Core Insights - NETGEAR, Inc. reported quarterly earnings of $0.06 per share, exceeding the Zacks Consensus Estimate of a loss of $0.16 per share, and showing improvement from a loss of $0.74 per share a year ago, resulting in an earnings surprise of +137.50% [1] - The company achieved revenues of $170.53 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 5.25% and increasing from $143.9 million year-over-year [2] Financial Performance - Over the last four quarters, NETGEAR has consistently surpassed consensus EPS estimates, achieving this four times [2] - The company has also topped consensus revenue estimates four times in the last four quarters [2] Stock Performance and Outlook - NETGEAR shares have declined approximately 10% since the beginning of the year, contrasting with the S&P 500's gain of 8.3% [3] - The current consensus EPS estimate for the upcoming quarter is -$0.07 on revenues of $177.31 million, and for the current fiscal year, it is -$0.23 on revenues of $689.92 million [7] Industry Context - The Computer - Networking industry, to which NETGEAR belongs, is currently ranked in the top 37% of over 250 Zacks industries, indicating a favorable outlook compared to lower-ranked industries [8]

Financial Data and Key Metrics Changes - In Q2 2025, the company reported net revenue of $170.5 million, exceeding guidance and reflecting an 18.5% year-over-year growth and a 5.2% sequential increase [7][24]. - Non-GAAP gross margins reached an all-time high of 37.8%, a significant increase from 22.4% in the prior year [29]. - Non-GAAP operating loss was $1.2 million, resulting in a non-GAAP operating margin of negative 0.7%, an improvement of 2,090 basis points year-over-year [32]. Business Line Data and Key Metrics Changes - The NFV segment led revenue growth with $82.6 million, up 38% year-over-year and 4.3% sequentially [25]. - Home Networking revenue was $67.5 million, reflecting a 13.1% year-over-year increase and a 10% sequential growth [26]. - The Mobile segment generated $20.4 million in revenue, down 16.1% year-over-year and 5% sequentially due to weaker service provider sales [27]. Market Data and Key Metrics Changes - The company noted strong demand for its ProAV managed switch products, with a 14% sequential revenue growth despite supply constraints [11][25]. - The home networking market remains competitive, with the company gaining market share during Prime Day despite aggressive competition from TP Link [66]. Company Strategy and Development Direction - The company is focused on a transformation strategy aimed at delivering long-term shareholder value through profitable growth, with positive contribution margins achieved across all business units [8][21]. - The launch of the new AV Professional Services Group is part of the strategy to enhance enterprise value and drive higher-margin revenue [12][56]. - The company is investing in software development capabilities and enhancing go-to-market strategies to support its NFV business [35][76]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position amidst geopolitical tensions, noting that most products remain exempt from tariffs and that the company does not manufacture in China [19]. - The outlook for Q3 2025 anticipates net revenue between $165 million and $180 million, with continued investments in software development and operational capabilities [35]. Other Important Information - The company completed the acquisition of Acxiom to enhance its NFV portfolio and repurchased $7.5 million of its shares during the quarter [25][33]. - The company ended Q2 with $363.5 million in cash and short-term investments, down from the previous quarter due to acquisitions and share repurchases [33]. Q&A Session Summary Question: Can you provide more details on ProAV and the supply constraints? - Management confirmed that ProAV has become a significant part of the business, contributing to about 25% of NETGEAR's overall top line, and expects to start reducing backlog towards the end of Q3 [40][43]. Question: How should we think about OpEx ramping through the back half of the year? - Management indicated a mid-single-digit increase in OpEx due to ongoing investments, with expectations for a sequential decrease in Q4 [46][49]. Question: What parts of NFB will the new professional services affect the most? - The professional services will initially support the AV business, with expectations for significant growth in recurring revenue in 2026 [56]. Question: Any updates on TP Link and the competitive landscape? - Management remains confident that the current geopolitical climate will serve as a tailwind for NETGEAR, positioning the company well to capitalize on market opportunities [58][62]. Question: Can you provide an update on software insourcing? - The company has made significant progress in insourcing software development, which is expected to lead to better product quality and faster execution [76].

