Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Core Insights - A10 Networks reported quarterly earnings of $0.23 per share, exceeding the Zacks Consensus Estimate of $0.21 per share, and showing an increase from $0.21 per share a year ago, resulting in an earnings surprise of +9.52% [1] - The company achieved revenues of $74.68 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 6.29%, compared to $66.72 million in the same quarter last year [2] - A10 Networks has consistently surpassed consensus EPS and revenue estimates over the last four quarters [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.26 on revenues of $76.72 million, and for the current fiscal year, it is $0.88 on revenues of $282.51 million [7] - The estimate revisions trend for A10 Networks was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Communication - Network Software industry, to which A10 Networks belongs, is currently ranked in the top 39% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Data and Key Metrics Changes - Revenue grew nearly 12% year-over-year, reaching $74.7 million in Q3 2025 [5][11] - EBITDA margins expanded from 26.7% to 29.3% year-over-year, while non-GAAP operating margin improved from 22.6% to 24.7% [6][13] - Non-GAAP net income for Q3 was $16.7 million, or $0.23 per diluted share, reflecting 7.4% EPS growth from the previous year [13] Business Line Data and Key Metrics Changes - Product revenue grew 17% year-over-year to $43.1 million, while service revenue increased 6% to $31.6 million [11][12] - Security-led revenue exceeded the long-term target of generating 65% of total revenue, reflecting strong customer demand [12][20] Market Data and Key Metrics Changes - Revenue from the Americas increased 25% on a trailing 12-month basis, driven primarily by investments in AI infrastructure [5][12] - The Americas region represented 65% of global revenue, highlighting the strength of A10's investments in the enterprise segment [12][13] Company Strategy and Development Direction - A10 Networks is aligning its solutions with customer needs in trusted infrastructure, cybersecurity, and AI capabilities, which are seen as essential for growth [5][8] - The company is focused on disciplined execution and capital deployment to drive growth while maintaining profitability [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining a full-year growth rate of 10% based on momentum in strategic initiatives [8][36] - The company is navigating macro uncertainties but remains optimistic about its positioning in the market, particularly with the acceleration of AI infrastructure build-out [16][36] Other Important Information - A10 Networks generated $22.8 million in cash flow from operations in Q3, with cash and investments totaling $371 million at the end of the quarter [15] - The board approved a quarterly cash dividend of $0.06 per share to be paid on December 1, 2025 [15] Q&A Session Summary Question: How is security-led revenue tracking this year? - Management indicated that security-led revenue is currently higher than 65%, and they aim to maintain this goal while not sacrificing infrastructure revenue [20] Question: Will F5's data breach impact customer discussions? - Management noted an increased level of interest from customers wanting to understand market alternatives, but no negative impact on spending was observed [23][29] Question: What specific factors contributed to the strength in North American AI infrastructure investments? - The growth was driven by a few large customers investing aggressively in AI infrastructure, with ongoing engagement with a multitude of players for future opportunities [27] Question: What is the outlook for 2026? - Management expects to sustain growth in the high single-digit range, focusing on maintaining EBITDA margins of 26%-28% and EPS growth faster than the top line [36] Question: What progress has been made in expanding the service provider customer base? - Management highlighted efforts to improve share of wallet with tier-one providers while gaining traction with tier-two service providers [41] Question: What drove the outperformance in the EMEA region? - A significant project contributed to the revenue increase in EMEA, but it is not expected to set a new baseline for future performance [46]

Financial Performance - Q3 2025 revenue increased by 11.9% year-over-year[12] - Year-to-date revenue is up 12.1%[12] - Non-GAAP gross margins reached 80.7% in Q3 2025[12] - GAAP EPS stands at $0.17, while Non-GAAP EPS is $0.23[12] - Adjusted EBITDA for Q3 2025 is $21.9 million[18] Revenue Breakdown - Service Provider revenue year-to-date is $128.4 million[22] - Enterprise revenue year-to-date is $81.8 million[22] - Americas accounted for 65% of Q3 2025 revenue, totaling $74.7 million[25] Balance Sheet - The company holds $86.6 million in cash and cash equivalents as of September 30, 2025[37] - Marketable securities amounted to $284.3 million[37] - Long-term debt stands at $218.5 million[37]

