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]

Financial Performance - Q2 2025 revenue increased by 15% year-over-year[11], and up 12% year-to-date[11] - Q2 revenue increased 11% on a trailing twelve month (TTM) basis[11] - Non-GAAP gross margins were 80.0% in Q2 2025[11] - GAAP EPS was $0.14, compared to $0.13 in Q2 2024[11] - Non-GAAP EPS was $0.21, compared to $0.18 in Q2 2024[11] - Adjusted EBITDA increased from $15.5 million in Q2 2024 to $19.7 million in Q2 2025[16] Revenue Breakdown - Enterprise revenue increased 8% on a TTM basis[11] - Service provider revenue increased 14% on a TTM basis[11] - Service Provider revenue increased from $33.4 million in Q2 2024 to $41.6 million in Q2 2025[20] - In Q2 2025, Americas accounted for 59% of revenue, APJ 26%, and EMEA 15%, with total revenue of $69.4 million[22] Balance Sheet - Cash and cash equivalents were $252.9 million as of June 30, 2025[34] - Marketable securities were $114.5 million as of June 30, 2025[34] - Long-term debt was $218.1 million as of June 30, 2025[34]

[Note Regarding Forward-Looking Statements](index=4&type=section&id=Note%20Regarding%20Forward-Looking%20Statements) - The report contains forward-looking statements identified by expressions like "believe," "may," "will," "potentially," "estimate," etc., which convey uncertainty of future events or outcomes[9](index=9&type=chunk) - Key areas of forward-looking statements include strategy, business plans, revenue expectations, new product introductions, investment plans (sales, marketing, R&D), and stock repurchase programs[12](index=12&type=chunk) - These statements are subject to risks, uncertainties, and assumptions, including those detailed in the "Risk Factors" section of the Annual Report on Form 10-K, and actual results may differ materially[10](index=10&type=chunk) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, recent acquisitions, debt, equity, and other financial components for the periods ended June 30, 2025, and December 31, 2024 (for balance sheet) or June 30, 2024 (for income/cash flow statements) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20and%20December%2031%2C%202024) Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | As of June 30, 2025 | As of December 31, 2024 | Change | % Change | | :-------------------------- | :------------------- | :---------------------- | :----- | :------- | | Total Assets | $607,915 | $432,815 | $175,100 | 40.5% | | Cash and cash equivalents | $252,924 | $95,129 | $157,795 | 165.9% | | Marketable securities | $114,459 | $100,429 | $14,030 | 14.0% | | Accounts receivable, net | $52,364 | $76,687 | $(24,323) | -31.7% | | Total current assets | $457,062 | $307,288 | $149,774 | 48.7% | | Long-term debt | $218,086 | $— | $218,086 | N/A | | Total liabilities | $403,927 | $200,986 | $202,941 | 101.0% | | Total stockholders' equity | $203,988 | $231,829 | $(27,841) | -12.0% | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) Condensed Consolidated Statements of Operations (Three Months Ended June 30, in thousands, except per share) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Net revenue | $69,383 | $60,096 | $9,287 | 15.5% | | Products revenue | $39,173 | $29,533 | $9,640 | 32.6% | | Services revenue | $30,210 | $30,563 | $(353) | -1.2% | | Gross profit | $54,711 | $48,058 | $6,653 | 13.8% | | Income from operations | $10,311 | $7,916 | $2,395 | 30.3% | | Net income | $10,538 | $9,476 | $1,062 | 11.2% | | Diluted EPS | $0.14 | $0.13 | $0.01 | 7.7% | Condensed Consolidated Statements of Operations (Six Months Ended June 30, in thousands, except per share) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Net revenue | $135,520 | $120,771 | $14,749 | 12.2% | | Products revenue | $75,152 | $59,602 | $15,550 | 26.1% | | Services revenue | $60,368 | $61,169 | $(801) | -1.3% | | Gross profit | $107,406 | $97,289 | $10,117 | 10.4% | | Income from operations | $19,089 | $15,129 | $3,960 | 26.2% | | Net income | $20,081 | $19,202 | $879 | 4.6% | | Diluted EPS | $0.27 | $0.25 | $0.02 | 8.0% | [Condensed Consolidated Statements of Comprehensive Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $10,538 | $9,476 | $20,081 | $19,202 | | Unrealized gain (loss) on marketable securities | $(48) | $38 | $(25) | $(1) | | Unrealized gain (loss) on cash flow hedge | $(241) | $486 | $(306) | $537 | | Comprehensive income | $10,249 | $10,000 | $19,750 | $19,738 | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) Stockholders' Equity Changes (Six Months Ended June 30, 2025, in thousands) | Item | Amount | | :------------------------------------------ | :------- | | Balance at December 31, 2024 | $231,829 | | Common stock issued under employee equity incentive plans | $1,710 | | Repurchase of common stock | $(50,973) | | Stock-based compensation expense | $10,427 | | Payments for dividends | $(8,755) | | Net Income | $20,081 | | Balance at June 30, 2025 | $203,988 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | Change | | :----------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | $39,384 | $44,650 | $(5,266) | | Net cash used in investing activities | $(41,241) | $(42,472) | $1,231 | | Net cash provided by (used in) financing activities | $159,652 | $(21,965) | $181,617 | | Net increase (decrease) in cash and cash equivalents | $157,795 | $(19,787) | $177,582 | | Cash and cash equivalents—end of period | $252,924 | $77,457 | $175,467 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and breakdowns of the figures presented in the condensed consolidated financial statements. They cover the company's business, significant accounting policies, recent acquisition of ThreatX Protect, details on leases, marketable securities, derivatives, long-term debt (2030 Convertible Senior Notes), commitments, equity incentive plans, stock-based compensation, stock repurchase programs, net income per share, income taxes, segment and geographic information, and revenue recognition [1. Description of Business and Summary of Significant Accounting Policies](index=12&type=section&id=1.