[Q2 2025 Financial and Operational Highlights](index=1&type=section&id=Q2%202025%20Financial%20and%20Operational%20Highlights) [Overall Performance](index=1&type=section&id=Overall%20Performance) The company reported strong Q2 2025 results, exceeding revenue and operating margin guidance while achieving record gross margins Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $170.5M | $143.9M | +18.5% YoY | | GAAP Gross Margin | 37.5% | 22.1% | +1,540 bps YoY | | Non-GAAP Gross Margin | 37.8% | 22.4% | +1,540 bps YoY | | GAAP Operating Income | $(9.5)M | $(46.9)M | Improvement | | Non-GAAP Operating Income | $(1.2)M | $(31.1)M | Improvement | | GAAP EPS | $(0.22) | $(1.56) | Improvement | | Non-GAAP EPS | $0.06 | $(0.74) | Improvement | - The company's transformation is accelerating due to proactive strategic investments, streamlined operating costs, and **strong demand for new products**[4](index=4&type=chunk) - Completed the acquisition of Exium to integrate its SASE platform and add security offerings to the **NETGEAR For Business (NFB) segment**[1](index=1&type=chunk)[6](index=6&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlighted record gross margins, improved profitability, and a strong cash position despite recent acquisitions - The company delivered results **above the high end of guidance** and achieved record gross margins, with each business unit showing significant year-over-year contribution margin increases[4](index=4&type=chunk) - Days Sales Outstanding (DSOs) reached an **eight-year low of 77 days**, and the company ended the quarter with nearly $364 million in cash and short-term investments[4](index=4&type=chunk) [Segment Performance Analysis](index=2&type=section&id=Segment%20Performance%20Analysis) [NETGEAR For Business (NFB)](index=2&type=section&id=NETGEAR%20For%20Business%20(NFB)) The NFB segment delivered strong results with significant year-over-year revenue growth driven by high demand for ProAV solutions NFB Segment Q2 2025 Performance | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $82.6M | +38.0% | | Non-GAAP Gross Margin | 46.7% | +1,300 bps | | Non-GAAP Contribution Margin | 19.3% | +1,590 bps | - ProAV solutions saw **double-digit year-over-year sell-through growth** across all geographies, leading to a significant backlog entering Q3[6](index=6&type=chunk) [Home Networking](index=2&type=section&id=Home%20Networking) The Home Networking segment exceeded expectations in revenue and profitability, aided by a favorable product mix and inventory management Home Networking Segment Q2 2025 Performance | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $67.5M | +13.1% | | Non-GAAP Gross Margin | 29.5% | +1,800 bps | | Non-GAAP Contribution Margin | 4.7% | +2,590 bps | - The company launched the Orbi 370, its **most affordable WiFi 7 mesh system**, to broaden its market reach[7](index=7&type=chunk) [Mobile](index=2&type=section&id=Mobile) The Mobile segment's revenue declined due to softer demand from service providers, though the retail channel performed ahead of expectations Mobile Segment Q2 2025 Performance | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $20.4M | -16.1% | | Non-GAAP Gross Margin | 29.1% | +750 bps | | Non-GAAP Contribution Margin | 0.7% | +550 bps | - **Softer service provider demand** led to a muted performance, though the retail channel exceeded expectations[8](index=8&type=chunk) [Q3 2025 Business Outlook](index=2&type=section&id=Q3%202025%20Business%20Outlook) [Guidance for Third Quarter 2025](index=3&type=section&id=Guidance%20for%20Third%20Quarter%202025) The company anticipates Q3 2025 net revenue between $165 million and $180 million, with increased investments in the NFB business Q3 2025 Financial Guidance | Metric | Guidance Range | | :--- | :--- | | Net Revenue | $165M - $180M | | GAAP Operating Margin | (11.0)% to (8.0)% | | Non-GAAP Operating Margin | (5.5)% to (2.5)% | | GAAP Tax Expense | $0.8M to $1.8M | | Non-GAAP Tax Expense | $(0.5)M to $0.5M | - The company expects continued strong demand for its NFB ProAV line but faces **lengthy supply lead times**[13](index=13&type=chunk) [Financial Statements and Supplemental Data](index=7&type=section&id=Financial%20Statements%20and%20Supplemental%20Data) [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets stood at $803.6 million as of June 29, 2025, with cash, cash equivalents, and short-term investments totaling $363.5 million Balance Sheet Summary (in thousands) | Account | June 29, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and short-term investments | $363,472 | $408,690 | | Accounts receivable, net | $144,871 | $156,210 | | Inventories | $157,305 | $162,539 | | **Total Assets** | **$803,550** | **$850,230** | | Total current liabilities | $243,141 | $270,083 | | **Total Liabilities** | **$280,392** | **$309,164** | | **Total Stockholders' Equity** | **$523,158** | **$541,066** | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported Q2 2025 net revenue of $170.5 million and a significantly improved GAAP net loss of $6.4 million Statement of Operations Summary - Q2 (in thousands) | Account | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net revenue | $170,532 | $143,900 | | Gross profit | $63,978 | $31,823 | | Gross margin | 37.5% | 22.1% | | Loss from operations | $(9,540) | $(46,859) | | **Net loss** | **$(6,428)** | **$(45,175)** | | **Net loss per share, diluted** | **$(0.22)** | **$(1.56)** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, net cash used in operating activities was $10.5 million, primarily due to business and financing activities Cash Flow Summary - Six Months Ended (in thousands) | Activity | June 29, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(10,520) | $35,635 | | Net cash used in investing activities | $(16,900) | $(12,905) | | Net cash used in financing activities | $(18,004) | $(22,343) | | **Net decrease in cash** | **$(45,424)** | **$387** | | Cash at end of period | $241,020 | $177,104 | [Reconciliation of GAAP to Non-GAAP Measures](index=10&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) Non-GAAP figures are provided to clarify ongoing operational performance by excluding items like stock-based compensation and acquisition expenses Q2 2025 GAAP to Non-GAAP Reconciliation (in thousands) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Gross Profit | $63,978 | $456 | $64,434 | | Operating Loss | $(9,540) | $8,317 | $(1,223) | | Net Loss | $(6,428) | $8,109 | $1,681 | [Supplemental Financial Information](index=12&type=section&id=Supplemental%20Financial%20Information) Supplemental data shows improved DSOs, with the Americas remaining the largest market and NFB leading segment revenue - Days Sales Outstanding (DSO) improved to **77 days** in Q2 2025 from 93 days in Q2 2024[37](index=37&type=chunk) Q2 2025 Net Revenue by Geography | Region | Revenue (in thousands) | Percentage | | :--- | :--- | :--- | | Americas | $116,279 | 68% | | EMEA | $34,375 | 20% | | APAC | $19,878 | 12% | | **Total** | **$170,532** | **100%** | Q2 2025 Segment Data (Non-GAAP, in thousands) | Segment | Net Revenue | Gross Profit | Contribution Income | | :--- | :--- | :--- | :--- | | NETGEAR for Business | $82,621 | $38,585 | $15,962 | | Mobile | $20,408 | $5,932 | $133 | | Home Networking | $67,503 | $19,917 | $3,154 | [Notes on Financial Reporting](index=4&type=section&id=Notes%20on%20Financial%20Reporting) [Use of Non-GAAP Financial Measures](index=4&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) Non-GAAP measures supplement GAAP results to provide a better understanding of the company's ongoing operational performance - Non-GAAP measures are used for **performance evaluation, strategic planning, and determining management incentive compensation**[21](index=21&type=chunk) - Key adjustments to GAAP results include excluding **stock-based compensation, acquisition-related expenses, and restructuring charges**[19](index=19&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk)

