Extreme Networks, Inc. (EXTR) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary reflects strong financial performance with a 12% revenue increase and improved margins. The Q&A insights highlight robust AI platform adoption and effective market strategies. Despite cautious guidance for fiscal year '27 and avoidance of acquisition rumors, the company's strong positioning in AI and market share gains suggest positive sentiment. The market cap indicates moderate sensitivity to news, supporting a positive stock price reaction.
Key Financial Performance
Revenue $318 million this quarter, exceeding guidance, and up 14% year-over-year, driven by competitive wins with large customers across all verticals.
Product Revenue Increased double digits year-over-year for the fourth consecutive quarter, driven by strong demand for AI-powered platform and competitive differentiation.
SaaS ARR $227 million, up 25% year-over-year, driven by cloud subscription momentum and success with Platform ONE subscriptions.
Earnings Per Share (EPS) $0.26, a 24% year-over-year improvement from $0.21 in the prior year quarter, driven by profit growth outpacing revenue growth.
Recurring Revenue Up 12% year-over-year, supported by strong pipeline for Platform ONE sales and growth in subscription and support revenue.
Deferred Recurring Revenue $628 million, a 9% year-over-year improvement, providing predictability in high-margin revenue.
Non-GAAP Gross Margin 62%, an increase of 70 basis points from the last quarter, driven by mitigating actions to offset higher component costs and improved product quality.
Operating Margin 15%, up from 13.3% last quarter and 14.7% in the prior year quarter, reflecting operating leverage and higher revenue.
Adjusted EBITDA $52.4 million, with an adjusted EBITDA margin of 16.5%, supported by effective working capital management.
Free Cash Flow $43 million in the second quarter, driven by reduced inventory levels and days on hand.
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Operating Highlights
AI-powered platform: Strong demand driving revenue growth and market share gains. Platform ONE highlighted for its unique AI capabilities, including autonomous diagnostics and actionable insights.
Wi-Fi 7 solutions: Adopted by major clients like Baylor University, Henry Ford Health, and Pittsburgh Steelers for advanced networking needs.
Cloud subscription services: SaaS ARR grew 25% year-over-year, reaching $227 million, with strong subscription bookings.
Market share growth: Grew 3x faster than largest competitors in enterprise networking, with significant wins in large enterprise projects.
Geographic expansion: Strong revenue growth across all regions, with notable expansion in Europe, APAC, and Americas.
Operational agility: Implemented strategies to address component shortages, including sourcing alternatives and price adjustments to protect margins.
Partner program enhancements: Launched 'Extreme Partner First' program to simplify deal registration, improve pricing transparency, and embed AI into partner experience.
Strategic shifts in customer targeting: Focused on larger enterprise projects and high-margin subscription revenue, leveraging AI and next-gen technologies like Wi-Fi 7.
Competitive positioning: Capitalizing on market trends like Cisco's end-of-life refresh cycle and HP-Juniper merger to gain market share.
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Risk or Challenges
Supply Chain Disruptions: The company has faced challenges with component shortages, requiring a replacement strategy to address scarcity. For example, they replaced over 125 components in a year during the COVID era, which is 10x the normal rate. Recently, they had to identify and swap out a new source of DDR4 memory chips.
Margin Pressures: Installation services for multimillion-dollar deployments at large venues carry a much lower margin profile than traditional subscription and support margins. This is expected to impact the company's mix during the third and fourth quarters.
Component Cost Increases: The company has taken mitigating actions to offset higher component costs, including price increases. However, ongoing increases in memory or other component costs could pose challenges.
Operational Complexity: Managing an evolving supply chain environment and qualifying third-party suppliers adds complexity to operations, which could impact efficiency and costs.
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Guidance & Outlook
Revenue Guidance for Q3 FY26: Expected revenue to be in the range of $309.1 million to $314.1 million, reflecting normal seasonality.
Gross Margin Guidance for Q3 FY26: Expected gross margin to be in the range of 61% to 61.4%, impacted by large professional services deployments.
Operating Margin Guidance for Q3 FY26: Expected operating margin to be in the range of 13.6% to 14.8%.
Earnings Per Share (EPS) Guidance for Q3 FY26: Expected EPS to be in the range of $0.23 to $0.25.
Full Fiscal Year 2026 Revenue Guidance: Revenue is expected to be in the range of $1,252 million to $1,270 million, reflecting an 11% year-over-year growth.
Full Fiscal Year 2026 Earnings Per Share (EPS) Guidance: Expected EPS to be in the range of $0.98 to $1.02.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you provide evidence of share gain and discuss the impact of restructuring in the go-to-market model?
A:The company uses third-party analysts like 650 Group and Dell'Oro to validate share gains, showing they are growing at 3x the market in enterprise deployments. Restructuring efforts, including Norman Rice's leadership in sales and Monica Kumar's marketing overhaul, have improved forecasting, accountability, and targeted market efforts, resulting in increased confidence in bookings and share gains.
Q:What is the importance of AI in your offerings and customer activity?
