At today's price, Arista's stock is pricing in about 21.5% annual free-cash-flow growth for the next ten years — below the company's own actual revenue growth over the past 3 years (27.1%) and 5 years (32.2%). It's an unusually mild ask compared to most reverse DCFs, though it says nothing about how durable that growth is given how concentrated Arista's customer base remains.
At its current price, ANET implies ~21.5% annual FCF growth for the next 10 years, discounted at 10%.
Arista's actual revenue growth has averaged 27.1% a year over the past 3 years and 32.2% over the past 5.
Required growth vs. historical growth
Required growth from the reverse DCF below. Historical revenue CAGRs from 10-K FY2021-FY2025 (revenue grew from $2,948.0M to $9,005.7M). Revenue, not FCF, is used as the historical yardstick here because 2022's FCF ($448.2M) was temporarily depressed by supply-chain-driven inventory buildup, distorting any FCF-based CAGR. The 40.7% figure is a single-year 2026 analyst revenue-growth estimate (stockanalysis.com), shown for reference only.
Sensitivity: what if the discount rate moves?
| WACC | Required growth | Note |
|---|---|---|
| 8% | 16.4% | Treats Arista as a safer company |
| 10% (base case) | 21.5% | Typical large-cap growth-stock assumption |
| 12% | 25.9% | Treats Arista as high-growth, high-volatility |
Even at the highest discount rate tested (12%), the required growth rate (25.9%) still sits below Arista's 5-year revenue CAGR (32.2%) — though it's now close to the 3-year pace (27.1%), narrowing the cushion considerably.
What would move this number
- Using trailing-twelve-month FCF ($5,155.3M) instead of FY2025's figure ($4,252.4M) lowers the required growth rate further, from 21.5% to 18.8% — recent quarters have generated cash even faster than the full FY2025 figure implies.
- A 12% discount rate — arguably reasonable given the customer-concentration risk covered in the snapshot and story pieces — raises the required growth rate to 25.9%, nearly erasing the cushion versus the 3-year actual pace (27.1%).
- If AI data-center capital spending slows and Arista's two largest customers (a combined 42% of FY2025 revenue) pull back at the same time, future actual growth could fall well below 21.5% — a scenario this backward-looking math can't anticipate.
Show your work
Inputs, sources, model assumptions, and the calculation
- Share price$195.69 — stockanalysis.com, Aug 31, 2026 close
- Diluted shares outstanding1,261.2M — 10-Q Q2 FY2026 cover page, Jul 30, 2026
- Market cap$246.81B — price × diluted shares (calculated)
- Base FCF (FY2025)$4,252.4M — 10-K FY2025: $4,371.9M operating cash flow minus $119.5M capex
- Net debt-$13,343.3M (net cash) — 10-Q Q2 FY2026 (Jun 30, 2026): $0 interest-bearing debt minus $2,290.2M cash and $11,053.1M short-term investments
- Enterprise value (target)$233,466M — market cap plus net debt
- Discount rate (WACC)10% base case (8%/12% tested)
- Terminal growth rate2.5% — long-run GDP-level assumption
Normalization check: the 3-year average FCF (2023-2025) is $3,309.4M; FY2025's figure ($4,252.4M) is +28.5% above that average — within the ±40% threshold, so used as-is without adjustment. FY2022's FCF ($448.2M) was excluded from CAGR comparisons as a one-off, supply-chain-driven low point.
Model: free cash flow is assumed to grow at a constant annual rate g for 10 years, then at a 2.5% terminal rate thereafter, solved by bisection for the value of g that equates present value to today's target enterprise value ($233,466M).
Historical CAGR check: 3-yr revenue CAGR (2022→2025) = ($9,005.7M ÷ $4,381.3M)^(1/3) − 1 = 27.1%. 5-yr revenue CAGR (2021→2025) = ($9,005.7M ÷ $2,948.0M)^(1/4) − 1 = 32.2%.
The fine print
- This isn't a fair-value price target — it only shows what the current price already assumes.
- Change the discount rate or the FCF base period, and the required growth rate moves — see the sensitivity table above.
- Even a "mild ask" reverse DCF says nothing about durability — with just 2 customers making up 42% of FY2025 revenue, a pullback from either one could push actual growth well below what this math assumes.
- A reverse DCF shows what the market currently expects — it does not say what the stock is "worth."
- Any investment decision, and its outcome, is your own responsibility.
Frequently asked questions
What growth rate does ANET's stock price assume?
At today's price, Arista's stock is pricing in about 21.5% annual free-cash-flow growth for the next ten years, at a 10% discount rate.
How does that compare to Arista's actual growth?
Arista's actual revenue CAGR was 27.1% over the past 3 years and 32.2% over the past 5 years — both above the 21.5% the current price requires. Analyst consensus for 2026 alone calls for 40.7% revenue growth, though that's a single-year estimate, not a multi-year CAGR.
What share price was used for this analysis?
This analysis used $195.69, as of the Aug 31, 2026 close.