A10 Networks, Inc. (ATEN) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial performance, with revenue growth driven by AI and cybersecurity, and improved margins. The Q&A reveals some uncertainties, but overall, the company's strategic alignment with AI and security trends is promising. The return to guidance after years and growth in enterprise and Americas revenue are positive indicators. Given the market cap of $1 billion, the stock is likely to react positively, falling in the 2% to 8% range.
Key Financial Performance
Q4 2025 Revenue $80.4 million, an 8.3% increase year-over-year. Growth attributed to investments in targeting North America customers and strong seasonal performance.
Full Year 2025 Revenue $290.6 million, an 11% increase year-over-year. Growth driven by increased demand for security-led solutions and strong performance in the Americas.
Adjusted EBITDA (Full Year 2025) $86 million, representing 29.6% of revenue. Growth attributed to disciplined execution and a productive operating model.
Security-led Revenue (Full Year 2025) 72% of total revenue, reflecting the increasing central role of security in networks.
Product Revenue (Q4 2025) $48.8 million, a 13% increase year-over-year. Growth driven by demand for security-led solutions.
Non-GAAP Gross Margin (Q4 2025) 80.8%, in line with stated goals of 80%-82%.
Operating Margin (Q4 2025) 26.6%, reflecting increased investments in R&D for next-generation networking and security.
Net Income (Q4 2025) $19.1 million or $0.26 per share. Growth supported by strong revenue and disciplined cost management.
Adjusted EBITDA (Q4 2025) $24.9 million, representing 31% of revenue.
Free Cash Flow (Q4 2025) $16 million, derived from $22.7 million in cash flow from operations and $6.7 million in CapEx.
Revenue from Americas (Full Year 2025) Increased 30%, driven by investments in enterprise segment and AI infrastructure build-out.
Revenue from EMEA (Full Year 2025) Increased 12%, offsetting a decline in APJ revenue due to macroeconomic headwinds.
Cash and Marketable Securities (End of 2025) $378 million, reflecting strong cash management and operational performance.
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Operating Highlights
AI-driven solutions: Investments in AI-driven workloads and solutions have been emphasized, with a focus on traffic management, availability, and security at scale.
Security-led solutions: Achieved 65% of total revenue from security-led solutions, reflecting the central role of security in both legacy and next-generation networks.
North America growth: Investments in targeting North America customers resulted in faster growth in this region compared to overall revenue.
Global diversification: Maintained geographic and customer diversity, enabling consistent performance despite macroeconomic variability.
Revenue growth: Full-year revenue grew 11% year-over-year to $290.6 million, with Q4 revenue reaching a record $80.4 million, an 8.3% increase year-over-year.
Profitability: Adjusted EBITDA for 2025 was $86 million, representing 29.6% of revenue, showcasing disciplined execution and a strong operating model.
Cash flow: Generated $22.7 million in cash flow from operations in Q4, with free cash flow of $16 million.
AI and R&D investments: Reallocated R&D budgets to accelerate AI-related solutions and integrate AI across offerings, supporting future growth.
Customer wins: Secured significant deals with a global data analytics provider and a large airline, emphasizing performance, security, and cost efficiency.
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Risk or Challenges
Macroeconomic Headwinds in APJ Region: The APJ region has been experiencing macroeconomic challenges such as low GDP growth, persistent inflation, and concerns with tariffs, which have led to a decline in revenue from this region.
Supply Chain and Component Flexibility Risks: The company is closely monitoring the broader supply environment, including the memory segment, and has taken proactive steps to mitigate potential impacts. However, supply chain disruptions and cost pressures remain a risk.
Shift in Customer Priorities: Non-cloud service provider revenue was flat year-over-year, reflecting a shift in customer priorities towards security and next-generation networking initiatives over legacy infrastructure, which could impact legacy-related revenue streams.
Input Cost Pressures: The company is navigating input cost pressures, which could impact gross margins despite proactive measures.
Geopolitical and Tariff Risks: Persistent inflation and the threat of tariffs in regions outside the Americas pose risks to revenue growth and operational costs.
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Guidance & Outlook
Revenue Growth: A10 Networks expects revenue growth of 10% to 12% over 2025 levels for the full year 2026.
Gross Margin: Non-GAAP gross margin is expected to remain in line with historical trends and within the stated business model goals of 80% to 82%, despite navigating input cost pressures.
Net and EBITDA Margins: The company anticipates expanding net and EBITDA margins from current levels in 2026.
Earnings Per Share (EPS) Growth: EPS growth is expected to exceed the revenue growth rate in 2026.
AI and Security Investments: A10 Networks is reallocating research and development budgets to accelerate AI-related solutions and integrate AI across all offerings, supporting current and future growth.
Market Positioning: The company is positioned to benefit from durable secular catalysts, including AI infrastructure build-out and next-generation networking demands.
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Shareholder Return Plan
Cash Dividends Paid: $17.4 million in cash dividends were paid during the year.
Quarterly Cash Dividend: The Board has approved a quarterly cash dividend of $0.06 per share to be paid on March 2, 2026, to shareholders of record on February 16, 2026.
Share Repurchase: $68.9 million worth of shares were repurchased during the year.
Remaining Share Repurchase Authorization: The company has $53.4 million remaining on its $75 million share repurchase authorization.
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Key Q&A
Q:How sustainable is the service provider growth trend in 2026, and what are the growth drivers?