%20Description%20of%20Business%20and%20Summary%20of%20Significant%20Accounting%20Policies) - A10 Networks, Inc. is a leading provider of secure application solutions and services, offering network infrastructure products (e.g., Thunder ADC, CGN, SSLi, CFW) and security products (A10 Defend suite, A10 Control) to improve cyber protection and digital responsiveness[30](index=30&type=chunk)[31](index=31&type=chunk) - Revenue is derived from two sources: products (hardware, perpetual/term software licenses) and services (post contract support, professional services, training, SaaS offerings)[32](index=32&type=chunk) Revenue by Customer Vertical (Three Months Ended June 30) | Customer Vertical | 2025 | 2024 | | :---------------- | :--- | :--- | | Service providers | 60% | 56% | | Enterprise | 40% | 44% | - Purchases from the ten largest end-customers accounted for **46% of total revenue** for the three months ended June 30, 2025, up from **35%** in the same period of 2024[36](index=36&type=chunk) - In February 2025, the company acquired ThreatX Protect, expanding its cybersecurity portfolio with web application and API protection (WAAP)[39](index=39&type=chunk) [2. Leases](index=16&type=section&id=2.%20Leases) Operating Lease Liabilities (in thousands) | Metric | As of June 30, 2025 | As of December 31, 2024 | | :-------------------------- | :------------------ | :---------------------- | | Total right-of-use assets | $11,388 | $11,539 | | Total operating lease liabilities | $11,747 | $11,938 | Aggregate Future Lease Payments (as of June 30, 2025, in thousands) | Period | Amount | | :--------------- | :------- | | Remainder of 2025 | $2,840 | | 2026 | $5,756 | | 2027 | $3,288 | | 2028 | $237 | | Total lease payments | $12,121 | Total Lease Costs (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :------------- | :----- | :----- | | Total lease costs | $2,481 | $2,407 | [3. Marketable Securities and Fair Value Measurements](index=17&type=section&id=3.%20Marketable%20Securities%20and%20Fair%20Value%20Measurements) Marketable Securities (as of June 30, 2025, in thousands) | Type | Amortized Cost | Fair Value | | :------------------------ | :------------- | :--------- | | Corporate securities | $47,432 | $47,529 | | U.S. Treasury and agency securities | $66,806 | $66,930 | | **Total Debt securities** | **$114,238** | **$114,459** | Fair Value Measurements (as of June 30, 2025, in thousands) | Asset Type | Level 1 | Level 2 | Level 3 | Total | | :------------------------ | :------ | :------ | :------ | :------ | | Cash | $77,239 | $— | $— | $77,239 | | Cash equivalents | $175,685 | $— | $— | $175,685 | | Corporate securities | $— | $47,529 | $— | $47,529 | | U.S. Treasury and agency securities | $43,407 | $23,523 | $— | $66,930 | | **Total** | **$296,331** | **$71,052** | **$—** | **$367,383** | - The fair value of the 2030 Convertible Senior Notes was **$241.1 million** as of June 30, 2025, categorized as Level 2[66](index=66&type=chunk) [4. Derivatives](index=18&type=section&id=4.%20Derivatives) - The Company uses foreign exchange forward contracts to manage foreign currency exposures, not for speculative or trading purposes[67](index=67&type=chunk) Foreign Exchange Forward Contracts Notional Amounts (in millions) | Contract Type | As of June 30, 2025 | As of December 31, 2024 | | :-------------------------------- | :------------------ | :---------------------- | | Not designated as hedging instruments | $3.5 | $7.6 | | Designated as hedging instruments | $10.1 | $— | - For the six months ended June 30, 2025, the Company recorded a realized net loss of **$0.5 million** from non-hedging contracts, compared to a realized net gain of **$5.0 million** in the same period of 2024[68](index=68&type=chunk) [5. Acquisition](index=19&type=section&id=5.%20Acquisition) - In February 2025, the Company acquired the ThreatX Protect business for **$19.6 million** in cash, accounted for as a business combination[70](index=70&type=chunk) - The preliminary purchase price allocation included **$7.6 million** to identified intangible assets and **$13.8 million** to goodwill, primarily attributable to assembled workforce and future synergies[70](index=70&type=chunk) Acquired Intangible Assets (as of June 30, 2025, in thousands) | Asset Type | Gross | Accumulated Amortization | Net | Weighted Average Remaining Useful Life (years) | | :-------------------- | :---- | :----------------------- | :---- | :------------------------------------------- | | Developed technology | $5,700 | $(431) | $5,269 | 4.6 | | Customer relationships | $1,500 | $(113) | $1,387 | 4.6 | | Trademark / trade name | $400 | $(38) | $362 | 3.6 | | **Total** | **$7,600** | **$(582)** | **$7,018** | | - Amortization expense from acquired intangible assets was **$0.6 million** for the six months ended June 30, 2025[74](index=74&type=chunk) [6. Condensed Consolidated Financial Statement Components](index=20&type=section&id=6.%20Condensed%20Consolidated%20Financial%20Statement%20Components) Key Financial Statement Components (in thousands) | Metric | As of June 30, 2025 | As of December 31, 2024 | | :-------------------------------- | :------------------ | :---------------------- | | Allowance for credit losses, ending balance | $357 | $465 | | Total inventory | $20,082 | $22,005 | | Total prepaid expenses and other current assets | $17,233 | $13,038 | | Property and equipment, net | $44,458 | $39,142 | | Total accrued liabilities | $27,815 | $32,696 | | Total deferred revenue | $144,366 | $148,259 | - Depreciation expense on property and equipment was **$4.6 million** for the six months ended June 30, 2025, up from **$3.1 million** in 2024[81](index=81&type=chunk) [7. Long-Term Debt](index=22&type=section&id=7.%20Long-Term%20Debt) - In March 2025, the Company issued **$225.0 million** aggregate principal amount of **2.75%** Convertible Senior Notes due 2030 (the "2030 Notes"), receiving net proceeds of approximately **$217.7 million**[85](index=85&type=chunk) - The 2030 Notes are convertible at an initial rate of **42.6257 shares** of common stock per **$1,000** principal amount, equivalent to an initial conversion price of **$23.46003 per share**[86](index=86&type=chunk) - The carrying value of the 2030 Notes, net of unamortized debt issuance costs, was **$218.1 million** as of June 30, 2025, with an effective interest rate of **3.43%**[94](index=94&type=chunk) [8. Commitments and Contingencies](index=23&type=section&id=8.%20Commitments%20and%20Contingencies) - The Company has non-cancellable operating lease arrangements expiring through April 2028, with aggregate future lease payments totaling **$12.1 million** as of June 30, 2025[95](index=95&type=chunk) - Open purchase commitments with manufacturers in Taiwan totaled **$13.2 million** as of June 30, 2025[98](index=98&type=chunk) - The Company provides indemnifications to customers against intellectual property infringement claims and other performance guarantees, with no significant impact on financial statements to date[99](index=99&type=chunk) [9. Equity Incentive Plans, Stock-Based Compensation and Stock Repurchase Programs](index=24&type=section&id=9.