Revenue Performance - Total net revenue for the three months ended September 30, 2025, was $74.7 million, an increase of 11.9% compared to $66.7 million in the same period of 2024[137]. - Products revenue for the nine months ended September 30, 2025, was $118.3 million, representing a 22.6% increase from $96.5 million in the same period of 2024[138]. - Services revenue for the three months ended September 30, 2025, was $31.6 million, a 5.7% increase from $29.9 million in the same period of 2024[137]. - For the nine months ended September 30, 2025, total net revenue increased by $22.7 million, or 12%, to $210.2 million compared to the same period in 2024[149]. - Products revenue for the nine months ended September 30, 2025, increased by $21.8 million, or 23%, to $118.3 million, primarily due to demand from service provider customers in the Americas and EMEA regions[150]. - Services revenue for the nine months ended September 30, 2025, increased by $0.9 million, or 1%, to $91.9 million, driven by demand from enterprise customers in the Americas and EMEA regions[150]. Profitability and Margins - Gross profit for the three months ended September 30, 2025, was $59.9 million, with a gross margin of 80.1%, compared to $53.7 million and 80.5% in the same period of 2024[137]. - For the three months ended September 30, 2025, total gross profit was $59.9 million with a gross margin of 80.1%, compared to $53.7 million and 80.5% in the same period of 2024, reflecting a decrease of 0.4% in gross margin[162]. - Products gross profit increased by $5.7 million, or 19.4%, to $35.0 million, while services gross profit increased by $0.5 million, or 2.0%, to $24.8 million for the same period[162]. Operating Expenses - Operating expenses for the three months ended September 30, 2025, were $46.9 million, representing 62.7% of total revenue, compared to $43.2 million and 64.8% in the same period of 2024[137]. - Operating expenses for the three months ended September 30, 2025, totaled $46.9 million, an increase of $3.6 million, or 8.4%, compared to $43.2 million in 2024[166]. - Research and development expenses rose by $2.6 million, or 16.8%, to $18.4 million for the three months ended September 30, 2025, driven by increased personnel costs[171]. Cash Flow and Liquidity - Cash provided by operating activities was $62.2 million during the nine months ended September 30, 2025, compared to $64.8 million in the same period of 2024[134]. - Cash provided by operating activities was $62.2 million for the nine months ended September 30, 2025, consisting of net income of $32.3 million and non-cash charges of $28.3 million[190]. - As of September 30, 2025, the company had $86.6 million in cash and cash equivalents and $284.3 million in marketable securities[134]. - The company repurchased 3.3 million shares for a total cost of $62.0 million under the 2024 and 2025 stock repurchase programs during the nine months ended September 30, 2025[185]. - The company anticipates continuing to pay quarterly cash dividends of $0.06 per share, totaling $4.3 million for the three months ended September 30, 2025[186]. Regional Performance - The Americas region accounted for 65% of total revenue for the three months ended September 30, 2025, up from 51% in the same period of 2024[132]. - The Americas region generated $48.8 million, or 65% of total revenue, for the three months ended September 30, 2025, representing a 43% increase compared to the same period in 2024[146]. - The APJ region contributed $16.7 million, or 22% of total revenue, for the three months ended September 30, 2025, reflecting a 27% decrease compared to the same period in 2024[147]. Investments and Acquisitions - The company acquired ThreatX Protect in February 2025, enhancing its cybersecurity portfolio with WAAP protection[128]. - The company plans to continue investing in growth priorities, including cybersecurity and artificial intelligence technologies, with an expected increase in research and development expenses[172]. Marketable Securities and Investments - As of September 30, 2025, the investment portfolio included marketable securities with an aggregate amortized cost basis of $283.7 million and a fair value of $284.3 million[205]. - The fair value of marketable securities as of September 30, 2025, was $284.3 million, with hypothetical fair values varying based on interest rate shifts[206].

