A10 Networks (ATEN) Q3 2026 Earnings Call Transcript

DATE

Thursday, Nov. 5, 2026

CALL PARTICIPANTS

• President and Chief Executive Officer - Dhrupad Trivedi
• Chief Financial Officer - Michelle Caron

TAKEAWAYS

• Revenue -- $91.5 million, an increase of 22.6% year over year driven by broad-based customer demand and record quarterly performance.
• Non-GAAP Diluted EPS -- $0.31, compared to $0.23 in the prior-year period, reflecting increased operating leverage.
• Non-GAAP Gross Margin -- 80.0%, representing a record non-GAAP gross profit of $73.3 million for the quarter.
• Full-Year Revenue Guidance -- approximately 16% growth, which management raised from the previous outlook of 12% to 14%.
• Full-Year Non-GAAP Diluted EPS Guidance -- $1.08 to $1.10, representing annual growth of 20% to 22% and outpacing projected revenue growth.
• Enterprise Revenue -- 58% of third-quarter revenue, reflecting progress toward the company's goal of diversifying its revenue mix.
• Security-Led Revenue -- 65% of total revenue, continuing to serve as a primary driver of product growth.
• Americas Region Revenue -- 64% of global revenue, supported by artificial intelligence infrastructure build-outs and enterprise market strength.
• Free Cash Flow -- $57.5 million on a year-to-date basis, representing an 18% increase compared to the previous year.
• Long-Term Revenue Target -- $500 million in annual organic revenue by fiscal year 2029, implying a 14% compound annual growth rate.
• Long-Term EPS Target -- $2.00 in annual non-GAAP EPS by fiscal year 2029.
• Adjusted EBITDA Margin -- 32.2%, consistent with management's stated business model objectives.
• Share Repurchases -- $23.0 million, with the company buying back 879,000 shares during the quarter at an average price of $26.18 per share.
• Cash and Marketable Securities -- $360.4 million as of Sept. 30, 2026, providing liquidity for ongoing investments and shareholder returns.
• Days Sales Outstanding (DSO) -- 49 days, benefiting from the specific timing of cash receipts during the quarter.
• Dividends -- $4.4 million in cash dividends paid during the quarter, with an upcoming quarterly dividend of $0.06 per share.
• Product Revenue -- $58.5 million, representing 64% of total quarterly revenue.
• Service Revenue -- $33.0 million, or 36% of total revenue, providing a foundation of recurring income.

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RISKS

• Trivedi stated, "In the next, you know, 4 quarters or 6 quarters, we probably will have to balance and optimize, right, if there is supply constraints on what we choose or prioritize," indicating potential operational friction from industry-wide supply challenges.
• Caron noted that service provider spending in the Americas region remains below historical levels, which has constrained incremental growth despite recent signs of normalization.

SUMMARY

A10 Networks, Inc. (NYSE:ATEN) reported record third-quarter results, characterized by double-digit revenue growth and expanded profitability driven by accelerating demand for artificial intelligence infrastructure and advanced network security. Management raised full-year 2026 financial guidance and established long-term organic growth targets for fiscal year 2029, citing the increasing relevance of its portfolio as network traffic volumes and security complexity rise. The company continues to shift its revenue mix toward enterprise customers while maintaining a strong balance sheet to support shareholder returns through both dividends and share repurchases. Management reported that demand is broad-based across international markets, with specific strength in the Americas region related to AI deployments.

• Management stated that a Fortune 50 financial services company is utilizing the A10 AI firewall to protect 40,000 employees and govern traffic across 800 internal and external applications.
• The company reported that approximately 50,000 sessions are routed daily to its AI guardrail solutions under unified, customized policies.
• A global analytics provider has implemented the company's AI red teaming capability to probe models and applications for vulnerabilities prior to deployment.
• Revenue from customers other than the company's largest strategic partner grew at a double-digit rate during the third quarter.
• CFO Caron stated, "Customer satisfaction and on time delivery remain our top priorities as we navigate input and cost and delivery challenges."
• Management indicated that the growth in traffic and the expansion of security needs, rather than solely data center build-outs, are the primary drivers of current demand.

INDUSTRY GLOSSARY

• ADC (Application Delivery Controller): A network device used to manage and optimize the way user sessions are distributed among server resources.
• Agentic AI: AI systems designed to operate autonomously to achieve specific goals, often requiring specialized networking and security guardrails.
• DDoS (Distributed Denial of Service): A cyberattack that attempts to make a network resource unavailable by overwhelming it with traffic from multiple sources.
• Red Teaming: The practice of rigorously testing a system or model for vulnerabilities by simulating the actions of a potential adversary.
• SSL (Secure Sockets Layer): A standard security technology for establishing an encrypted link between a server and a client.

