Calix, Inc. (CALX) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial metrics, including record gross margin and free cash flow, alongside growth in RPOs. The company shows optimism in AI monetization, international expansion, and partnerships, particularly with Google Telecom. Despite guidance of declining organic revenue, the company's strategic initiatives and positive Q&A insights suggest potential for growth. The market cap indicates moderate volatility, but the overall sentiment is positive due to operational efficiency and strategic growth plans.
Key Financial Performance
Revenue Record revenue of $265 million, reflecting sequential quarterly growth of 10%. The overperformance relative to guidance was due to robust broad-based deployments from BXP customers, new subscribers, footprint expansion, network upgrades, new builds, and competitive displacements.
RPOs (Remaining Performance Obligations) RPOs grew 2% sequentially to a record $355 million and increased 20% year-over-year. Current RPOs were $141 million, up 5% sequentially and up 28% year-over-year. This growth indicates strength in the platform cloud and managed services model.
Gross Margin Non-GAAP gross margin reached a record 57.7%, representing a 90 basis point sequential quarterly increase. This was driven by the combination of BXP customers winning new subscribers and the strength of Access Edge deployments.
Free Cash Flow Free cash flow was $27 million, marking the 10th consecutive quarter of 8-figure free cash flow. This reflects strong operational performance and financial discipline.
Cash and Investments Ended the quarter with record cash and investments of $340 million, an increase of $41 million sequentially. This growth was attributed to strong free cash flow generation and operational efficiency.
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Operating Highlights
Calix Agent Workforce: Launched as an end-to-end integration of Agentic AI into the company's third-generation platform in partnership with Google. This platform aims to simplify operations, go to market, and innovate for customers.
International Expansion: The third-generation platform in partnership with Google supports expansion into new geographies with local sovereign data centers and large Tier 1 customers.
Record Revenue: Achieved record revenue of $265 million in Q3 2025, reflecting a 10% sequential growth.
Gross Margin Improvement: Set a record non-GAAP gross margin of 57.7%, marking the seventh consecutive quarter of margin improvement.
Free Cash Flow: Generated $27 million in free cash flow, marking the 10th consecutive quarter of 8-figure free cash flow.
RPO Growth: RPOs grew 2% sequentially to $355 million, a 20% year-over-year increase.
AI Integration: Invested $2 billion over 15 years to build foundational blocks for AI integration, including Access Edge, Experience Edge, and Calix Cloud. The company is leveraging AI to improve internal operations and customer success.
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Risk or Challenges
Market Conditions: The company acknowledges the rapid pace of change driven by AI, which could be overwhelming for some and presents challenges in adapting to this fast-evolving landscape.
Strategic Execution Risks: The company is heavily investing in AI and platform development, which could strain resources and delay returns on investment. Additionally, the expansion into new geographies and support for large Tier 1 customers introduces execution risks.
Regulatory Hurdles: Expansion into international markets with local sovereign data centers may face regulatory challenges related to data privacy and compliance.
Operational Performance: The company is revamping internal operations and customer support processes to integrate AI, which could disrupt current workflows and impact short-term operational efficiency.
Economic Uncertainties: While not explicitly mentioned, the company's reliance on customer deployments and product demand could be impacted by broader economic conditions, potentially affecting revenue growth.
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Guidance & Outlook
Revenue Outlook for Q4 2025: Revenue is expected to be between $267 million and $273 million, representing a 2% sequential increase and 20% growth for the fiscal year compared to 2024.
Non-GAAP Gross Margin Guidance for Q4 2025: Expected to slightly increase from Q3 2025, exceeding the higher end of the target financial model of 100 to 200 basis points improvement for fiscal 2025.
Non-GAAP Operating Expenses: Expected to increase sequentially due to investments in AI development and Connections, with a return to the target financial model by the end of 2026.
AI and Platform Development: Focus on accelerating AI agent development and functionality into the first half of 2026, leveraging a partnership with Google for the third-generation platform.
International Expansion: Plans to expand into new geographies with local sovereign data centers and support for large Tier 1 customers with dedicated platform instances.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What has been driving the company's revenue outperformance relative to expectations?
A:The overperformance is driven by broad-based demand across the customer base and competitive expansion of the company's footprint. Customers are winning more, adding subscribers, and expanding their networks, which contributes to incremental revenue for the company.
Q:How is the company thinking about the implications of the innovation cycle, particularly with AI, on its business model and investments?
A:The company has been investing in its platform for 15 years, with $2 billion invested so far. The AI layer added to the platform automates significant components of customers' businesses, allowing them to scale rapidly. The company plans to accelerate AI-related R&D investments, aiming to monetize AI by helping customers optimize their businesses and increase revenue. International expansion and partnerships, such as with Google Telecom, also represent significant growth opportunities.
Q:What is the sustainability of the company's growth into 2026, and what is driving it?
A:The growth is broad-based across the company's 1,200 customers, with no single customer driving results. The company sees durable sequential growth and expects to achieve 10%-15% growth, with the lower end of the range excluding BEAD (Broadband Equity, Access, and Deployment) program contributions. Growth is driven by customers winning more, adding subscribers, and adopting more of the company's platforms and solutions.
Q:What is the company's monetization strategy for its AI capabilities?
A:The company plans to monetize AI by helping customers acquire subscribers faster, roll out more services, and optimize their businesses. This will increase recurring revenue and contract values. Some AI elements will be charged for directly, while others will be monetized through the acceleration of the company's business model.
Q:What is the company's outlook on the BEAD program and its potential impact?
A:The company is more constructive on BEAD than before, expecting some revenue from the program in 2026. The total program size has been revised to $30 billion, with fiber being the dominant technology. The company expects BEAD to drive network builds, which will also create opportunities to add subscribers and expand revenue.
Q:What is the company's approach to growth in international markets and large customers?
A:The company plans to expand into international markets and large customers in late 2026. These expansions are seen as significant growth opportunities, supported by partnerships like the one with Google Telecom. The company aims to leverage its platform's scalability and cloud-based solutions to drive revenue and margin growth.
Q:What are the company's views on risks and growth limiters in the industry?
A:The company does not see significant risks or growth limiters at this time. Permitting and labor availability are natural limiters for network builds, but there is focus on addressing these issues. The company is confident in its broad-based demand, customer relationships, and ability to execute its strategy.
Q:How does the company view its competitive position and displacement of competitors?
A:The company is displacing competitors by becoming the go-to-market engine for customers, helping them improve their strategies and win against competitors not using the company's products. This includes competitive displacements in medium and large customer segments.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the exact revenue impact of the BEAD program, stating it is too early to determine the demand dynamics and buying patterns. Additionally, they did not provide a detailed breakout of the appliance versus software and platform business, maintaining the timeline for this disclosure as the end of 2026.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Access Edge
Agentic AI
BXP subscriber
Calix journey
Calix pace
Capital
LLC Research
President Investor
RPOs
Relations section
Research Division
Vice President
addition
agent
community
enterprise team
generation platform
letter stockholder
margin improvement
market platform
midpoint increase
overperformance
pace change
platform Google
platform service
product
record margin
replay
stage
subscriber churn
success
yesterday
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Frequently Asked Questions
Where does this earnings call transcript come from?
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Why do some answers appear as “Unclear” or “Inaudible”?
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Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
