Should you buy shares in Arista networks?(Stock Analysis)

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Cloud computing is cheaper because of economics of scale. Companies can outsource their IT & infrastructure lowering costs & In house maintenance.

The CRM (Customer Relationship Management) software industry such as Sales Force, has already reached a tipping point where a higher proportion of it’s spending occurs in than cloud rather than in traditional software.


The Cloud Computing industry is expected to growth by 12.5% per year which is massive.
Some estimates have even suggested a growth of 17.5% per year.

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Major cloud technology companies are investing billions of dollars each year in cloud Research and Development.

For example, all the way back in 2011 Microsoft committed 90 percent of its $9.6 billion R&D budget to its cloud.

Now for some exposure to the CLOUD COMPUTING INDUSTRY you may initially think Microsoft, due to Microsoft’s Azure platform or Amazon as it has AWS (Amazon Webs services) the public cloud leader.

& while these are both is a fantastic investments.

Both Microsoft & Amazon are some of the most overvalued stocks on the stock market!

Instead, you could INVEST INTO ARISTA NETWORK’s a cutting edge cloud computing company of which it’s customers are Microsoft & Google! That way you will benefit from Microsoft & Googles cloud computing growth!

So in this video, I’m going to evaluate Arista Network’s business, analyse the stock & inform you why I just purchased shares in Arista Network’s.

However, it has deep exposure to the cloud networking Industry by providing the networking equipment (Routers & Switches). In addition, to start of the art software which connect the servers & other computing devices to the cloud data centers.

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Arista Networks has been growing its revenue and operating income thanks to its networking solutions that deliver the performance, flexibility, scalability & support which the Cloud Titans demand!

Such as Microsoft, Google and Facebook! Some of it’s greatest customers.

Microsoft was Arista Networks' largest customer in 2019, accounting for 23% of its revenue.
With its exposure to the cloud computing market and with Microsoft as one of its largest customers, Arista Networks partly depends on the success of Microsoft Azure.
That is a risk for Arista Networks as it’s revenue depends on just a few giant customers.
However, a positive from this is it has allowed the company to limit it’s sales & marketing expenses to only 8.9% of it’s revenue in 2019.


As a result of Arista’s efforts, its market share in the high-speed data center switching market has increased to 18% last year, up from 10% in 2015.

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The company has recently diversified its activities into other networking areas such as Wi-Fi and campus networking with it’s (on-premises data centers).
Competitor’s?
Arista Networks is a best in class networking provider and market leader in the data centre market although a relative newbie on the scene.
(Competitor research Screenshots)
It’s closest competitor Cisco Systems, a legacy Giant of the industry has watched Arista Networks come up the outside lane & take massive market share gains.


Arista generated trailing-12-month revenue of about $2.5 billion and has a market value of $14.7 billion.

Its prime competitor and industry leader, Cisco, generated trailing revenue of about $52 billion and has a market value of $205 billion, approximately 14 times larger than Arista.

Both are innovating and selling into large growing markets.

Thus In 5 to 10 years, I think Arista will be a lot larger than it is today!

Overall, ARISTA networks offers exposure to the high growth cloud computing industry at better value than the Cloud Titans such as Microsoft which has a P/E ratio of 30.31 compared to Arista’s P/E ratio of just 19. This lower share price relative to it’s earnings give’s Arista networks a MARGIN of SAFETY WHEN INVESTING into it.

With previous years growth of 162% and a strong balance sheet of $2.7 billion without debt!

As an investor I will be tracking Arista’s market share gains, learning about it’s acquisiton strategy having spent $97 million on two recent companies & observing if Arista increases it’s R&D spending to keep as a strong innovative company.