Revenue and Income - Revenue for Q3 2025 was $74.7 million, an increase of 11.9% year-over-year from $66.7 million in Q3 2024[7] - GAAP net income was $12.2 million, or $0.17 per diluted share, compared to $12.6 million, or $0.17 per diluted share, in Q3 2024[7] - Non-GAAP net income rose to $16.7 million, or $0.23 per diluted share, from $15.9 million, or $0.21 per diluted share, in Q3 2024[7] - Total net revenue for the nine months ended September 30, 2025, was $210.2 million, up from $187.5 million in the same period of 2024[18] - GAAP net income for Q3 2025 was $12,191, a slight decrease from $12,637 in Q3 2024, while non-GAAP net income increased to $16,701 from $15,926[19] Margins and Profitability - GAAP gross margin was 80.1%, while non-GAAP gross margin was 80.7%[7] - GAAP operating margin improved to 17.4% from 15.7% in Q3 2024; non-GAAP operating margin increased to 24.7% from 22.6%[7] - The company reported a gross profit of $59.9 million for Q3 2025, compared to $53.7 million in Q3 2024[18] - GAAP gross profit for Q3 2025 was $59,852, up from $53,682 in Q3 2024, resulting in a GAAP gross margin of 80.1% compared to 80.5%[24] - Non-GAAP gross profit for Q3 2025 was $60,269, compared to $54,216 in Q3 2024, with a non-GAAP gross margin of 80.7%[24] - Adjusted EBITDA for Q3 2025 was $21,877 million, an increase from $17,800 million in Q3 2024, indicating a 22.8% rise[30] - Adjusted EBITDA margin for the nine months ended September 30, 2025, was 29.1%, up from 25.2% in the same period of 2024[30] Cash Flow and Dividends - The company returned $15.3 million to investors, including $11.0 million in share repurchases and $4.3 million in cash dividends[7] - A quarterly cash dividend of $0.06 per share was approved, payable on December 1, 2025[7] - Cash flows from operating activities for the nine months ended September 30, 2025, totaled $62,187, slightly down from $64,782 in 2024[23] - Cash and cash equivalents at the end of Q3 2025 were $86,555, down from $95,129 at the beginning of the period[23] Assets and Liabilities - Total current assets rose significantly to $468,679 in Q3 2025 from $307,288 in Q4 2024, driven by an increase in marketable securities[21] - The company’s long-term debt increased to $218,450 in Q3 2025, compared to no long-term debt reported in Q4 2024[21] - The accumulated deficit decreased to $(8,072) in Q3 2025 from $(40,344) in Q4 2024, indicating improved financial health[21] Operating Performance - GAAP income from operations for Q3 2025 was $12,994 million, up from $10,443 million in Q3 2024, representing a 24.4% increase[28] - Non-GAAP operating income for Q3 2025 reached $18,458 million, compared to $15,059 million in Q3 2024, reflecting a 22.4% growth[28] - For the nine months ended September 30, 2025, GAAP income from operations was $32,083 million, a 25.4% increase from $25,572 million in the same period of 2024[28] Expenses - Non-GAAP total operating expenses for the nine months ended September 30, 2025, were $118,295, an increase from $113,582 in the same period of 2024[26] - Stock-based compensation and related payroll tax for Q3 2025 amounted to $4,961 million, compared to $4,516 million in Q3 2024[28] - Acquisition-related expenses for the nine months ended September 30, 2025, totaled $655 million, with no expenses reported in the same period of 2024[28] Customer Base - A10 Networks serves over 7,000 global customers, focusing on secure application services and solutions[14]

Core Viewpoint - A10 Networks (NYSE: ATEN) provides products that enhance the security and efficiency of online systems for companies and internet service providers, with a previous rating of "Hold" due to perceived high stock price [1] Company Summary - A10 Networks specializes in solutions that protect online systems and improve operational efficiency for businesses and internet service providers [1] Market Context - The analysis primarily focuses on small- to mid-cap companies, which are often overlooked by investors, while also considering large-cap companies for a broader market perspective [1]

Group 1 - A10 Networks Inc. (NYSE:ATEN) is underperforming in the data center sector in 2025, with its stock largely flat since the beginning of the year, contrasting with the strong performance of larger data center stocks [1] - The company appointed a new CFO, Michelle Caron, on September 24, who previously served as VP of Finance and CFO at Beckman Coulter Life Sciences, a division of Danaher Corporation [2] - Analyst activity has been limited, with BTIG analyst Gray Powell upgrading the stock to a Buy with a price target of $22 after the company reported better-than-expected Q2 2025 results, indicating potential for high-single-digit growth this year and double-digit growth in the future [3] Group 2 - A10 Networks provides security and infrastructure solutions for on-premises, hybrid cloud, and edge cloud environments, but certain AI stocks are considered to have greater upside potential and less downside risk [4]

