Arista: AI Headlined 2023 Analyst Day; Long-Term Model Matches Our Forecast

We maintain our $160 fair value estimate for shares of wide-moat Arista Networks after a positive and informative 2023 analyst day. Arista provided a 2027 financial model that largely agreed with our existing forecasts. Management highlighted continuity in Arista’s successful strategy, focusing on high-speed hardware and transparent and efficient software to differentiate and win placements in customers. We liked in-depth discussions surrounding artificial intelligence and how Arista’s portfolio is implemented in large AI clusters. Shares dipped 6% afterhours following the session, which we view mostly as a coming back to earth after a 20% rise since Arista’s bullish earnings call less than two weeks prior. We agree with the market that Arista has a ripe opportunity in clouds, enterprises, and AI applications, but we continue to see valuation as challenging.