%20Equity%20Incentive%20Plans%2C%20Stock-Based%20Compensation%20and%20Stock%20Repurchase%20Programs) - As of June 30, 2025, **3,018,417 shares** were available for future grant under the 2023 Stock Incentive Plan, and **2,914,643 shares** were available under the Amended 2014 Employee Stock Purchase Plan[100](index=100&type=chunk)[101](index=101&type=chunk) Stock-Based Compensation Expense (Six Months Ended June 30, in thousands) | Category | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Cost of net revenue | $1,103 | $1,017 | | Sales and marketing | $1,834 | $2,136 | | Research and development | $2,567 | $1,887 | | General and administrative | $4,923 | $3,065 | | **Total** | **$10,427** | **$8,105** | - The Board authorized a new **$75 million** stock repurchase program (the "2025 Program") on May 1, 2025. During Q2 2025, **228,878 shares** were repurchased for **$3.9 million**, with **$71.1 million** remaining available[108](index=108&type=chunk) [10. Net Income Per Share](index=25&type=section&id=10.%20Net%20Income%20Per%20Share) Net Income Per Share (Six Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Basic Net Income Per Share | $0.28 | $0.26 | | Diluted Net Income Per Share | $0.27 | $0.25 | - As of June 30, 2025, **9,735 thousand** potentially dilutive shares were excluded from diluted EPS calculation as their effect would have been anti-dilutive, including **9,591 thousand** from the 2030 Notes[112](index=112&type=chunk) [11. Income Taxes](index=26&type=section&id=11.%20Income%20Taxes) Provision for Income Taxes (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $1,391 | $1,507 | | Six Months Ended June 30 | $2,326 | $3,001 | - The Company had **$8.3 million** of unrecognized tax benefits as of June 30, 2025, with no material change anticipated over the next twelve months[114](index=114&type=chunk) - The Company is evaluating the impact of the One Big Beautiful Bill Act ("OBBBA"), enacted July 4, 2025, which introduces significant tax provisions effective from 2025 through 2027[116](index=116&type=chunk)[117](index=117&type=chunk) [12. Segment and Geographic Information](index=27&type=section&id=12.%20Segment%20and%20Geographic%20Information) - The Company manages its business as a single reportable operating segment, with performance assessed based on consolidated net income[118](index=118&type=chunk)[119](index=119&type=chunk) Revenue by Geographic Region (Six Months Ended June 30, in thousands) | Region | 2025 | 2024 | % of Total Revenue (2025) | | :------------- | :----- | :----- | :------------------------ | | Americas | $74,688 | $58,311 | 55% | | APJ | $36,558 | $44,330 | 27% | | EMEA | $24,274 | $18,130 | 18% | | **Total** | **$135,520** | **$120,771** | **100%** | Long-Lived Assets by Physical Location (as of June 30, 2025, in thousands) | Region | Amount | | :------- | :------- | | Americas | $51,235 | | Japan | $2,115 | | Other | $2,496 | | **Total** | **$55,846** | [13. Revenue](index=28&type=section&id=13.%20Revenue) Revenue by Customer Vertical (Six Months Ended June 30, in thousands) | Customer Vertical | 2025 | 2024 | % of Total Revenue (2025) | | :---------------- | :----- | :----- | :------------------------ | | Service providers | $80,604 | $71,038 | 59% | | Enterprises | $54,916 | $49,733 | 41% | | **Total** | **$135,520** | **$120,771** | **100%** | Contract Balances (as of June 30, 2025, in thousands) | Metric | Amount | | :-------------------------- | :------- | | Accounts receivable, net | $52,364 | | Deferred revenue, current | $73,345 | | Deferred revenue, non-current | $71,021 | | **Total deferred revenue** | **$144,366** | Expected Revenue Recognition from Remaining Performance Obligations (as of June 30, 2025, in thousands) | Period | Amount | | :-------------------- | :------- | | Within 1 year | $73,345 | | Next 2 to 3 years | $57,006 | | Thereafter | $14,015 | | **Total** | **$144,366** | [14. Subsequent Event](index=29&type=section&id=14.%20Subsequent%20Event) - On August 5, 2025, the Board approved a quarterly cash dividend of **$0.06 per share**, payable on September 2, 2025, to stockholders of record on August 15, 2025[130](index=130&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three and six months ended June 30, 2025, compared to the same periods in 2024. It covers an overview of the business, detailed analysis of revenue, cost of revenue, gross margin, operating expenses, non-operating income/expense, income taxes, liquidity, capital resources, and critical accounting policies [Overview](index=30&type=section&id=Overview) - A10 Networks is a leading provider of secure application solutions, offering network infrastructure and security products (A10 Defend, A10 Control) to enhance cyber protection and digital responsiveness[133](index=133&type=chunk)[134](index=134&type=chunk) - The company acquired ThreatX Protect in February 2025, expanding its cybersecurity portfolio with WAAP protection, and issued **$225.0 million** in 2030 Convertible Senior Notes in March 2025[135](index=135&type=chunk) Key Financial Position and Cash Flow (as of/for Six Months Ended June 30, in millions) | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Cash and cash equivalents | $252.9 | $77.5 | | Marketable securities | $114.5 | $100.4 | | Cash provided by operating activities | $39.4 | $44.7 | - The company plans to continue investing in product development, global sales and marketing, and distribution channels for long-term growth, which may impact short-term profitability[142](index=142&type=chunk) - Macroeconomic volatility, including enhanced U.S. tariffs and import/export restrictions, is impacting demand and cost inputs, leading to uneven spending patterns[143](index=143&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Condensed Consolidated Statements of Operations (Three Months Ended June 30, in thousands) | Metric | 2025 | % of Total Revenue (2025) | 2024 | % of Total Revenue (2024) | Increase (Decrease) | % Change | | :-------------------------- | :----- | :------------------------ | :----- | :------------------------ | :------------------ | :------- | | Net revenue | $69,383 | 100.0% | $60,096 | 100.0% | $9,287 | 15.5% | | Cost of net revenue | $14,672 | 21.1% | $12,038 | 20.0% | $2,634 | 21.9% | | Gross profit | $54,711 | 78.9% | $48,058 | 80.0% | $6,653 | 13.8% | | Total operating expenses | $44,400 | 64.0% | $40,142 | 66.8% | $4,258 | 10.6% | | Income from operations | $10,311 | 14.9% | $7,916 | 13.2% | $2,395 | 30.3% | | Non-operating income, net | $1,618 | 2.3% | $3,067 | 5.1% | $(1,449) | -47.2% | | Income before income taxes | $11,929 | 