Full Conference Call Transcript

Operator: Good afternoon. And welcome to the A10 Networks Third Quarter 26 Financial Results Conference Call. At this time, all participants are in a listen-only mode. And we will open the floor for your questions after the presentation. If you wish to join the queue to ask a question at any time, you can press 1. Should you wish to remove yourself from the queue, press 2. Is now my pleasure to turn the floor over to your host, Tom Baumann. The floor is yours.

Tom Baumann: Thank you, and thank you all for joining us today. This call is being recorded and webcast live and may be accessed for at least 90 days via the A10 Networks website. At a10networks.com. Hosting the call today are Dhrupad Trivedi, A10's President and CEO and CFO, Michelle Caron. Before we begin, I would like to remind you that shortly after the market closed today, A10 Networks issued a press release announcing its third quarter 26 financial results. Additionally, A10 published a presentation and supplemental trended financial statements. You may access the press release, presentation, trended financial statements on the Investor Relations section of the company's website. During the course of today's call, management will make forward looking statements.

Including statements regarding projections for future operating results, demand, industry and customer trends, macroeconomic factors, strategy, potential new products and solutions, our capital allocation strategy, profitability, expenses and investments, positioning, and our dividend program. These statements are based on current expectations and beliefs as of today, 11/05/2026. These forward looking statements involve a number of risks and uncertainties. Some of which are beyond our control that could cause actual results to differ materially and you should not rely on them as predictions of future events. A10 does not intend to update information contained in these forward looking statements whether as a result of new information, future events, or otherwise, unless required by law.

For a more detailed description of these risks and uncertainties, please refer to our most recent 10 k and quarterly report On Form 10-Q. Please note that with the exception of revenue, financial measures discussed today are a non GAAP basis. Unless otherwise noted. And you may have been. It may have been adjusted to exclude certain charges. The non GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. And may be different from non GAAP financial measures presented by other companies.

A reconciliation between GAAP and non GAAP measures be found in the press release issued today and on the trended quarterly financial statements posted on the company's website at a10networks.com. Now I would like to turn the call over to Dhrupad Trivedi, president and CEO of A10 Networks.

Dhrupad Trivedi: Thank you, Tom. And thank you all for joining us today. The third quarter was another record quarter for ATN, with revenue up 22.6% and profitability that enabled us to consistently exceed our stated performance goals. We continue to win business and gain market share in our key growth markets of advanced, network security and next generation networking. Strong year to date results and sustained demand for our solutions gives us the confidence to raise our guidance for the second time this year. A10 is well positioned at the intersection of advanced networking and security. The growth of AI is increasing the volume and complexity of network traffic making our portfolio increasingly relevant.

Customers need to distribute application requests and connect employees. To external AI services reliably. Our next generation networking solutions help them meet those needs. They also need to defend against DDoS and other attacks that could disrupt access to AI and other shared enterprise applications. Our A10 Defend portfolio helps protect the availability of these critical services with industry leading performance. We are also seeing demand for solutions that secure the use and development of AI and help enterprises manage AI access, routing, and costs. A Fortune 50 financial services company with over 40 thousand employees.

Is using A10's AI firewall, both to help protect employees accessing public AI tools and to go on AI traffic in their internal and external facing applications. The deployment illustrates how leading enterprises are moving Agentic AI into production at scale with approximately 800 enterprise agentic AI applications connected to our guardrail solution. These include internal and external facing applications with the largest application being external facing. Roughly 50 thousand sessions are routed to the solutions each day under unified customized policies. In another example, a global information and analytics provider is using A10's AI red teaming capability to test AI models and applications for vulnerability.

By probing systems for potential weaknesses before deployment, the company can better assess AI related risks, and strengthen its security practices as it expands its use of AI. These examples reflect how both A10's core portfolio and newer AI solutions can help customers meet mission critical needs in an increasingly complex environment. Our growth is not solely predicated upon build out of new data centers. It is in fact linked to growth in traffic, expansion of security, and responsible use of AI. Our deep partnership with our largest strategic customer continue to contribute to our growth. Through this relationship, A10's technology helps protect cloud infrastructure supporting enterprises across industries and geographies.

That infrastructure enables AI application alongside other mission critical workloads extending A10's role in helping keep the services businesses and consumers rely on availability. Demand across the rest of the business was broad based and related to our core differentiation and increasing relevance to evolving needs for networking and security. EMEA and APJ revenue grew at double digit levels on a year over year basis. Overall revenue, excluding our largest customer, grew at a double digit rate in the quarter. At the same time, we are converting demand into greater profitability and cash generation. Our goal is to sustain growth while investing in the capabilities this demand environment requires.

We remain on track for non GAAP earnings per share growth to outpace revenue growth. I would now like to turn the call over to Michelle Caron, our Chief Financial Officer, to discuss our financial results in greater detail.

