I like companies with important customers. I become considerably less relaxed when two of those customers account for nearly half the business. That is the strange position I find myself in whenever I look at Arista Networks. The company has become one of the most important suppliers of high-performance networking equipment for hyperscale data centers and artificial-intelligence infrastructure. Its technology sits in the digital engine rooms of some of the richest and most technically demanding companies on Earth. That sounds wonderful because it is wonderful. It is also the problem. According to Arista’s 2025 annual filing, two customers individually accounted for 26% and 16% of annual sales. Together, those two relationships represented 42% of the company’s revenue. The customers were widely identified as Microsoft and Meta, two technology giants spending aggressively to expand cloud and AI infrastructure. If I were trying to invent the perfect customer list for a networking company,...
I have reached the stage of the artificial-intelligence investment cycle where merely hearing the letters “AI” no longer causes me to throw money at a stock as though valuation were an outdated social convention. That does not mean I think the AI infrastructure boom is imaginary. The capital spending is real. The data centers are real. The demand for faster networking is real. The enormous checks being written by hyperscale cloud companies are painfully real—particularly for anyone who thought free cash flow would eventually be used for something quaint, such as dividends. Arista Networks is also a very real beneficiary. The company sells the high-speed networking equipment and software that allow massive computing systems to communicate. If graphics processors are the engines of an AI data center, networking is the road system connecting them. It does not matter how impressive the engines are if traffic jams leave them idling while an executive explains that the cluster is “experienci...