17.2% | $10,983 | 18.3% | $946 | 8.6% | | Provision for income taxes | $1,391 | 2.0% | $1,507 | 2.5% | $(116) | -7.7% | | Net income | $10,538 | 15.2% | $9,476 | 15.8% | $1,062 | 11.2% | Condensed Consolidated Statements of Operations (Six Months Ended June 30, in thousands) | Metric | 2025 | % of Total Revenue (2025) | 2024 | % of Total Revenue (2024) | Increase (Decrease) | % Change | | :-------------------------- | :----- | :------------------------ | :----- | :------------------------ | :------------------ | :------- | | Total revenue | $135,520 | 100.0% | $120,771 | 100.0% | $14,749 | 12.2% | | Total cost of revenue | $28,114 | 20.7% | $23,482 | 19.4% | $4,632 | 19.7% | | Gross profit | $107,406 | 79.3% | $97,289 | 80.6% | $10,117 | 10.4% | | Total operating expenses | $88,317 | 65.2% | $82,160 | 68.0% | $6,157 | 7.5% | | Income from operations | $19,089 | 14.1% | $15,129 | 12.5% | $3,960 | 26.2% | | Total non-operating income, net | $3,318 | 2.4% | $7,074 | 5.9% | $(3,756) | -53.1% | | Income before income taxes | $22,407 | 16.5% | $22,203 | 18.4% | $204 | 0.9% | | Provision for income taxes | $2,326 | 1.7% | $3,001 | 2.5% | $(675) | -22.5% | | Net income | $20,081 | 14.8% | $19,202 | 15.9% | $879 | 4.6% | [Net Revenue](index=33&type=section&id=Net%20Revenue) Net Revenue by Source and Geographic Region (Three Months Ended June 30, in thousands) | Category | 2025 Amount | 2025 % of Total | 2024 Amount | 2024 % of Total | Change | % Change | | :---------------- | :---------- | :-------------- | :---------- | :-------------- | :----- | :------- | | Products | $39,173 | 56% | $29,533 | 49% | $9,640 | 33% | | Services | $30,210 | 44% | $30,563 | 51% | $(353) | (1)% | | **Total Net Revenue** | **$69,383** | **100%** | **$60,096** | **100%** | **$9,287** | **15%** | | Americas | $41,192 | 59% | $30,869 | 51% | $10,323 | 33% | | APJ | $17,939 | 26% | $19,287 | 32% | $(1,348) | (7)% | | EMEA | $10,252 | 15% | $9,940 | 17% | $312 | 3% | Net Revenue by Source and Geographic Region (Six Months Ended June 30, in thousands) | Category | 2025 Amount | 2025 % of Total | 2024 Amount | 2024 % of Total | Change | % Change | | :---------------- | :---------- | :-------------- | :---------- | :-------------- | :----- | :------- | | Products | $75,152 | 55% | $59,602 | 49% | $15,550 | 26% | | Services | $60,368 | 45% | $61,169 | 51% | $(801) | (1)% | | **Total Net Revenue** | **$135,520** | **100%** | **$120,771** | **100%** | **$14,749** | **12%** | | Americas | $74,688 | 55% | $58,311 | 48% | $16,377 | 28% | | APJ | $36,558 | 27% | $44,330 | 37% | $(7,772) | (18)% | | EMEA | $24,274 | 18% | $18,130 | 15% | $6,144 | 34% | - Products revenue increased by **33%** (Q2) and **26%** (YTD) primarily due to increased demand from service provider and enterprise customers in the Americas and EMEA regions[153](index=153&type=chunk)[159](index=159&type=chunk) - Services revenue decreased by **1%** (Q2 and YTD) mainly due to lower demand from service provider customers in the APJ region[154](index=154&type=chunk)[159](index=159&type=chunk) [Cost of Net Revenue, Gross Margin and Gross Profit](index=36&type=section&id=Cost%20of%20Net%20Revenue%2C%20Gross%20Margin%20and%20Gross%20Profit) Cost of Net Revenue (Six Months Ended June 30, in thousands) | Category | 2025 | 2024 | Change | % Change | | :--------------- | :----- | :----- | :----- | :------- | | Products | $15,460 | $13,612 | $1,848 | 13.6% | | Services | $12,654 | $9,870 | $2,784 | 28.2% | | **Total** | **$28,114** | **$23,482** | **$4,632** | **19.7%** | - Products cost of revenue increased by **13.6%** (YTD) primarily due to product and regional mix[165](index=165&type=chunk) - Services cost of revenue increased by **28.2%** (YTD) driven by higher personnel-related support costs and changes in the mix of services delivered[166](index=166&type=chunk) Gross Profit and Gross Margin (Six Months Ended June 30, in thousands) | Category | 2025 Amount | 2025 Gross Margin | 2024 Amount | 2024 Gross Margin | Change in Amount | Change in Gross Margin | | :--------------- | :---------- | :---------------- | :---------- | :---------------- | :--------------- | :--------------------- | | Products | $59,692 | 79.4% | $45,990 | 77.2% | $13,702 | 2.2% | | Services | $47,714 | 79.0% | $51,299 | 83.9% | $(3,585) | (4.9)% | | **Total** | **$107,406** | **79.3%** | **$97,289** | **80.6%** | **$10,117** | **(1.3)%** | [Operating Expenses](index=37&type=section&id=Operating%20Expenses) Operating Expenses (Six Months Ended June 30, in thousands) | Category | 2025 | 2024 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Sales and marketing | $40,509 | $40,667 | $(158) | (0.4)% | | Research and development | $32,156 | $28,800 | $3,356 | 11.7% | | General and administrative | $15,652 | $12,693 | $2,959 | 23.3% | | **Total operating expenses** | **$88,317** | **$82,160** | **$6,157** | **7.5%** | [Sales and Marketing](index=38&type=section&id=Sales%20and%20Marketing) - Sales and marketing expenses decreased by **0.4%** for the six months ended June 30, 2025, primarily due to a decrease in personnel costs[177](index=177&type=chunk) - For the full year 2025, sales and marketing expenses are expected to increase modestly as the company focuses investments on high-opportunity areas[178](index=178&type=chunk) [Research and Development](index=38&type=section&id=Research%20and%20Development) - Research and development expenses increased by **11.7%** for the six months ended June 30, 2025, primarily due to an increase in personnel costs[180](index=180&type=chunk) - R&D expenses are expected to increase in 2025, reflecting strategic investments in cybersecurity and artificial intelligence technologies[181](index=181&type=chunk) [General and Administrative](index=38&type=section&id=General%20and%20Administrative) - General and administrative expenses increased by **23.3%** for the six months ended June 30, 2025, mainly due to higher professional services and personnel costs[183](index=183&type=chunk) - G&A expenses are projected to increase modestly in 2025, maintaining a disciplined investment approach[184](index=184&type=chunk) [Non-Operating Income (Expense)](index=39&type=section&id=Non-Operating%20Income%20(Expense)) Non-Operating Income (Expense) (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- | | Interest income | $4,784 | $3,442 | $1,342 | 39.0% | | Interest expense | $2,200 | $— | $2,200 | N/A | | Interest and other income (expense), net | $(1,466) | $3,632 | $(5,098) | -140.4% | - The net loss in 'Interest and other income (expense), net' for 2025 was primarily due to foreign currency