing environments, through distributors, resellers and a direct sales force. At 186.17 USD on 9 November 2026, the company has a market capitalisation of 235.2 billion USD.

The verdict is overvalued. Today's price-to-earnings ratio of 49.5 sits at a 6.1% premium to its ten-year median of 46.6, and price-to-sales of 19.8 sits at a 74.8% premium to its median of 11.3. The discounted cash flow gives 84.18 USD per share at a discount rate of 13.06%. The fair value band runs from 93.91 to 140.87 USD with a midpoint of 117.39 USD, a margin of safety of -36.9% at the current price. The reverse DCF implies growth of 27.3% a year, which is -3.9% against the five-year revenue growth rate of 31.2%.

What holds the case up is the growth record: revenue compounded at 31.2% over five years, and free cash flow conversion over five years was 106.4%. Operating margin of 43.8% is well above its ten-year median of 32.4%. What would break it is the valuation itself, with price-to-sales 74.8% above its median and a margin of safety of -36.9%. The Piotroski score of 4 out of 8 is the weakest earnings-quality reading, and the lack of reported debt data limits the financial health picture.

Financial health

Financial strength is green, held up by the Altman Z-score of 18.703, a current ratio of 3.29 and a quick ratio of 2.48, all assessed as good. Net debt to EBITDA, debt to equity and interest coverage are not available, because the company does not report its debt or interest expense. The Altman model was designed for manufacturers; Arista is a hardware maker, but its business is largely software-driven, so the zone of 18.703 should be read with that in mind. The insolvency risk is low, about 0.02% by the estimate of the Ohlson model over one to two years. The estimate is based on financial statements as at 31 December 2025.

Earnings quality

Earnings quality is green. Free cash flow conversion is 105.6% on a trailing basis and 106.4% over five years, and the accrual ratio is -0.051, which means cash earnings are slightly ahead of reported earnings. Stock-based compensation is 4.3% of revenue, leaving free cash flow after it at 4.50 billion USD. The five-year share count change is 0.07% a year, so there are no meaningful buybacks. The Piotroski score is 4 out of 8 evaluable tests, a weaker result. The Beneish M-score reading is not available. The company beat earnings estimates in all 8 of the last quarters, with an average surprise of 12.0%. Analysts raised current-year estimates by 5.7% over 90 days and next-year estimates by 6.9%, with no downward revisions in the last 30 days.

Profitability

Profitability is green. Operating margin is 43.8% against a ten-year median of 32.4%, net margin is 40.0% against 29.7%, and gross margin is 62.9% against 64.0%. Operating margin has been relatively stable, with a stability measure of 27.7%. The five-year median ROIC is 105.3%, against a WACC of 13.06%. The trailing ROIC and the ROIC minus WACC figure are not available. Return on equity is 28.9%. The DuPont split shows a net margin of 39.0%, an asset turnover of 0.46 and an equity multiplier of 1.57, so leverage contributes little to the return on equity.

Growth

Growth is green. Revenue compounded at 27.2% over three years, 31.2% over five years and 26.8% over ten years. Earnings per share compounded at 37.1%, 40.7% and 38.5% over the same periods. Revenue grew in 9 of the last 10 comparable years. Free cash flow per share compounded at 111.2% over three years, 42.6% over five and 35.7% over ten. The consensus next-year earnings growth estimate is 24.5%.

Valuation

Valuation is red. The price-to-earnings ratio is 49.5 against a ten-year median of 46.6, a premium of 6.1%. Price-to-free-cash-flow is 46.9 against 42.4, a premium of 10.4%. Price-to-sales is 19.8 against 11.3, a premium of 74.8%, and price-to-book is 14.3 against 10.2, a premium of 40.3%. The discounted cash flow gives 84.18 USD per share at a discount rate of 13.06%, with 47.0% of the value in the terminal value. The fair value band runs from 93.91 to 140.87 USD, with a midpoint of 117.39 USD and a margin of safety of -36.9%. The fair value from historical multiples is 150.61 USD. These are estimates built on fixed assumptions, not price targets. The company pays no dividend.

Risks

The weakest numbers are the valuation premiums, especially price-to-sales at 74.8% above its median, and the margin of safety of -36.9%. If growth slows toward the 27.3% the price implies, the premium could compress, and a shortfall against the 24.5% next-year earnings estimate would weigh on the multiples. The Piotroski score of 4 out of 8 points to weaker fundamental signals than the other earnings measures. The beta of 1.637 means the share price can move sharply with the market. Debt, interest expense, trailing ROIC, the Beneish M-score and the current enterprise value-to-EBITDA multiple are not available. The analysis has no debt maturity schedule and no revenue by segment, so it cannot judge refinancing risk or the mix of growth drivers.