A:The growth trend is supported by cloud-oriented companies building AI and cloud services infrastructure, as well as traditional telcos improving network security and adding capacity. However, the sustainability of this trend depends on these factors continuing.
Q:Is AI driving higher traffic volumes and DDoS attacks, contributing to the refresh cycle?
A:AI is facilitating more complex attacks and increasing traffic volumes, but it is too early to quantify its impact. Service providers are aware of this trend but have not yet significantly invested in response.
Q:What drove the outperformance in the fourth quarter, and how did the quarter trend?
A:The outperformance was driven by improved service provider relationships, growth in enterprise customers, and investments in AI infrastructure. Service provider spending improved slightly, and enterprise and AI-led infrastructure growth met expectations.
Q:Did the company displace competitors with new customers, and has the competitive landscape changed?
A:Yes, the company displaced competitors in most cases, except for new security solutions where no prior solution existed. The competitive landscape has not changed significantly.
Q:What caused the uptick in CapEx spending, and how should it be viewed for 2026?
A:The uptick was due to investments in back-end infrastructure for new services and early-stage AI infrastructure demos. This trend is expected to continue into 2026.
Q:Why is the company providing guidance now after two to three years, and what is the basis for this visibility?
A:The company now has a more durable revenue base with diversified exposure across enterprise, service providers, and AI spending. This provides better visibility compared to the past when it was more reliant on cyclical service provider spending.
Q:What drove the performance in the APJ region, and was it country-specific?
A:The performance was primarily impacted by Japan due to low GDP and tariff concerns, leading to reduced spending by large service providers and enterprises. Other countries in the region performed closer to the company average.
Q:What contributed to the 8% enterprise revenue growth this quarter, and how should enterprise growth be viewed for 2026?
A:The growth was due to closing notable deals and expanding the enterprise footprint. Enterprise growth is expected to align with the overall company growth rate of 10%-12% for 2026.
Q:How would you characterize net new enterprise logo activity, and what is the strategy for acquiring new enterprise customers?
A:The company focuses on acquiring large enterprise customers with complex networks rather than a high volume of SMB customers. The strategy includes expanding relationships with existing customers and adding new ones selectively.
Q:How does AI drive growth in modernization, network capacity, and security, and how are these ranked?
A:Growth is primarily driven by network capacity and security, which are closely linked. Modernization is less of a focus unless it involves building new networks, which is not a major driver in the current economic environment.
Q:What are the emerging use cases for Agentic AI, and how does the company fit into this context?
A:The company is engaged with customers on using AI for predictive analytics, network performance, and security. It is early in the cycle, and the focus is on enabling customers to manage new types of traffic and threats effectively.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about AI driving higher traffic volumes and DDoS attacks, stating it was too early to quantify the impact. Additionally, they used vague language when discussing the sustainability of service provider growth and the competitive landscape, without providing specific data or detailed insights.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI infrastructure
AI network
AI offering
America portion
Americas
Chair President
Dhrupad line
Today
ability solution
addition
automation
availability
cash flow
component
development
diversity
efficiency
expansion
generation network
generation networking
headwind
inflation
infrastructure build
investment North
legacy
mix
momentum
outlook
platform
portfolio
provider
region
scale
service
shift
spite investment
strength
supplier
supply environment
tariff
traffic
win
ATEN Transcript
A10 Networks, Inc. (ATEN) Q4 2025 Earnings Call Transcript
Positive2-4
The earnings call highlights strong financial performance, with revenue growth driven by AI and cybersecurity, and improved margins. The Q&A reveals some uncertainties, but overall, the company's strategic alignment with AI and security trends is promising. The return to guidance after years and growth in enterprise and Americas revenue are positive indicators. Given the market cap of $1 billion, the stock is likely to react positively, falling in the 2% to 8% range.
A10 Networks, Inc. (ATEN) Q3 2025 Earnings Call Transcript
Positive11-4
The earnings call revealed strong financial performance with a 7.4% EPS growth and robust cash flow management, supported by share buybacks and dividends. Deferred revenue suggests future growth, and the focus on AI and cybersecurity aligns with market trends. The Q&A highlighted increased customer interest due to competitor breaches, potential growth in AI infrastructure, and strategic enterprise expansion. Despite some uncertainties, the overall sentiment is positive, supported by high single-digit revenue growth expectations and strong shareholder returns, likely leading to a positive stock price movement.
A10 Networks, Inc. (ATEN) Q2 2025 Earnings Call Transcript
Positive8-5
The earnings report shows solid financial performance with revenue and net income growth, strong cash generation, and a robust cash position due to a debt offering. The acquisition of ThreatXProtect and partnerships like Microsoft indicate strategic growth and market expansion. Despite some uncertainties in the Q&A, such as AI revenue contributions and ThreatX impact, the overall sentiment is positive with sustained growth potential, a new share repurchase program, and a dividend payment. Given the small-cap nature of the company, the stock is likely to react positively.
A10 Networks, Inc. (NYSE:ATEN) Q1 2025 Earnings Call Transcript
Positive5-2
The earnings call highlights a 9% revenue growth YoY, with strong enterprise revenue growth and a new share repurchase program, indicating confidence in financial health. The Q&A section reveals cautious optimism regarding tariffs and AI data centers, with management maintaining revenue growth expectations. The dividend and share repurchase announcements further support a positive outlook. Despite some uncertainties, the overall sentiment leans positive, and with a market cap of approximately $1 billion, the stock is likely to see a moderate positive reaction of 2% to 8% in the short term.
ATEN Report
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