A10 Networks Q3 2026 Earnings Call Transcript

A10 Networks (NYSE:ATEN) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

A10 Networks reported a 22.6% increase in revenue for Q3 2026, reaching a record $91.5 million, with strong growth in advanced network security and next-generation networking.

The company raised its full-year 2026 revenue growth guidance to approximately 16%, up from the previous 12% to 14%, reflecting strong demand and market share gains.

A10 Networks highlighted strategic wins, including deployments with a Fortune 50 financial services company and a global information and analytics provider, enhancing AI security and application reliability.

The company achieved record non-GAAP gross profit of $73.3 million, with a gross margin of 80%, while operating margin rose to 27.8%, driven by investments in AI-focused innovation and networking security.

A10 Networks continues to focus on cash generation and shareholder returns, with Q3 free cash flow reaching record levels and a dividend of $0.06 per share declared for December 2026.

Full Transcript

OPERATOR

Good afternoon and welcome to A10 Networks’ third quarter 2026 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 star-1. Should you wish to remove yourself from the queue, press star-2. It is now my pleasure to turn the floor over to your host, Tom Bauman. The floor is yours.

Tom Bauman

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 2026 financial results. Additionally, A10 published a presentation and supplemental trended financial statements. You may access the press release, presentation, and 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 and, as of today, November 5, 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 on a non-GAAP basis unless otherwise noted and 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 can be found in the press release issued today and on the trended quarterly financial statements posted on the company’s website.

Now I would like to turn the call over to Dhrupad Trivedi, President and CEO of A10 Networks.

Dhrupad Trivedi (Chief Executive Officer)

Thank you, Tom, and thank you all for joining us today. The third quarter was another record quarter for A10, 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 give 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 40,000 employees is using A10’s AI firewall both to help protect employees accessing public AI tools and to govern 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 50,000 sessions are routed through 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 vulnerabilities. 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 customers continues 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 applications alongside other mission-critical workloads, extending A10’s role in helping keep the services businesses and consumers rely on available.

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 APAC 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’d now like to turn the call over to Michelle Caron, our Chief Financial Officer, to discuss our financial results in greater detail.

Elizabeth Michelle Caron (Chief Financial Officer)

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 is 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 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 twelve-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’re confident that our service provider relationships around the world remain a strong foundation for continued growth, and we’re 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 buildout and strength in the enterprise markets. We’re also seeing improving results from international markets this quarter. Customer satisfaction and on-time delivery remain our top priorities as we navigate input 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 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 the 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 to $77 million, from approximately $64 million a year ago. Adjusted EBITDA was $29.5 million, or 32.2% 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 deferred 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 December 1, 2026 to shareholders of record on November 16, 2026. The company has $30.1 million remaining on its $75 million share repurchase authorization.

I’ll now turn the call back to Dhrupad for an update on our 2026 outlook and closing comments.

Dhrupad Trivedi (Chief Executive Officer)

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 the 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 a 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’ll 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 star-1. We do ask, if listening on speakerphone today, please pick up your handset while asking your question to provide optimal sound quality. Once again, please press star-1 on your phone at this time to join the queue to ask a question. Please hold a moment while we poll for questions. First question from Gray Powell with U.S. Bank.

Please go ahead.

Gray Powell (Analyst at U.S. Bank)

Great. Thank you for taking the question, and congratulations on the great results here. It was really nice to see.

Dhrupad Trivedi (Chief Executive Officer)

Thank you, Gray.

Gray Powell (Analyst at U.S. Bank)

Absolutely. So I guess my main question would be on product revenue. Growth has been excellent this year. In fact, I think it’s the best product revenue growth you’ve seen in at least eight years, maybe longer. My model doesn’t 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 the 14% organic commentary — that was really helpful. I’m just trying to make sure that we have the building blocks correct as we think about next year.

Dhrupad Trivedi (Chief Executive Officer)

Yeah. So 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 replenish customers with new solutions. There is nothing unusual in the last two or three years where we draw some artificial refresh cycle or something like that. It is a natural evolution of demand as we look on a long-term trend. You are correct. 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 that is not based on a trend that is going to come and go. It’s more broad-based, and if we can drive more of kind of a replacement cycle, that’s great, but that is not what we are counting upon to get the next two to three year growth.

Gray Powell (Analyst at U.S. Bank)

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

Dhrupad Trivedi (Chief Executive Officer)

So I would say that you should think of that as that segment can support that double-digit growth going forward in the next four quarters or six quarters. We probably will have to balance and optimize, if there are supply constraints, on what we choose or prioritize. But what that is meant to indicate is our growth is not a result of one company doing something, but it’s more broad-based, and that we will obviously continue to prioritize customers and high growth potential as we go through every quarter.

But I think it’s more meant to be an indicator that the demand is much more broad-based versus single-customer based.

Gray Powell (Analyst at U.S. Bank)

Understood, that’s very helpful. Thank you.

Dhrupad Trivedi (Chief Executive Officer)

Thanks, Gray.

OPERATOR

Thank you. Next question comes from Hamid Corsa with BWS Financial. Please go ahead.

Hamid Corsa (Analyst at BWS Financial)

Hi, could you just talk about 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’re now being included in.

Dhrupad Trivedi (Chief Executive Officer)

So I would say, Hamid, that there’s two aspects to it. I would say one is, obviously, we are all living in a constrained environment in some ways, and it’s 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 there is a kind of capex cyclic variation in demand whether it’s in Asia or Europe and the U.S. And so some of it was kind of being able to service that demand, and second was balancing that fulfillment, right, while keeping our largest customers satisfied as well.

Hamid Corsa (Analyst at BWS Financial)

Okay, and then could you just talk about your accounts receivables declining in the quarter? That was great to see. But is that sustainable, and what’s a good area for us to expect that balance?

Elizabeth Michelle Caron (Chief Financial Officer)

Yeah. So, Hamid, our quarter benefited from the timing of cash receipts in that quarter. We’re still on track to deliver the cash flow that I talked about a few minutes ago for the full year — between $74 to $77 million in cash flow. So it was a timing related to this quarter, bringing the DSO to 49 days.

Hamid Corsa (Analyst at BWS Financial)

Yeah. Okay, great. Thank you.

Elizabeth Michelle Caron (Chief Financial Officer)

You’re welcome.

OPERATOR

Thank you, Hamid. Next question comes from John Conti with Deutsche Bank. Please go ahead.

John Conti (Analyst at Deutsche Bank)

Yeah, thank you for taking my questions. Congrats again on the quarter. Maybe just one on the guide. I’m 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’d 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?

Dhrupad Trivedi (Chief Executive Officer)

Okay, yeah, so we said it in the script. So 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’s the 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 obviously we are highly aligned with a large customer who apparently is also the best positioned in terms of the backlog they have on AI receivables versus the cash they’re generating, and they are the only cash flow positive category in that world. So we feel pretty good about that. And if you look through the data, I think we have addressed all your questions quantitatively in the earnings release.

John Conti (Analyst at Deutsche Bank)

Thank you.

Dhrupad Trivedi (Chief Executive Officer)

Okay, thank you.

OPERATOR

Thank you. That concludes our Q&A session. I will turn it back over to Dhrupad Trivedi for closing comments.

Dhrupad Trivedi (Chief Executive Officer)

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 your conference call for today. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.