Arista Networks is a company that builds the networking infrastructure behind the world's largest cloud data centers. If you're wondering what Arista Networks does, the short version is this: they design and sell high-speed network switches and routers, paired with a software operating system called EOS, that help massive data centers move enormous amounts of data quickly and reliably. Their customers include some of the biggest names in tech and finance, and their revenue comes from selling both hardware and software-driven networking solutions.
Key takeaways
- Arista Networks makes money by selling high-performance network switches, routers, and its proprietary EOS software platform to large-scale cloud and enterprise customers.
- The company's biggest customers are cloud titans (often called "hyperscalers") like Microsoft and Meta, which account for a significant share of total revenue.
- Arista differentiates itself from competitors like Cisco by focusing on software-driven networking, programmability, and a single operating system across all its products.
- The business model blends hardware sales with recurring software and support revenue, giving it both scale and stickiness.
What does Arista Networks do, exactly?
Think of Arista Networks as the company that builds the "roads and highways" inside data centers. Every time you stream a video, run a cloud application, or interact with an AI tool, data has to travel between servers at incredible speeds. Arista builds the switches and routers that make that data flow possible.
Their products sit inside data centers operated by cloud providers, financial institutions, and large enterprises. The hardware is only part of the story, though. What really sets Arista apart is EOS, or Extensible Operating System, their proprietary software that runs on every switch they sell.
EOS (Extensible Operating System): Arista's proprietary network operating system that runs across all of its switching and routing products. It's built on a single software image, meaning every Arista device runs the same codebase. This makes upgrades, troubleshooting, and automation significantly simpler for network engineers.
Where a traditional networking company might have dozens of different software versions running across product lines, Arista uses one. That might sound like a small detail, but for companies managing thousands of switches across massive data centers, it's a meaningful operational advantage.
How does Arista Networks make money?
Arista's revenue comes from two main buckets: product sales and services.
- Product revenue is the larger portion. This includes the physical switches and routers, plus the EOS software licenses that come bundled with them. When a cloud provider builds out a new data center or upgrades an existing one, they're buying Arista hardware in bulk.
- Services revenue covers ongoing software subscriptions, technical support, and professional services. This piece is smaller but tends to be more predictable and recurring.
The mix matters. Hardware sales can be lumpy because they depend on when big customers decide to build or expand data centers. Services revenue smooths things out and creates a longer-term relationship with each customer. Over time, Arista has been growing its software and subscription-based offerings, which typically carry higher margins than hardware alone.
Who are Arista's biggest customers?
This is where things get interesting and a little risky. Arista's customer base is heavily concentrated among a handful of very large buyers. The hyperscale cloud providers, companies like Microsoft, Meta, and others that operate enormous global data center networks, represent a major chunk of Arista's revenue.
Hyperscalers: Companies that operate data centers at massive scale, often spanning dozens of facilities worldwide. They need networking equipment that can handle extreme data volumes with minimal downtime. Think of the infrastructure behind cloud computing, social media platforms, and AI workloads.
Beyond the cloud giants, Arista also sells to large enterprises and financial services firms. Wall Street trading firms, for example, need ultra-low-latency networking, meaning data has to travel through the network with as little delay as physically possible. Arista has built a strong reputation in that niche.
The concentration risk is real, though. If one or two of those hyperscale customers slow their spending or shift to a competitor, it hits Arista's revenue hard. Investors looking at ANET's stock page will want to keep an eye on customer concentration disclosures in the company's filings.
What makes Arista different from Cisco?
If you're new to networking stocks, you'll inevitably hear about Cisco. Cisco is the legacy giant, the company that dominated enterprise networking for decades. So what is ANET doing differently?
A few things stand out:
- Software-first architecture: Arista was built from the ground up around EOS. Cisco, by contrast, has accumulated multiple operating systems across acquisitions and product lines over the years. Arista's single-image approach is cleaner and easier to automate.
- Cloud-native focus: While Cisco serves a broad range of customers from small businesses to governments, Arista deliberately targeted the highest end of the market: cloud data centers that need the fastest, most reliable switches available. That focus let them optimize for a specific use case rather than trying to be everything to everyone.
- Programmability and automation: Arista's switches are designed to be managed programmatically. Network engineers can write scripts to configure and monitor thousands of devices at once. This matters enormously at cloud scale, where manually configuring switches one by one isn't practical.
- Merchant silicon strategy: Arista often uses off-the-shelf networking chips from companies like Broadcom rather than designing proprietary chips. This keeps costs down and lets them adopt the latest chip technology quickly. Cisco has historically relied more heavily on custom silicon.
None of this means Cisco is irrelevant. Cisco has a far larger installed base, wider product portfolio, and deeper relationships across enterprise IT. But in the specific arena of high-speed cloud data center networking, Arista has carved out a strong competitive position.
Why does Arista Networks matter for investors?
For anyone exploring stock analysis, ANET is worth understanding because it sits at the intersection of several major technology trends.
Cloud computing continues to grow as businesses move workloads off their own servers and into the cloud. AI workloads, which require enormous amounts of data processing and networking bandwidth, add another growth driver. Every new AI training cluster or inference server farm needs high-performance networking, and that's Arista's sweet spot.
