Massive Cloud Investment Continues To Fuel Arista’s Growth Despite Supply Constraints; Keep $130 FVE

We maintain our $130 fair value estimate for wide-moat Arista Networks after it reported third-quarter results above our expectations. Arista’s largest cloud customers are maintaining high levels of demand and generating torrid top-line growth in 2022. At the same time, supply constraints continue to limit its ability to meet demand and are hamstringing profitability. We expect cloud spending to stay strong through 2023, but for supply constraints to hamper Arista’s ability to meet demand at other customers in the short term. Long-term, we continue to believe that Arista’s disruptive, software-led approach will gain share across its served markets. We see shares as close to fairly valued.