Arista Networks (ANET)

Q3 2024 Results

 We have written two notes on Arista Networks (ANET). The first was an “Initiating Coverage” type note from 12 May 2023 and can be found here. In our biased view, it is worth reading as it is one of our best efforts!

The note led to our first investments in ANET, and we have added to it since then. ANET has risen 202% in the last three years and 41% in the last twelve months. We have made an 86% return on our holding.

The most recent note can be found here.

ANET is a provider of products, software and technology which helps to make computer networks. These can be single location networks, Campus network, Wide Area Networks (WAN) and increasingly AI datacentres. In the last 10-15 years the large Cloud Hyperscalers have made huge investments in Datacentres.

ANET offers

• Extensible Operating Systems (EOS) Software developed for Networks

• a set of network applications

• Ethernet switching and routing platforms.

Arista designs revolutionary products in California. These are built by contract manufacturers in Asia and delivered by Arista to customers worldwide through distribution partners, systems integrators and resellers with a strong dedication to partner and customer success.

Manufacturing is outsourced, and ANET has a capital light business model. The Switches and Routers that Arista supplies range in speed from 10-800 gigabits per second.  

One metric for tracking Arista’s growth is the number of ports. In 2008, Arista had 1500 ports, and this had reached 1mn in 2018. Today that has grown to 100mn across 10,000 customers. This means their products are connected to over 100mn physical ports on customer networks. A port is a physical or logical endpoint on a network device that allows data to be transmitted and received. In Arista Networks' case, the ports are typically on their switches, which are used to connect computers and other devices together on a network.

The number of ports served is not a static number. It constantly changes as new customers adopt Arista Networks' products and as existing customers add more ports to their networks.

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