exchange fluctuations and the absence of investments in publicly held equity securities, compared to net gains in 2024[188](index=188&type=chunk) [Provision for Income Taxes](index=39&type=section&id=Provision%20for%20Income%20Taxes) Provision for Income Taxes (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Provision for income taxes | $2,326 | $3,001 | $(675) | -22.5% | [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity Position (as of June 30, 2025, in millions) | Metric | Amount | | :-------------------------- | :----- | | Cash and cash equivalents | $252.9 | | Marketable securities | $114.5 | | Working capital | $348.9 | | Total stockholders' equity | $204.0 | - The company believes its existing cash, cash equivalents, and marketable securities are sufficient to meet anticipated cash needs for at least the next 12 months and beyond[191](index=191&type=chunk) - In March 2025, the company issued 2030 Notes, generating approximately **$217.7 million** in net proceeds, significantly boosting liquidity[192](index=192&type=chunk) - A new **$75 million** stock repurchase program (2025 Program) was authorized on May 1, 2025. Through June 30, 2025, **$47.5 million** was spent on repurchases under the 2024 and 2025 Programs[193](index=193&type=chunk) - The company paid cash dividends of **$0.06 per share**, totaling **$8.8 million**, for the six months ended June 30, 2025, and anticipates continuing comparable quarterly cash dividends[194](index=194&type=chunk) [Statements of Cash Flows](index=41&type=section&id=Statements%20of%20Cash%20Flows) Summary of Cash Flow Activities (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Operating activities | $39,384 | $44,650 | | Investing activities | $(41,241) | $(42,472) | | Financing activities | $159,652 | $(21,965) | | Net increase (decrease) in cash and cash equivalents | $157,795 | $(19,787) | - Cash provided by operating activities decreased in 2025 primarily due to unfavorable changes in accounts payable, deferred revenue, accrued liabilities, and prepaid expenses, partially offset by favorable changes in accounts receivable and inventory[198](index=198&type=chunk)[199](index=199&type=chunk) - Cash used in investing activities in 2025 included **$19.1 million** for the acquisition of ThreatX Protect[202](index=202&type=chunk) - Cash provided by financing activities significantly increased in 2025 due to **$217.7 million** in proceeds from the issuance of convertible notes, partially offset by stock repurchases and dividend payments[204](index=204&type=chunk) [Contractual Obligations](index=42&type=section&id=Contractual%20Obligations) - As of June 30, 2025, contractual obligations primarily consisted of **$11.7 million** in non-cancellable operating lease arrangements, expiring through April 2028[206](index=206&type=chunk) [Critical Accounting Policies and Estimates](index=42&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - The Company applied fair value measurement requirements for the ThreatX Protect acquisition in February 2025, using estimates and assumptions for allocating purchase consideration to tangible and intangible assets[208](index=208&type=chunk) - There have been no other material changes to the Company's critical accounting policies and estimates during the six months ended June 30, 2025[209](index=209&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, specifically foreign currency risk and interest rate sensitivity, and how these risks are managed [Foreign Currency Risk](index=43&type=section&id=Foreign%20Currency%20Risk) - The company's financial results are subject to fluctuations from changes in foreign currency exchange rates, particularly the Japanese Yen, British Pound, and Euro against the U.S. Dollar[210](index=210&type=chunk)[211](index=211&type=chunk) - Net foreign exchange gains were **$0.7 million** for the six months ended June 30, 2025, compared to **$2.8 million** in the same period of 2024[212](index=212&type=chunk) - A hypothetical **10%** change in exchange rates would not have a significant impact on the condensed consolidated results of operations[212](index=212&type=chunk) [Interest Rate Sensitivity](index=43&type=section&id=Interest%20Rate%20Sensitivity) - Exposure to market risk for changes in interest rates primarily relates to the company's marketable securities portfolio, which includes corporate, U.S. Treasury, and agency securities[213](index=213&type=chunk) - As of June 30, 2025, the marketable securities portfolio had a fair value of **$114.5 million**[213](index=213&type=chunk) Hypothetical Fair Values of Marketable Securities (as of June 30, 2025, in thousands) | Interest Rate Shift | Fair Value | | :------------------ | :--------- | | -150 BPS | $115,565 | | -100 BPS | $115,197 | | -50 BPS | $114,828 | | **Actual (6/30/2025)** | **$114,459** | | +50 BPS | $114,090 | | +100 BPS | $113,720 | | +150 BPS | $113,350 | [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details management's evaluation of the effectiveness of the company's disclosure controls and procedures and internal control over financial reporting [Management's Evaluation of Disclosure Controls and Procedures](index=44&type=section&id=Management's%20Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[218](index=218&type=chunk) - The condensed consolidated financial statements included in this Form 10-Q present fairly, in all material respects, and in conformity with U.S. GAAP[218](index=218&type=chunk) [Changes in Internal Control over Financial Reporting](index=44&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - There were no material changes in the company's internal control over financial reporting during the three months ended June 30, 2025[219](index=219&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=44&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) - Management acknowledges that control systems provide only reasonable, not absolute, assurance and are subject to inherent limitations, including resource constraints and the need for judgment[220](index=220&type=chunk) [PART II. OTHER INFORMATION](index=45&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings and assesses the probability and amount of potential losses. Significant judgment is required, and actual outcomes may differ materially from estimates - The Company is involved in various legal proceedings with outcomes that are not entirely within its control and may not be known for prolonged periods[221](index=221&type=chunk) - A liability for claims is recorded when a loss is deemed probable and reasonably estimable, but judgments are