ANET Stock in 2025: Overvalued or the Next 10x Growth Giant?

I’ve been watching Arista Networks (NYSE: ANET) for a while, and after doing a deep dive into its numbers, story, and position in the AI infrastructure space, I’ve decided to open a position. I'm a growth investor by nature, and while I’m not chasing every shiny object, I’m also not scared of a little premium pricing if the fundamentals are solid. In Arista’s case, they really are.

Is Arista Still Growing Fast?

Yeah—it’s been putting up some pretty strong numbers. Over the past three years, revenue has grown at around 33% annually. EPS has climbed even faster, at close to 49% per year. Free cash flow? Up over 56% annually. That kind of consistent, high-quality growth is tough to ignore.

And it’s not just sales volume. The company’s return on equity is about 28.5%, which shows that it’s not just growing—it’s growing efficiently. If you're new to what ROE really means for a company’s profitability, I recently explained it in detail here.

What Makes Arista Different From the Old Guard?

One thing that really sets Arista apart is how it approaches networking. It’s not trying to compete on hardware alone. The real value is in its software—specifically EOS (Extensible Operating System) and CloudVision. These platforms make networks easier to manage, more secure, and highly programmable, which is a huge deal for large-scale data centers.

This isn’t a company selling to small businesses. It’s deeply embedded with tech giants like Microsoft and Meta. That kind of trust and scale isn’t easy to replicate.

It reminds me a bit of how companies like ASML are playing an enabling role in the chip industry—they aren’t always the headline names, but they make the whole ecosystem work.

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Is ANET Overvalued Right Now?

Yeah, it’s definitely not cheap. The P/E is around 45, and the PEG is hovering around 1.8 to 2.2. Even the P/S ratio is above 14. Those numbers usually make me hesitate, but in this case, I’m okay with it.

Why? Because Arista isn’t a maybe—it’s already executing. The valuation is high, but it’s not hype-driven. The company is delivering real growth and has a sticky product. I’d rather pay up for a business that’s winning than get a “value” deal on something that's flatlining.

That’s a similar lens I applied when evaluating whether Nvidia is too expensive or worth it.

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What Are Analysts Saying?

Most analysts seem to be leaning positive. The average price target is around $108, which is roughly 19% above where the stock’s trading now. Some even have it going as high as $145. The low end is $76, which I can live with if I’m holding long enough and the story stays intact.

There have been a few recent revisions—Morgan Stanley bumped their target up to $100 and Rosenblatt moved from “sell” to “neutral” while still raising their target. So the momentum from the street isn’t bearish at all.

What’s Driving Growth Right Now?

Arista just launched a new AI-focused networking suite with tools like Cluster Load Balancing and CloudVision Universal Network Observability. It’s a fancy way of saying they’re making sure data centers can handle AI traffic better.

They’re also projecting around $750 million in AI-related revenue for 2025, which is impressive considering that line of business didn’t even exist not long ago. This isn’t a company trying to ride the AI trend with buzzwords—it’s actually providing the backbone that powers AI compute.

Kind of reminds me of the investment thesis I laid out for Broadcom as a 10x AI infrastructure enabler.

What Are the Risks?

There are a few things I’m keeping an eye on. First, customer concentration. A big chunk of their revenue comes from Meta and Microsoft. If either one cuts spending, it’ll be noticeable.

Then there’s insider selling. The CTO recently offloaded about $95 million worth of shares. That’s not nothing, but I’m not panicking over it either. Execs sell for all kinds of reasons.

And of course, valuation risk is real. If growth slows even slightly, a P/E of 45 could get compressed fast. I’m okay with that risk because I think the business still has room to grow into it.

If you prefer plays with wider moats and undervalued price points, you might want to check out this healthcare gem I broke down recently.

How’s the Networking Sector Doing?

The overall sector is in a good spot. Demand for AI, cloud services, and edge computing is keeping growth strong. Analysts expect the data center networking market to grow at 11%+ annually through 2029.

Arista’s not just in the sector—it’s leading some of its most important segments. That gives me confidence that even if the macro gets bumpy, the company still has a solid long-term runway.

If you're someone who balances growth with some recurring income, I've also covered ideas for monthly dividend stocks that pair well with plays like this.

What I’m Watching Next

Even though I’ve opened a position, I’m not tuning out. I’ll be watching:

• how fast AI revenue ramps up
• whether Meta and Microsoft stay consistent with their spending
• how competitors like Nvidia or Broadcom move into networking
• whether Arista keeps innovating with EOS and CloudVision

If the thesis holds, I might add more over time. That’s how I’ve approached other names recently, like GOOG in 2025 and Amazon’s upside potential.

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Final Thoughts

I like where Arista is headed. It’s not a screaming bargain, but it’s got a real moat, strong relationships with hyperscalers, and it’s building the infrastructure for one of the biggest tech trends of the decade. That’s enough for me to start building a position.

If you’re a growth investor looking for exposure to the picks-and-shovels side of AI and cloud, ANET is worth a serious look.

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