Lately, I’ve been obsessed with understanding the AI boom. I want to know how to can get a piece of the action. The thing is, we don’t have a ton of pure-play AI stocks listed right here in India yet. So, I’ve been looking globally for companies that are really nailing the AI infrastructure game. And that’s how I stumbled upon a name called Arista Networks (ANET). They were mentioned by Yahoo Finance in one of their latest articles. Apart from AI, the thing that caught my attention about this company is its Indian CEO & Chairman, Jayshree V. Ullal.
Now, before you switch off thinking, “ok, another American stock,” hear me out. Arista offers a fascinating blueprint for what a successful Indian AI-focused company could look like in the future. It’s not just about the stock; it’s about understanding the business model and the trends.
What Exactly Does Arista Do?
Arista Networks, in simple terms, builds the plumbing for the AI revolution. Think of it like this: AI models need massive amounts of data to learn and function. All that data needs to be moved around fast between servers and data centers. Arista specializes in high-performance networking solutions – the super-fast Ethernet switches and software that make all that data transfer possible.
They’re not selling AI algorithms directly; they’re selling the shovels in the gold rush. And let me tell you, that’s often a much better business to be in.
So, it’s not just about what they do, but who is doing it. Arista was founded by serious techies – Andy Bechtolsheim, Ken Duda, and David Cheriton. These are the kind of people who can be called as trend setters. And leading the charge is CEO Jayshree Ullal. When you see such a strong leadership team, it is a first sign of a moat.
What’s also interesting is how Arista has strategically grown through acquisitions. For example, acquiring Awake Security allowed them to offer advanced threat detection and response. The purchase of Mojo Networks gave them Wi-Fi solutions for campus and enterprise environments. These moves show that Arista is evolving and adapting to the changing needs of the market. ensuring they stay ahead of the curve.
They seems to be on a mission to become a one-stop shop for all data driven networking needs.
Why Arista is Impressive?
The biggest driver for Arista is the explosive growth of AI. Companies like Google, Microsoft, and Meta are investing billions in AI infrastructure. They need the fastest, most reliable networks to train their AI models, and that’s where Arista comes in.
Arista’s secret sauce is its Extensible Operating System (EOS). It’s like the Android operating system, but for networking (its their Tech – their another moat). It allows for a lot of automation, security features, and real-time analytics, all critical in today’s complex networks.
Look at the numbers.
- A market cap of over $149 billion,
- Revenue growing at over 23.3% year-on-year (since 2021),
- Their EPS growth rate is about 32% CAGR (since 2021),
- Free Cash Flow (FCF) has grown at about 34% CAGR since 2021, and
- The operating margins is over 40%.
This is a serious, profitable business. They’re also virtually debt-free, which is always a good sign.
Jayshree Ullal, the CEO, is a rockstar. She’s been leading the company since 2008 and has guided them to become a major player in the industry.
So, What Does This Mean for India?
This is where it gets interesting. India has the potential to develop its own “Arista Networks” for the AI age. Think about it:
- Data Centers are Exploding in India: As India’s digital economy grows, we need more and more data centers. These data centers will need high-performance networking solutions.
- Indian IT Companies Have the Expertise: Indian IT giants already have a deep understanding of networking and software. They could leverage this expertise to build AI-optimized networking solutions.
- Make in India for AI: A push to manufacture networking equipment in India could create a domestic supply chain and reduce reliance on foreign vendors.
Imagine an Indian company that focuses on building the networking infrastructure for AI. It could partner with local data centers, cloud providers, and AI startups. It could develop its own proprietary software for network automation and security. The possibilities are enormous.
Which Indian company has business like Arista Networks?
In India, no company exactly mirrors Arista Networks (ANET) in its entire business model, but one company that comes closes is the following:
- Tejas Networks (NSE: TEJASNET): It is India’s leading telecom and networking companies. It specializes in optical networking, broadband access, and wireless solutions. Like Arista, it develops software-defined networking (SDN)-based solutions and serves data centers, telecom providers, and enterprises. The company is a part of the Tata Group companies. While Tejas Networks focuses more on telecom networks rather than AI-driven data center networking like Arista, its growing focus on cloud and data center solutions makes it the closest Indian parallel.
Final Words
Arista Networks is definitely a company worth keeping an eye on. It is especially interesting for people like me who are interested in the AI revolution. While the stock might seem expensive (at PE of 55.62), the company’s growth potential and strong fundamentals are hard to ignore.
More importantly, Arista shows us what a successful AI infrastructure company looks like. It’s a blueprint that Indian companies can learn from as they venture into the AI space.