subjective and actual outcomes could materially differ[221](index=221&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors from the 2024 Annual Report, highlighting new or materially changed risks related to intellectual property, litigation, laws, regulations, and the company's convertible indebtedness [Risks Related to Intellectual Property, Litigation, Laws and Regulations](index=45&type=section&id=Risks%20Related%20to%20Intellectual%20Property%2C%20Litigation%2C%20Laws%20and%20Regulations) - Significant uncertainty exists regarding U.S. trade policies, tariffs, and import/export restrictions, particularly with China, which could negatively affect global economic conditions and the company's business[223](index=223&type=chunk) - Increased tariffs could lead to higher costs, reduced profits, price increases, and customer delays or cancellations, potentially placing the company at a disadvantage compared to competitors[223](index=223&type=chunk)[224](index=224&type=chunk) - Trade disruptions could depress economic activity, restrict access to suppliers or customers, and materially adversely affect the company's business, financial condition, and operating results[225](index=225&type=chunk) [Risks Related to Our Convertible Indebtedness](index=46&type=section&id=Risks%20Related%20to%20Our%20Convertible%20Indebtedness) - The potential issuance of common stock upon conversion of the 2030 Notes could depress the trading price of the common stock and dilute existing stockholders' economic and voting rights[226](index=226&type=chunk) - The company may be unable to raise sufficient funds to repurchase the 2030 Notes following a fundamental change or to pay cash amounts due upon maturity or conversion, which could lead to a default[227](index=227&type=chunk) - Provisions within the 2030 Notes Indenture could make a third-party attempt to acquire the company more difficult or expensive, potentially discouraging beneficial takeovers[228](index=228&type=chunk) - The requirement to settle at least a portion of conversion obligations for the 2030 Notes in cash could materially and adversely affect the company's financial position and liquidity[229](index=229&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's stock repurchase activities under the newly authorized 2025 Program - On May 1, 2025, the Board authorized a new stock repurchase program (the "2025 Program") for up to **$75 million** of common stock, with no specified term or termination date[230](index=230&type=chunk) Share Repurchase Activity (Three Months Ended June 30, 2025, in thousands, except per share) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs | | :--------------- | :----------------------------- | :--------------------------- | :----------------------------------------------------------------------- | :-------------------------------------------------------------------------- | | April 1 - 30, 2025 | — | $— | — | $— | | May 1 - 31, 2025 | 229 | $17.22 | 229 | $71,058 | | June 1 - 30, 2025 | — | $— | — | $— | | **Total** | **229** | | | **$71,058** | [Item 5. Other Information](index=47&type=section&id=Item%205.%20Other%20Information) This section states that there were no adoptions or terminations of Rule 10b5-1 or non-Rule 10b5-1 trading arrangements by directors or officers during the quarter - No directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the fiscal quarter ended June 30, 2025[232](index=232&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Quarterly Report on Form 10-Q Exhibit Index Highlights | Exhibit Number | Description | | :------------- | :---------- | | 3.1 | Amended and Restated Certificate of Incorporation | | 3.2 | Amended and Restated Bylaws | | 10.1+* | Form of Performance-Based Restricted Stock Unit Agreement | | 10.2+ | 2014 Employee Stock Purchase Plan, as amended | | 31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act | | 31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act | | 32.1** | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act | | 32.2** | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act | | 101* | Inline XBRL Document Set for condensed consolidated financial statements | | 104* | Inline XBRL for the cover page | [Signatures](index=49&type=section&id=Signatures) - The report was signed on August 5, 2025, by Dhrupad Trivedi, President and Chief Executive Officer, and Brian Becker, Chief Financial Officer[240](index=240&type=chunk)

Executive Summary [Q2 2025 Performance Overview](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Summary) A10 Networks reported strong Q2 2025 financial results, driven by normalized end markets, data center expansions, and AI infrastructure investments, achieving year-over-year revenue growth, improved GAAP and non-GAAP net margins, increased EPS, and robust cash flow from operations - Demand for security and infrastructure solutions grew due to normalized end markets, data center expansions, and AI infrastructure investments, including selection by global AI data center leaders[3](index=3&type=chunk) - A10 Networks demonstrated strong operational discipline, translating revenue growth into improved profitability and cash flow, with expansion in both GAAP and non-GAAP net margins and increased earnings per share[3](index=3&type=chunk) [Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) A10 Networks reported significant year-over-year growth in Q2 2025, with revenue up **15%** to **$69.4 million** and diluted EPS increasing for both GAAP (**$0.14**) and non-GAAP (**$0.21**), while returning **$8.3 million** to investors and approving a quarterly cash dividend of **$0.06 per share** Q2 2025 Key Financial Highlights | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | YoY Change | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Revenue | $69,400 | $60,100 | +15% | | GAAP Gross Margin | 78.9% | - | - | | Non-GAAP Gross Margin | 80.0% | - | - | | GAAP Net Income | $10,500 | $9,500 | +10.5% | | GAAP Net Income (% of revenue) | 15.2% | 15.8% | -0.6 pp | | GAAP Diluted EPS | $0.14 | $0.13 | +$0.01 | | Non-GAAP Net Income | $15,500 | $13,200 | +17.4% | | Non-GAAP Net Income (% of revenue) | 22.3% | 22.0% | +0.3 pp | | Non-GAAP Diluted EPS | $0.21 | $0.18 | +$0.03 | - The company returned **$8.3 million** to investors in Q2 2025, comprising **$3.9 million** for repurchasing **229 thousand shares** at an average price of **$17.22**, and **$4.3 million** in cash dividends, with **$71.1 million** remaining on the **$75.0 million** share repurchase authorization[7](index=7&type=chunk) - The Board of Directors approved a quarterly