ANET Rides on Steady Cash Flow Growth: Will the Uptrend Continue?

Arista Networks, Inc. ANET generated $3.11 billion of net cash from operating activities compared with $2.68 billion in the year-ago period, in the first nine months of 2025. The improvement was primarily driven by a solid improvement in profitability, combined with working capital efficiency.

During the first nine months of 2025, GAAP net income improved to $2.55 billion, up from $2.05 billion a year ago. 27.6% surge in revenue growth backed by healthy traction in the AI networking vertical. ANET offers one of the broadest ranges of data center and campus Gigabit Ethernet switches and routers in the industry. The company’s product suite enables the implementation of high-performance, highly scalable and appropriate solutions for every environment. AI-driven momentum is expected to drive the company’s top line and cash flow in the upcoming quarters.

A scalable cost structure is another positive. Revenue growth is outpacing the growth in expenses. Despite a rise in headcount, new product introduction costs and higher variable compensation expenditures, Arista’s operating expenses remained around 22% of the total revenue, enhancing profitability and cash flow.

Strong working capital efficiency is another major tailwind. In the first nine months of 2025, working capital requirements decreased by a net $424.5 million. Deferred revenues increased $1.8 billion, backed by growing customer contracts. These upfront cash payments from customers are a major driver of cash flow. Accounts payable increased by $117.7 million. That implies Arista is using supplier credit to fund its inventory purchases. This is also improving short-term cash flow. 

However, a $348.1 million increase in accounts receivable partially offset this positive trend. The increase was due to higher revenues, and it implies Arista has extended its credit benefit to customers. Inventory rose by $321 million year over year to support the growing demand for its products. That said, Arista’s cash flow momentum continues to be driven by solid growth in profitability, optimized cost structure and efficient working capital management.

Other Tech Firms With Solid Cash Flow Improvement

Celestica, Inc. CLS generated an operating cash flow of $126.2 million compared with $122.8 million in the year-ago quarter, bringing the respective tallies for the first nine months of 2025 and 2024 to $408.9 million and $330.5 million. During the third quarter, Celestica’s free cash flow was $88.9 million in the third quarter compared with $76.8 million in the prior-year quarter. Its capital expenditure stood at $37 million, 1.2% of revenues and well below the expected 1.5-2% of the revenue range. This accentuates efficient capital management and implies that the company is well-positioned to invest in growth initiatives, as well as pay debt and dividends. Celestica is benefiting from solid demand for 400G switches and 800G switches in AI data centers.

Sanmina Corporation SANM generated $199.1 million of net cash from operating activities compared with $51.9 million in the previous year’s quarter. In 2025, the company generated $620.7 million in cash compared to $340.2 million in 2024. Sanmina places a strong emphasis on a disciplined and balanced capital allocation framework. In addition to that, solid momentum in the communications networks, cloud and AI infrastructure end markets provides the company with greater financial flexibility, enabling Sanmina to invest in growth initiatives and return capital to shareholders.

ANET’s Price Performance, Valuation & Estimates

Shares of Arista have surged 8.3% over the past year against the industry’s decline of 1.2%.

From a valuation standpoint, Arista trades at a forward price-to-sales ratio of 15.09, above the industry average.

The Zacks Consensus Estimate for Arista’s earnings for 2025 and 2026 has remained unchanged over the past 60 days.
 

Arista currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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