1. How I Discovered Arista Networks
I was first introduced to Arista Networks through an episode of a Motley Fool podcast, where they were breaking down an earnings call. The discussion sparked my curiosity—particularly given my broader research at the time into companies powering next-generation digital infrastructure, including Fortinet and other cybersecurity or networking peers.
What stood out was that Arista wasn’t just another network hardware company. They were the go-to provider for hyperscale data centers and high-performance enterprise networks—serving the largest technology companies in the world, from cloud giants to sovereign nations.
2. The Spark: Dominance in the Shadows
Despite operating in a sector dominated historically by legacy players like Cisco and the now-defunct Nortel, Arista was emerging as a quiet giant—not making headlines, but winning repeat business from the most demanding customers on Earth.
I started researching their competitive positioning. What I found was impressive: best-in-class products, a loyal customer base, deep specialization in cloud-scale networking, and operational discipline that stood in contrast to many “growth at all costs” peers.
3. The Initial Investment
At the time, I was also looking into Fortinet, a company with adjacent but distinct offerings in cybersecurity. I made initial $1,000 investments in both companies—my standard “skin in the game” entry point. This allowed me to learn by ownership, while continuing to monitor execution and valuation.
What became clear over time was that Fortinet, while compelling, was priced far ahead of its fundamentals. The sales multiple was unsustainably high, and the path to profitability less convincing at the price I paid.
Conversely, Arista was profitable, had clear earnings growth, and had a Rule of 40 score comfortably above 40—a key metric I use to assess high-growth tech firms for balance between growth and profitability.
So I exited Fortinet and retained and built out my position in Arista Networks.
4. What Makes Arista Stand Out
Arista’s edge lies in its:
- High-performance, low-latency network switches, used in the most demanding environments
- Software-defined network architecture, which enables scale and flexibility
- Repeat enterprise contracts, where customers consistently expand spend
- Elite customer base, including hyperscalers and Tier 1 cloud providers
- Lean cost structure and disciplined capital allocation
They are not trying to be everything to everyone. Instead, they are laser-focused on solving the hardest networking problems for the biggest customers.
5. Role in My Portfolio
Arista represents approximately 1% of my total capital deployed. While not my largest holding, it’s one I continue to monitor closely—particularly for opportunities to increase exposure should market dynamics create pricing inefficiencies.
It currently sits in my G2 Fund – Future Leaders. It’s profitable, scaling sustainably, and likely to become an enduring infrastructure layer for the AI and cloud computing age.
6. Market Repricing & Opportunity
Earlier in 2025, Arista’s share price reached a high of $125, but it has since pulled back to ~$96, due to macroeconomic sentiment shifts—particularly around U.S. tariff policy. Much of Arista’s hardware is manufactured offshore and then imported into the U.S., exposing it to import tariffs and supply chain volatility.
This sentiment-driven pullback has tempered near-term growth expectations, despite the company continuing to execute operationally. For long-term investors, however, this may represent a buying opportunity—as fundamentals remain strong and Arista’s relevance continues to rise with the demand for AI-driven data centers and low-latency networking.
7. What I’m Watching
Going forward, I’m monitoring:
- Resolution or escalation of U.S. tariff policies
- Arista’s continued market share in hyperscaler networking
- Expansion of software-defined networking (SDN) offerings
- Growth of AI-native data center infrastructure
- Gross margin maintenance in light of supply chain pressures
8. What Would Break My Thesis
While I remain optimistic, my thesis would need re-evaluation if:
- Arista loses significant contracts with major hyperscaler customers
- Margins compress significantly due to manufacturing cost increases or tariffs
- They fall behind on key technological trends like AI networking or intent-based networking
But as of now, none of these concerns are material. Arista continues to execute methodically—and in my view, quietly power the infrastructure behind the cloud and AI revolution.
Final Reflection
Arista Networks may not have the brand awareness of Big Tech or the retail hype of AI startups—but they’re the picks and shovels powering the next digital frontier. In a world that’s moving data faster, storing more of it, and computing with ever-lower latency, Arista’s hardware and software are critical enablers.
If my kids ever ask why I chose to invest in a company they’ve never heard of, I’ll say: “Because they build the roads that all your data travels on—and I’d rather own the roads than chase the cars.”