cash dividend of **$0.06 per share**, payable September 2, 2025, to stockholders of record on August 15, 2025[7](index=7&type=chunk) Conference Call Information [Conference Call Details](index=1&type=section&id=Conference%20Call%20Details) Management will host a conference call on August 5, 2025, at 1:30 p.m. Pacific time to discuss the Q2 2025 results, with details for accessing the call via phone or live audio webcast provided, along with replay information - A conference call to discuss Q2 2025 results will be held on August 5, 2025, at 1:30 p.m. Pacific time (4:30 p.m. Eastern time)[4](index=4&type=chunk) - Participants can access the call by dialing (888) 506-0062 (toll-free) or (973) 528-0011 (international) using access code: 117352; a live audio webcast will be available on investors.a10networks.com and archived for one year[4](index=4&type=chunk)[5](index=5&type=chunk) Forward-Looking Statements & Risk Factors [Forward-Looking Statements Disclosure](index=1&type=section&id=Forward-Looking%20Statements%20Disclosure) This section outlines that the press release contains forward-looking statements regarding future performance, strategy, and capital returns, which are subject to known and unknown risks and uncertainties, including macroeconomic conditions, trade dynamics, supply chain issues, and other risks detailed in SEC filings - The report contains forward-looking statements about quarterly dividends, strategy, positioning, demand, growth, margins, operating leverage, profitability, and capital return, which are subject to known and unknown risks and uncertainties[8](index=8&type=chunk) - Actual results may differ due to factors such as unforeseen capital needs, global macroeconomic or political conditions, trade dynamics, supply chain disruptions, customer order changes, execution risks, market adoption, product development, profitability, competitive position, and risks detailed in SEC filings (e.g., Form 10-K filed February 25, 2025)[8](index=8&type=chunk) - The company does not intend to update or alter forward-looking statements unless required by applicable law[8](index=8&type=chunk) Non-GAAP Financial Measures Explanation [Non-GAAP Financial Measures Definition and Use](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20Definition%20and%20Use) A10 Networks uses non-GAAP financial measures, such as non-GAAP net income, EPS, gross profit, operating expenses, operating income, Adjusted EBITDA, and their respective margins, to provide additional insight into its core operating performance, excluding specific items like stock-based compensation and acquisition-related expenses - A10 Networks uses non-GAAP financial measures (e.g., non-GAAP net income, EPS, gross profit, operating expenses, operating income, Adjusted EBITDA) to provide useful insights into core operating performance, excluding unusual events or factors[9](index=9&type=chunk)[10](index=10&type=chunk) - Non-GAAP net income excludes stock-based compensation and related payroll tax, acquisition-related expense, amortization of purchased intangible assets, one-time legal expense, tax planning expense, and the income tax effect of these items; similar adjustments apply to other non-GAAP metrics[11](index=11&type=chunk) - Non-GAAP measures are for supplemental informational purposes only and should not be considered in isolation from or as a substitute for GAAP financial information[10](index=10&type=chunk)[12](index=12&type=chunk) About A10 Networks [Company Overview](index=4&type=section&id=Company%20Overview) A10 Networks, founded in **2004** and based in San Jose, California, is a leading provider of security and infrastructure solutions for on-premises, hybrid cloud, and edge-cloud environments, serving over **7,000** global customers to ensure their business-critical applications and networks are secure, available, and efficient - A10 Networks provides security and infrastructure solutions for on-premises, hybrid cloud, and edge-cloud environments[13](index=13&type=chunk) - The company serves over **7,000 customers**, including global large enterprises and communications, cloud, and web service providers, helping them ensure business-critical applications and networks are secure, available, and efficient[13](index=13&type=chunk) - Founded in **2004**, A10 Networks is headquartered in San Jose, California, and operates globally[13](index=13&type=chunk) Financial Statements (GAAP) [Condensed Consolidated Statements of Operations](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) For Q2 2025, A10 Networks reported GAAP total net revenue of **$69.383 million**, a **15.45% increase** year-over-year, primarily driven by product revenue growth, with GAAP net income increasing to **$10.538 million**, resulting in diluted EPS of **$0.14** Condensed Consolidated Statements of Operations (GAAP, Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------- | :------ | :------ | :--------- | | Products Revenue | $39,173 | $29,533 | +32.64% | | Services Revenue | $30,210 | $30,563 | -1.15% | | Total Net Revenue | $69,383 | $60,096 | +15.45% | | Gross Profit | $54,711 | $48,058 | +13.84% | | Income from Operations | $10,311 | $7,916 | +30.26% | | Net Income | $10,538 | $9,476 | +11.21% | | Diluted EPS | $0.14 | $0.13 | +$0.01 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2025, A10 Networks' total assets significantly increased to **$607.915 million** from **$432.815 million** at December 31, 2024, primarily due to a substantial rise in cash and cash equivalents and the addition of long-term debt, with total liabilities also increasing considerably Condensed Consolidated Balance Sheets (GAAP, as of June 30, 2025 vs Dec 31, 2024) | Metric (in thousands) | June 30, 2025 | Dec 31, 2024 | Change | | :-------------------- | :------------ | :----------- | :----- | | Cash and Cash Equivalents | $252,924 | $95,129 | +$157,795 | | Total Current Assets | $457,062 | $307,288 | +$149,774 | | Goodwill | $15,070 | $1,307 | +$13,763 | | Intangible Assets, net | $7,018 | $0 | +$7,018 | | Total Assets | $607,915 | $432,815 | +$175,100 | | Total Current Liabilities | $108,159 | $123,573 | -$15,414 | | Long-term Debt | $218,086 | $0 | +$218,086 | | Total Liabilities | $403,927 | $200,986 | +$202,941 | | Total Stockholders' Equity | $203,988 | $231,829 | -$27,841 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the six months ended June 30, 2025, net cash provided by operating activities decreased to **$39.384 million** from **$44.650 million** year-over-year, while financing activities generated a significant net cash inflow of **$159.652 