A:AI is a top priority for customers, and the company has a unique agentic AI platform at the core of its offerings. This platform provides competitive advantages, enabling integration with ecosystem partners and driving better business outcomes. The company doubled its forecast for subscription bookings for its AI platform, Extreme Platform ONE, indicating strong market reception.
Q:Are you replacing both Wi-Fi and switching components in competitive displacements, or does it start in one area?
A:Each project varies. The company leverages unique solutions like data sovereignty and fabric technology to win competitive displacements. Their fabric technology, particularly for campus networks, provides significant differentiation, enabling them to compete effectively against larger competitors like Cisco.
Q:How did customers react to the recent price increase, and is there a signal for another price increase?
A:The 7% price increase was well-absorbed by customers, with no significant pushback. The company evaluates price increases as needed and has strong vendor relationships to manage supply chain challenges. They also creatively source components, such as DDR4 memory chips, to meet demand.
Q:Can you unpack the cloud ARR growth and areas of strength in selling subscriptions?
A:The strength lies in the Extreme Platform ONE, which more than doubled its internal plan for the quarter. Customers appreciate the simple licensing model and the inclusion of agentic AI, which enhances network operations. The company achieved a 25% growth rate in ARR, aligning with its mid- to high-20s growth expectations.
Q:What drove the strong EMEA sales, and were there any regulatory impacts?
A:Strong EMEA sales were attributed to government spending recovery and the company's unique data sovereignty solutions. While regulatory impacts like data sovereignty requirements are expected to benefit the company, they have not yet significantly influenced sales.
Q:What is the company's stance on the Ruckus acquisition rumor?
A:The company is always open to exploring market opportunities and engaging in dialogue about potential acquisitions. However, there is no specific comment or confirmation regarding the Ruckus acquisition rumor.
Q:Are there any concerns about changes in tariffs?
A:The company views changing tariffs as a manageable aspect of its operations, with no significant concerns or impacts anticipated.
Q:Can you provide guidance on fiscal year '27 and expectations for gross margin improvement?
A:While the company is confident in its fiscal year '26 guidance, it is cautious about providing specific guidance for '27 due to market dynamics. However, gross margins are expected to improve as professional services normalize and pricing adjustments take effect.
Q:Why is the fiscal year '26 EPS guidance relatively unchanged despite a Q2 beat?
A:The guidance reflects the impact of low-margin professional services installations and the timing of price increases. While product margins are improving, the mix of services affects overall margins. The company expects pricing adjustments to contribute more significantly in the latter half of fiscal '26 and beyond.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the Ruckus acquisition rumor, providing only a general statement about exploring market opportunities. Additionally, they were cautious about providing specific guidance for fiscal year '27, citing market dynamics and uncertainty.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI core
AI fabric
AI partner
AI platform
AI requirement
APAC momentum
Americas trend
Baseball stadium
Baylor University
Belgium modernization
CEO Executive
CEO President
Cloud subscription
Competitors capability
Complex Wi
DDR memory
Day Fortune
Development Today
Fi solution
Finance Corporate
Health
President Finance
Wi Fi
component
demand environment
dollar
hardware
health care
issue
purpose
quality
sale
share gain
talent
win vertical
EXTR Transcript
Extreme Networks, Inc. (EXTR) Q2 2026 Earnings Call Transcript
Positive1-28
The earnings call summary reflects strong financial performance with a 12% revenue increase and improved margins. The Q&A insights highlight robust AI platform adoption and effective market strategies. Despite cautious guidance for fiscal year '27 and avoidance of acquisition rumors, the company's strong positioning in AI and market share gains suggest positive sentiment. The market cap indicates moderate sensitivity to news, supporting a positive stock price reaction.
Extreme Networks, Inc. (EXTR) Q1 2026 Earnings Call Transcript
Positive10-29
The earnings call highlights strong financial performance, with improved cash flow and cash conversion cycle. Despite component price increases, the company is implementing strategies to improve gross margins. The Q&A session reveals positive market opportunities, particularly from disruptions at competitors, and strong growth prospects driven by Platform ONE and federal market opportunities. While there are some uncertainties regarding specific metrics, the overall sentiment is optimistic, with strategic initiatives expected to drive growth. The market cap suggests a moderate reaction, leading to a positive stock price prediction.
Extreme Networks, Inc. (EXTR) Q4 2025 Earnings Call Transcript
Positive8-7
The earnings call reveals strong financial performance with a 35% revenue increase, a 32% EPS rise, and robust cash flow. Product and subscription revenues are growing, and guidance remains optimistic. The Q&A highlights sustainable growth in key regions and opportunities in the Fortune 500 market. Although Platform One's impact is limited, future contributions are expected. The company's differentiation in technology and anticipated margin improvements further support a positive outlook. With a market cap of approximately $1.7 billion, the stock is likely to see a positive reaction, potentially in the 2% to 8% range.
Extreme Networks at JPMorgan Conference: AI and Growth Strategies
Neutral5-13
EXTR Slides
EXTR Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
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No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
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.