Core Viewpoint - NETGEAR, Inc. (NTGR) has received an upgrade to a Zacks Rank 1 (Strong Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in a company's earnings picture, which is crucial for predicting near-term stock price movements [2][3]. - A strong correlation exists between earnings estimate revisions and stock price movements, with institutional investors using these estimates to determine fair value [3]. Business Improvement Indicators - Rising earnings estimates and the Zacks rating upgrade for NETGEAR suggest an improvement in the company's underlying business, which could lead to higher stock prices [4]. - Over the past three months, the Zacks Consensus Estimate for NETGEAR has increased by 37.4% [7]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [6]. - Only the top 5% of Zacks-covered stocks receive a "Strong Buy" rating, indicating superior earnings estimate revisions [8][9].

Group 1: Acquisition and Strategic Focus - NETGEAR Inc. (NTGR) has signed a definitive agreement to acquire Exium, a cybersecurity company, emphasizing its commitment to cloud-based innovations and networking solutions for SMEs and MSPs [1][10] - The acquisition aims to create a fully integrated SASE platform, combining networking and cybersecurity functions to meet the evolving needs of SMEs [2][4] Group 2: Market Potential and Growth - The SASE market is projected to reach $25 billion by 2027, growing at a CAGR of 29%, driven by the shift towards cloud-driven networking and security solutions [3] - By integrating Exium's technology, NETGEAR for Business (NFB) plans to offer a comprehensive solution that combines wired and wireless connectivity with advanced security features [3][4] Group 3: Financial Performance and Outlook - Revenues in the NFB segment increased by 15.4% year over year to $79.2 million, with a gross margin improvement to 46.3%, reflecting a 440 basis point increase from the previous year [6] - NETGEAR reported $8.7 million in recurring revenues with a subscriber base of 559,000, which is crucial for long-term financial health [8] Group 4: Seasonal Trends and Challenges - The company's business follows a seasonal pattern, with higher sales typically in the third and fourth quarters due to back-to-school and holiday shopping [9] - Supply constraints for certain managed switch models are expected to improve starting in the second quarter of the year [7]

