ANET

Arista is a genuinely elite business. Revenue has roughly tripled from $2.95B (FY2021) to $9.01B (FY2025), and the FY2025 print — +28.6% revenue, +23.1% net income — shows the growth is still compounding off a large base. The profitability is rare: 64.1% gross margin, 42.8% operating margin, 39.0% net margin and a 28.4% ROE, all funded internally. The model is asset-light and cash-generative — $4.37B of operating cash flow against just $120M of capex — and the balance sheet is fortress-grade, with $0 long-term debt, $12.4B equity and liabilities/equity of only 0.57x. The MD&A frames this as leadership in high-speed Ethernet switching with ~48% of revenue from 'Cloud and AI Titans,' positioning Arista directly in the AI data-center networking buildout.

The problem is the price, not the business. At $169.67 the stock trades at 61.7x FY2025 diluted EPS and 23.7x sales, a $213B market cap on $3.51B of net income. Even against ~24–29% growth, that is a PEG north of 2 — the multiple already discounts years of continued hypergrowth, leaving little margin of safety if growth merely normalizes. Note too that cash fell 28.9% to $1.96B as Arista leaned into buybacks ($1.60B, +278%); shareholder-friendly, but it removes the optical cushion.