Company Performance - A10 Networks reported quarterly earnings of $0.21 per share, exceeding the Zacks Consensus Estimate of $0.20 per share, and up from $0.18 per share a year ago, representing an earnings surprise of +5.00% [1] - The company achieved revenues of $69.38 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 4.30%, compared to $60.1 million in the same quarter last year [2] - Over the last four quarters, A10 Networks has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] Market Outlook - A10 Networks shares have underperformed the market, losing about 1.3% since the beginning of the year, while the S&P 500 has gained 7.6% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to those expectations [4] - The current consensus EPS estimate for the coming quarter is $0.22 on revenues of $70.2 million, and for the current fiscal year, it is $0.87 on revenues of $279.71 million [7] Industry Context - The Communication - Network Software industry, to which A10 Networks belongs, is currently ranked in the bottom 27% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors or through tools like the Zacks Rank [5][6]

Financial Data and Key Metrics Changes - Total revenue for the second quarter was $69.4 million, an increase of 15% year over year [12] - Non-GAAP net income for the quarter was $15.5 million or $0.21 per diluted share, compared to $13.2 million or $0.18 per diluted share in the same quarter last year [14] - EBITDA as a percentage of revenue grew year over year, reflecting a strong operational performance despite aggressive investments [10] Business Line Data and Key Metrics Changes - Product revenue for the quarter was $39.2 million, representing 56% of total revenue, while services revenue was $30.2 million or 44% of total revenue [12] - Enterprise revenue grew by 8% year over year, while service provider revenue increased by 14% [8] Market Data and Key Metrics Changes - The company experienced improved demand from data center expansions and AI infrastructure investments, particularly in the service provider segment [9] - Total deferred revenue increased to $144.4 million, indicating strong uptake of the company's portfolio [13] Company Strategy and Development Direction - The company is strategically aligned with the evolving cybersecurity landscape and emphasizes high performance and advanced security [6] - A focus on diversification across verticals and geographies enhances resilience and allows the company to capitalize on secular tailwinds in AI and cybersecurity [8] - The company aims to dynamically allocate resources to address changing market conditions while preserving profitability and shareholder returns [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic positioning, particularly in light of increased demand for cybersecurity solutions and AI-related spending [18] - The company remains comfortable in its ability to deliver annual revenue growth in the high single-digit range [9] Other Important Information - The company ended the quarter with $367.4 million in cash, cash equivalents, and marketable securities, compared to $195.6 million in the previous year [16] - The Board approved a quarterly cash dividend of $0.06 per share to be paid on September 2, 2025 [17] Q&A Session Summary Question: How should we think about the potential to sustain recent momentum and the sustainability of the service provider segment? - Management indicated that product revenue growth is a strong indicator of customer preference and future growth, with positive signs in service provider performance outside North America [23][26] Question: Can you provide insights on how linearity played out this quarter and any insights on July? - Management noted that there was no unexpected burst of activity in the third month of the quarter and that customer activity is on track for the third quarter [28][29] Question: How should we think about the potential contributions from the recent Microsoft award? - Management emphasized the importance of the long-term partnership with Microsoft and the relevance of their solutions to a global leader in cloud networking [34] Question: Does ATN see tailwinds from telcos raising CapEx following recent legislation? - Management acknowledged that increased CapEx could provide a tailwind, particularly in North America, while also focusing on selling more security solutions [39] Question: Can you elaborate on the AI global leaders mentioned in the press release? - Management confirmed that there are multiple customers involved, including both North American and international players, who are building new AI infrastructure [42][43] Question: What percentage of revenue is AI-driven? - Management indicated that current growth is primarily from customers building new data centers for AI traffic, with significant revenue expected in 2026 and beyond [48] Question: Can you provide insights on enterprise revenue growth by customer vertical and geography? - Management highlighted strong growth in enterprise revenue in North America, particularly among large enterprise customers in sectors like finance and technology [54][56] Question: How are conversations going with existing and prospective customers regarding ThreatX? - Management noted that ThreatX has been well integrated into the portfolio and is seen as a relevant solution for customers, although it is still early to quantify its impact [59][60]