The company also tends to operate with high gross margins compared to pure hardware businesses, largely because of its software differentiation. When you're evaluating ANET, pay attention to metrics like gross margin, revenue concentration by customer, and the split between product and services revenue. Those numbers tell you a lot about the durability of the business.
Gross margin: The percentage of revenue left after subtracting the direct cost of making the product. A higher gross margin generally means a company has pricing power or a strong software component. For Arista, healthy gross margins reflect the value customers place on EOS, not just the physical switches.
One approach some investors use is to compare Arista's margin profile against other networking and semiconductor companies to gauge whether the business has a durable competitive edge. You can explore comparisons like this using the Rallies Vibe Screener to filter for companies with similar financial characteristics.
What are the risks?
No business model is bulletproof, and Arista Networks for beginners wouldn't be a complete overview without covering the risks.
- Customer concentration: As mentioned, a small number of hyperscale customers generate a disproportionate share of revenue. If Microsoft or Meta pulls back on data center spending for a year, Arista feels it.
- Competition: Cisco isn't standing still. They've invested heavily in their own cloud networking products. Meanwhile, some hyperscale customers are developing their own in-house networking solutions, which could reduce their reliance on outside vendors like Arista.
- Cyclicality: Data center spending tends to come in waves. When cloud providers are in an expansion phase, orders surge. When they pause to digest what they've built, orders can slow significantly. This makes revenue growth somewhat unpredictable from quarter to quarter.
- Valuation expectations: Growth companies in the networking space can trade at high valuations relative to their earnings. That means any stumble in growth can lead to sharp price declines, even if the underlying business remains healthy.
Investors may want to research how Arista has handled previous spending slowdowns by its cloud customers, and whether the services revenue provides enough of a cushion during those periods.
How to research ANET on your own
If this ANET explained overview sparks your curiosity, here's a practical starting point. Pull up the company's investor relations page and look at the most recent annual report. Focus on three things: the revenue breakdown by product versus services, the list of risk factors related to customer concentration, and the management commentary on cloud spending trends.
You can also ask more targeted questions using the Rallies AI Research Assistant, which lets you dig into company fundamentals in a conversational format. It's a useful way to get plain-English answers without wading through dense filings on your own.
For broader context, the Rallies Discover page groups companies by investment themes, which can help you see how Arista fits within the larger cloud infrastructure and AI networking landscape.
Try it yourself
Want to run this kind of analysis on your own? Copy any of these prompts and paste them into the Rallies AI Research Assistant:
- Explain Arista Networks' business model like I'm new to cloud networking stocks — how do they make money, who are their main customers, and what makes them different from competitors like Cisco?
- Explain what Arista Networks does like I'm new to investing — how does the business work and why does it matter?
- What are the biggest risks to Arista Networks' business model, and how does customer concentration affect the stock?
Frequently asked questions
What is ANET in simple terms?
ANET is the stock ticker for Arista Networks, a company that builds high-speed networking equipment for cloud data centers and large enterprises. They sell switches, routers, and a software platform called EOS that manages network operations. Their products help data centers handle massive volumes of internet traffic efficiently.
Is Arista Networks for beginners a good stock to learn about?
Arista is a useful company to study if you want to understand how cloud infrastructure works and who builds the physical and software layers behind it. The business model is relatively straightforward compared to some tech companies: they sell networking hardware and software to big customers. It's a solid case study in customer concentration, competitive differentiation, and the relationship between hardware and software revenue.
How is Arista Networks different from Cisco?
Arista focuses specifically on high-performance data center networking with a single, unified software platform. Cisco has a much broader product portfolio that spans enterprise networking, security, collaboration tools, and more. Arista's narrower focus lets it optimize for speed and programmability in cloud environments, while Cisco's breadth gives it a wider customer base and more diversified revenue.
What does Arista Networks do with AI?
Arista builds the networking infrastructure that connects servers in AI training and inference clusters. AI workloads generate enormous amounts of data that needs to move between GPUs and storage at very high speeds with minimal latency. Arista's high-bandwidth switches are designed to handle exactly that kind of traffic, making them a key supplier to companies building AI data centers.
Who are Arista's main competitors?
The primary competitor is Cisco Systems in the data center networking space. Other competitors include Juniper Networks (now part of HPE), Huawei in some international markets, and increasingly the hyperscale cloud providers themselves, who sometimes design custom networking gear for their own use. The competitive landscape varies by customer segment and geography.
Bottom line
Understanding what Arista Networks does comes down to this: they build the high-speed networking backbone for the world's biggest data centers, combining purpose-built hardware with a unified software platform that their customers find hard to replace. The business is simple to grasp but has nuances around customer concentration, competitive positioning, and the cyclicality of cloud infrastructure spending that are worth digging into.
If you want to go deeper on ANET or explore similar companies in the networking and cloud infrastructure space, the Rallies stock analysis hub is a good next step for building your research process.
Disclaimer: This article is for educational and informational purposes only. It does not constitute investment advice, financial advice, trading advice, or any other type of advice. Rallies.ai does not recommend that any security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results. Before making any investment decision, consult with a qualified financial advisor and conduct your own research.
Written by Gav Blaxberg, CEO of WOLF Financial and Co-Founder of Rallies.ai.