BBH Select Mid Cap ETF on Arista Networks Inc.
Thesis
BBH views Arista as the leading provider of data-center switches to cloud-network customers and a direct beneficiary of the AI infrastructure buildout. First-quarter revenue and free cash flow exceeded expectations, while a portion of contracted demand shifted into deferred revenue because of longer customer acceptance cycles on new AI products. Management clarified that growth inclusive of deferred product revenue was much stronger than headline reported growth and remained confident in 2026 and 2027 demand. BBH believes multiyear supply commitments, strong execution and stable gross-margin guidance position Arista to manage component inflation while adding large new hyperscale customers.
“Management also expressed confidence in the outlook for 2026 along with a constructive demand backdrop for 2027.”
Key risks
- Supply-chain shortages could constrain reported growth.
- Extended customer acceptance cycles can delay revenue recognition.
- Rising component costs could pressure margins.