million**, primarily due to proceeds from convertible notes, leading to a substantial increase in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (GAAP, Six Months Ended June 30, 2025 vs 2024) | Metric (in thousands) | 6 Months 2025 | 6 Months 2024 | Change | | :-------------------------------- | :------------ | :------------ | :----- | | Net Cash Provided by Operating Activities | $39,384 | $44,650 | -$5,266 | | Net Cash Used in Investing Activities | $(41,241) | $(42,472) | +$1,231 | | Net Cash Provided by (Used in) Financing Activities | $159,652 | $(21,965) | +$181,617 | | Proceeds from Issuance of Convertible Notes | $225,000 | $0 | +$225,000 | | Repurchase of Common Stock | $(50,973) | $(14,876) | -$36,097 | | Net Increase (Decrease) in Cash and Cash Equivalents | $157,795 | $(19,787) | +$177,582 | | Cash and Cash Equivalents - End of Period | $252,924 | $77,457 | +$175,467 | Non-GAAP Reconciliations [Reconciliation of GAAP Net Income to Non-GAAP Net Income](index=6&type=section&id=RECONCILIATION%20OF%20GAAP%20NET%20INCOME%20TO%20NON-GAAP%20NET%20INCOME) For Q2 2025, non-GAAP net income was **$15.453 million**, an increase from **$13.210 million** in Q2 2024, primarily due to adjustments for stock-based compensation, acquisition-related expenses, amortization of purchased intangibles, and one-time legal expenses, with non-GAAP diluted EPS increasing to **$0.21** from **$0.18** year-over-year Reconciliation of GAAP Net Income to Non-GAAP Net Income (Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | GAAP Net Income | $10,538 | $9,476 | +11.21% | | Total Non-GAAP Adjustments | $4,915 | $3,734 | +31.64% | | Non-GAAP Net Income | $15,453 | $13,210 | +17.00% | | GAAP Diluted EPS | $0.14 | $0.13 | +$0.01 | | Non-GAAP Diluted EPS | $0.21 | $0.18 | +$0.03 | [Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit](index=9&type=section&id=RECONCILIATION%20OF%20GAAP%20GROSS%20PROFIT%20TO%20NON-GAAP%20GROSS%20PROFIT) In Q2 2025, non-GAAP gross profit was **$55.494 million**, up from **$48.621 million** in Q2 2024, with a non-GAAP gross margin of **80.0%**, reflecting adjustments primarily for stock-based compensation and amortization of purchased intangible assets Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | GAAP Gross Profit | $54,711 | $48,058 | +13.84% | | GAAP Gross Margin | 78.9% | 80.0% | -1.1 pp | | Non-GAAP Gross Profit | $55,494 | $48,621 | +14.14% | | Non-GAAP Gross Margin | 80.0% | 80.9% | -0.9 pp | [Reconciliation of GAAP Total Operating Expenses to Non-GAAP Total Operating Expenses](index=9&type=section&id=RECONCILIATION%20OF%20GAAP%20TOTAL%20OPERATING%20EXPENSES%20TO%20NON-GAAP%20TOTAL%20OPERATING%20EXPENSES) Non-GAAP total operating expenses for Q2 2025 were **$39.136 million**, an increase from **$35.925 million** in Q2 2024, with this adjustment primarily excluding stock-based compensation, acquisition-related expenses, amortization of purchased intangibles, one-time legal expenses, and tax planning expenses Reconciliation of GAAP Total Operating Expenses to Non-GAAP Total Operating Expenses (Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | GAAP Total Operating Expenses | $44,400 | $40,142 | +10.61% | | Non-GAAP Total Operating Expenses | $39,136 | $35,925 | +8.94% | [Reconciliation of GAAP Income from Operations to Non-GAAP Operating Income](index=10&type=section&id=RECONCILIATION%20OF%20GAAP%20INCOME%20FROM%20OPERATIONS%20TO%20NON-GAAP%20OPERATING%20INCOME) For Q2 2025, non-GAAP operating income increased to **$16.358 million** from **$12.696 million** in Q2 2024, resulting in a non-GAAP operating margin of **23.6%**, with this improvement driven by adjustments for non-cash and one-time expenses Reconciliation of GAAP Income from Operations to Non-GAAP Operating Income (Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | GAAP Income from Operations | $10,311 | $7,916 | +30.26% | | GAAP Operating Margin | 14.9% | 13.2% | +1.7 pp | | Non-GAAP Operating Income | $16,358 | $12,696 | +28.84% | | Non-GAAP Operating Margin | 23.6% | 21.1% | +2.5 pp | [Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA (NON-GAAP)](index=10&type=section&id=RECONCILIATION%20OF%20GAAP%20NET%20INCOME%20TO%20EBITDA%20AND%20ADJUSTED%20EBITDA%20(NON-GAAP)) In Q2 2025, Adjusted EBITDA reached **$19.659 million**, up from **$15.511 million** in Q2 2024, with an Adjusted EBITDA margin of **28.3%**, reflecting adjustments to GAAP net income for interest, depreciation, taxes, stock-based compensation, acquisition-related expenses, one-time legal expenses, and tax planning expenses Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA (Q2 2025 vs Q2 2024) | Metric (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | GAAP Net Income | $10,538 | $9,476 | +11.21% | | EBITDA | $13,992 | $10,731 | +30.39% | | Adjusted EBITDA | $19,659 | $15,511 | +26.74% | | Adjusted EBITDA Margin | 28.3% | 25.8% | +2.5 pp |

Industry Overview - The Zacks Communication-Network Software industry includes companies providing software solutions for cloud, on-premise, and hybrid environments, as well as communication technology solutions like broadband and VoIP [2] - The industry supports the deployment of 5G and 6G networks and offers solutions for various sectors including telecommunications, technology, and government [2] Current Trends - There is an increased adoption of cloud-based solutions driven by digitalization, leading to higher demand for cloud applications and security solutions [3] - Automation tools are becoming essential as enterprises transition to the cloud, improving performance monitoring and reducing costs [4] - The rapid evolution of 5G and 6G networks is creating growth opportunities due to rising demand for data-intensive applications and reduced latency [5] Performance Metrics - The Zacks Communication-Network Software industry has outperformed the Zacks S&P 500 composite and its sector, appreciating 23% over the past year compared to 10.6% for the Zacks Computer and Technology sector and 11.6% for the S&P 500 [9] - The industry is currently trading at an EV/Sales ratio of 2.68X, lower than the S&P 500's 5.19X and the sector's 7.08X, indicating potential valuation opportunities [12] Notable Companies - A10 Networks (Zacks Rank 2) is a leading provider of security and infrastructure solutions, benefiting from strong demand in AI-related data centers and expected to see significant security revenue growth by 2025 [16][17] - Ondas (Zacks Rank 3) provides private wireless and drone solutions, with a strong order backlog of $16.8 million and projected revenues of at least $25 million for 2025 [19][20]