Technology Sector Ideas

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>>> Arista Networks (ANET) leads high-speed data center networking


https://www.fool.com/investing/2023/02/06/2-market-beating-growth-stocks-to-buy-now-and-hold/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Arista provides the high-speed networking platforms (like switching and routing solutions) that allow information to flow through modern data centers. The company pairs its core networking products with adjacent software for network telemetry, workflow automation, and security. Arista first brought its technology to cloud data centers, but it has since expanded across enterprise and campus environments.

Arista says its principal innovation is its Extensible Operating System (EOS), the software that powers its entire lineup of switching and routing platforms. By running a single operating system, Arista allows clients to integrate their IT environments -- from public clouds to private data centers, in both wired and wireless workspaces -- into a seamless network. That distinguishes the company from legacy vendors that use multiple operating systems, an approach that increases cost and complexity for clients.


Arista's networking products offer industry-leading capacity and low latency, meanings its switches and routers can move large amounts of data very quickly. That selling point has helped Arista win the business of cloud titans like Microsoft and Meta Platforms, and it has propelled the company to the forefront of the industry. Arista holds 41.5% market share in high-speed data center switches (like 100G, 200G, and 400G), which is nearly twice as much market share as the next closest competitor.

Arista provides the high-performance networking platforms needed to support cloud data centers, and it lowers the total cost of network ownership for customers by implementing a single operating system. That value proposition has fueled impressive financial results, even in a difficult economic environment. Third-quarter revenue climbed 57% to $1.2 billion, and GAAP net income soared 61% to $1.13 per diluted share.

Going forward, Arista should benefit from several tailwinds, including the ongoing adoption of cloud computing, 5G networks, and artificial intelligence applications, and the proliferation of Internet of Things devices. Those trends will put pressure on data center infrastructure, creating a need for faster networking solutions over time. With that in mind, Arista estimates its total addressable market will grow at 13% annually to reach $51 billion by 2027.

Currently, shares trade at a reasonable 10.5 times sales, slightly above its three-year average of 10.3 times sales. At that price, Arista is still well positioned to produce market-beating returns for patient shareholders.

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