Michelle Caron: Thank you, Dhrupad. As a reminder, with the exception of revenue, all of the metrics discussed on this call are on a non GAAP basis. Unless otherwise stated. A full reconciliation of GAAP to non GAAP results are provided in our press release and on our website. Let me now turn to the results. As Dhrupad noted, Q3 results reflect encouraging demand globally. And our continued ability to convert growth into significant cash generation. We delivered revenue growth of 22.6% to a quarterly record of $91.5 million Year to date, our revenue was $246.7 million an increase of 17.4%. Turning to mix.

Product revenue in the third quarter was $58.5 million, or 64% of total revenue, while service revenue was $33.0 million, or 36% of total revenue. From a product mix perspective, security led revenue continues to drive product revenue growth and meet our long term goals. at 65% of total revenue. From a vertical perspective, enterprise customers represented 58% of Q3 revenue and approximately half of total revenue on a trailing 12-month basis. Stronger enterprise growth reflects progress toward our goal of diversifying our revenue mix. Service provider spend in The Americas has begun to normalize. But remains below historical levels, representing an opportunity for incremental growth.

We are confident that our service provider relationships around the world remain a strong foundation for continued growth. And we are not seeing our share of this market erode. From a geographic perspective, our Americas region represented 64% of global revenue. This reflects our deliberate focus on The Americas as a growth region, driven by AI infrastructure build outs and strength in the enterprise market. We are also seeing improving results from international markets this quarter. Customer satisfaction and on time delivery remain our top priorities as we navigate input and cost and delivery challenges. Like everyone else in the industry.

We delivered record non GAAP gross profit of $73.3 million in Q3 and non GAAP and non GAAP gross margin came in at 80% of revenue. Operating expenses were $47.8 million as we continue to prioritize investments in AI facing innovation next gen networking, and security. Operating margin was 27.8%, resulting in net income of $23.6 million or $0.33 per basic and $0.31 per diluted share. Compared to $0.23 in a year ago period. Our Q3 diluted weighted share count was 75.7 million shares. We generated a quarterly record for free cash flow. And on a year to date basis, free cash flow was $57.5 million an increase of 18% year on year.

We continue to expect full year free cash flow to grow year over year in the range of $74 million to $77 million from approximately $64 million a year ago. Adjusted EBITDA was $29.5 million or 32% of revenue, consistent with our business model goals. Turning to our balance sheet. Cash and marketable securities were $360.4 million as of September 30th and revenue was $157 million During the quarter, we paid $4.4 million in cash dividends, and repurchased $23 million worth of shares. Returning a total of $27.4 million to shareholders. The board has approved a quarterly cash dividend of $0.06 per share to be paid on 12/01/2026 to shareholders of record on 11/16/2026.

The company has $30.1 million remaining on its $75 million share repurchase authorization. I will now turn the call back to Dhrupad for an update on our 2026 outlook and closing comments.

Dhrupad Trivedi: Thank you, Michelle. Our results reflect broad based demand for A10's networking and security solutions as customers respond to rising traffic expanding AI deployments, and increasingly complex security needs. We are focused on supporting that demand while investing in our portfolio strengthening profitability, and generating cash. Based on our year to date performance, demand visibility, and the current supply environment, we are updating our full-year 2026 outlook. We expect revenue growth of approximately 16% year over year compared with our prior outlook of 12% to 14%. Note that this is roughly 400 to 500 basis points better than our largest competitor and our peer group. Demand from our largest customer remains healthy and stable.

Our outlook also implies continued year over year growth in the fourth quarter across rest of the business. We expect full year non GAAP adjusted EBITDA margin to exceed 30% and non GAAP diluted EPS of $1.08 to $1.10 representing year over year growth of 20% to 22% and outpacing revenue growth in line with our operating philosophy. We also discussed in today's press release our longer term organic target. Our progress expanding global opportunity, and continued execution gives us confidence in setting long term target of $500 million in annual revenue through organic growth and $2 in annual non GAAP EPS for fiscal year 29.

We remain confident in our strategy and in our ability to capture customer demand while protecting the long term earnings power of the business. With that, I will turn the call back to the operator to open the line for questions.

Operator: Thank you. The floor is now open for questions. If you wish to join the queue to ask a question at this time, please press 1. We do ask if listening on speaker phone today, please pick up your handset while asking you to provide optimal sound quality. Once again, please press 1 on your phone at this time to join the queue to ask a question. From Gray Powell with U. S. Bank. Please go ahead.

Gray Powell: Greg. Thank you for taking the question. And congratulations on the great results here. It was really nice to see.

Dhrupad Trivedi: Thank you, Gray. So. Yeah. Absolutely. Yeah.

Gray Powell: So I guess I guess my main question be is on product revenue. So growth has been excellent this year. In fact, I think it is the best product revenue growth you have seen in at least 8 years. Maybe longer. My model does not quite go back that far. Just how should we think about the sustainability of that growth over the next 12 months particularly as you face tougher comps? and 14% organic commentary, that was really helpful. Trying to make sure that, you know, we have building blocks, correct as we think about next year.

Dhrupad Trivedi: Yeah. So, you know, as we look at our product growth, Gray, I think that is really a good indicator of us being able to win new business as well as continue to rip replenish you know, customers with new solutions. There is nothing unusual in the last 2 or 3 years where we draw some artificial refresh cycle or something like that, right? So it is a natural evolution of demand. As we look on a long term trend, you are correct. You know, the product growth percentage reflects vitality in the products. And customer acceptance of new solutions as well as competitive wins.

So we feel pretty good that is not based on a trend that is going to come and go. it is more broad based. And if we can drive more of kind of a replacement cycle that is great, but that is not. We are counting upon to get the next 2- to 3-year growth.

Gray Powell: Okay. Greg. And then my follow-up question would be. So you called out I think, double digit growth excluding your largest customer. Just, yeah, in ballpark terms, give or take, is that how we should think about that segment going forward?

Dhrupad Trivedi: So I would say that you should think of that as that segment can support that double digit growth going forward. In the next, you know, 4 quarters or 6 quarters, we probably will have to balance and optimize, right, if there is supply constraints on what we choose or prioritize. But that. What that is meant to indicate is our growth is not a result of 1 company doing something but it is more broad based and that we will obviously continue to prioritize customers and high growth potential as we go through every quarter. So but I think it is more meant to be an indicator that the demand is much more broad based versus single customer based.

Understood. that is that is very helpful. Thank you. Thanks, Gray.

Operator: Thank you. Next question comes from Hamed Khorsand with BWS Financial. Please go ahead.

Hamed Khorsand: Hi. Could you just talk about the you know, the return of your international customers, if this was pent up demand as far as what was in the pipeline before, or if these are new projects that you are now being included in?

Dhrupad Trivedi: So I would say, Hamed, that there is 2 aspects to it. I would say 1 is you know, obviously, we are all living in a constrained environment in some ways. And, you know, it is not a big revenue impact for us, but, obviously, we prioritize customers as we need to. So part of it was not pent up demand, I would say, but sort of natural variation in demand. Because our historical customer base is service providers, and then they kind of CapEx cyclic variation in demand, whether it is in Asia or Europe and US. And so some of it was kind of being able to service that demand.

And second was balancing that fulfillment, right, while keeping our large customers satisfied as well.

Hamed Khorsand: Okay. And then could you just talk about your accounts receivables? Declining in the quarter? that is. That was a great to see, but is that sustainable? And what is a good area for us to expect that? Balance?

Michelle Caron: Yeah. So, Hamed, our quarter benefited from the timing of cash receipts in that quarter. We are still on track to deliver the cash flow that I talked about a few minutes ago for the full year between $75 million to $77 million, or $74 million to $77 million in cash flow. So, it was a timing related to this quarter bringing the DSO to 49 days. So Okay.

Hamed Khorsand: Greg. Thank you.

Dhrupad Trivedi: You are welcome. Thank you, Hamed.

Operator: Thank you. Next question comes from Julio Romero with Deutsche Bank. Please go ahead.

Analyst: Yes, thank you for taking my questions. Congrats again on the quarter. Maybe just 1 on the guide. I am not sure if you answered this, but what are the main drivers behind the $500 million revenue target? How much comes from your largest customer compared to the rest of the business? What depends on new wins? I would love to really unpack that. And then maybe a few thoughts on how did the business grow this quarter if you exclude your largest customer? Thanks.

Dhrupad Trivedi: Okay. Yeah. So we said it in the script. So, the business grew more than 10% excluding our largest customer. And our competitors and peers are growing 400 to 500 basis points lower than that. So that is first answer to your question. Second is, obviously, we expect this growth to be broadly based, which is why we are confident in that. If you look at our actuals, and what we have done year to date, which is higher than 14%, we feel pretty confident that 14% is a good number for us. And, yeah, I think, you know, obviously. And we are highly aligned with a large customer.

Who apparently is also the best position in terms of the backlog they have on AI receivables versus the cash they are generating, and they are the only cash flow positive. For, like, category in that world. So we feel pretty good about that. And if you look to the data, I think I probably. We have addressed all your questions quantitatively in the earnings release. Thank you. Okay. Thank you. Thank you.

Operator: That concludes our and A session. I will turn it back over to Dhrupad Trivedi for closing comments.

Dhrupad Trivedi: Thank you. And thank you to all of our employees around the world, customers, and shareholders for joining us today and for your continued support. I remain confident in our strategic orientation with security and next-generation networking spending patterns. Thank you for your time and attention.

Operator: Ladies and gentlemen, this concludes our conference call for today. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

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