Industry Overview - The Zacks Computer - Networking industry is facing heightened uncertainty due to global macroeconomic conditions and volatile supply-chain dynamics, with telecom operators reducing or delaying capital expenditures [1][4] - Despite short-term challenges, the industry is expected to benefit from increased focus on cloud computing, network security, big data, and cloud storage, particularly with the rapid adoption of AI technology [1][5] Trends Influencing the Industry - The accelerated deployment of 5G technology is driving demand for robust networking infrastructure, including IoT, Advanced Driver Assistance Systems, AR/VR devices, and 5G smartphones [2][6] - The Wi-Fi 7 upgrade cycle is anticipated to further stimulate demand for innovative networking products, benefiting major players like Cisco, Extreme Networks, and NETGEAR [2][7] - Innovation in networking technologies, including network virtualization and Software-Defined Networking, is opening new business avenues as enterprises seek to manage fixed and wireless devices securely [5] Performance Metrics - The Zacks Computer - Networking industry has outperformed the S&P 500 Composite and the broader Zacks Computer and Technology sector, gaining 35% over the past year compared to the sector's 13% and the S&P 500's 12.7% [11] - The industry is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 19.90X, below the S&P 500's 21.82X and the sector's 25.79X [14] Company Highlights - **Cisco Systems, Inc. (CSCO)**: The company is embedding AI across its security and collaboration platforms, with AI infrastructure orders exceeding $600 million in the third quarter of fiscal 2025, ahead of its $1 billion annual target [18][20] - **NETGEAR, Inc. (NTGR)**: The company reported a 15.4% revenue increase in its NETGEAR for Business segment, but overall revenues declined by 1.5% year-over-year, highlighting challenges in certain business units [25][26] - **Extreme Networks (EXTR)**: The company experienced a 35% year-over-year revenue growth, driven by strong demand for its AI-driven cloud networking solutions, and has raised its revenue guidance for fiscal 2025 [30][32]

Core Viewpoint - NETGEAR Inc.'s share price has appreciated 15% over the past six months, significantly outperforming the Computer Networks Industry's growth of 6.4% and the broader market indices [1][8] Price Performance - NTGR stock closed at $29.12, nearing its 52-week high of $31.55, raising questions about its future trajectory [3] - The stock's recent performance indicates renewed investor confidence despite potential pullbacks [3] Growth Factors - The NETGEAR for Business (NFB) segment saw a revenue increase of 15.4% to $79.2 million, supported by strong demand for ProAV managed switch products [4] - The NFB segment achieved a gross margin of 46.3%, up 440 basis points year-over-year [4] - Recurring revenues reached $8.7 million in the last quarter, with a total of 559,000 recurring subscribers [6] Strategic Initiatives - NETGEAR's 2024 strategic realignment is expected to yield annual cost savings of $20 million, allowing for reinvestment in core growth areas [7] - The company successfully reduced inventory by $86 million in 2024, enhancing revenue predictability [7] - NETGEAR launched new products, including the Nighthawk M7 Pro Mobile Hotspot and the WBE710 WiFi 7 Access Point, to maintain a competitive edge [9] Capital Allocation - NETGEAR repurchased 254,000 shares worth $7.5 million in the last quarter and $33.6 million in 2024, with a remaining authorization for 3.1 million shares [10] - The company holds $392 million in cash and short-term investments, providing liquidity for continued buybacks and strategic investments [10] Valuation - NTGR stock is trading at a trailing 12-month price/book multiple of 1.57, compared to the industry average of 5.25, indicating a compelling valuation [11] Challenges - NETGEAR reported net revenues of $162.1 million, down 1.5% year-over-year, highlighting revenue challenges in certain business units, particularly the Mobile segment [13] - Mobile segment revenues decreased by 23.5% year-over-year, raising concerns about product competitiveness [14] - Despite improving margins, NETGEAR reported a non-GAAP operating loss of $2.6 million, with forecasts indicating continued pressure on profitability [15][16] Investment Outlook - Retaining NTGR stock is considered prudent due to momentum in the NFB segment, increasing recurring revenues, and a strong cash position [17]

Core Viewpoint - NETGEAR, Inc. (NTGR) shares have increased by approximately 5.6% since the last earnings report, outperforming the S&P 500, raising questions about the sustainability of this positive trend leading up to the next earnings release [1]. Group 1: Earnings Report Insights - No earnings estimate revisions have been made by analysts in the last two months, indicating a period of stability in expectations [2]. Group 2: VGM Scores - NETGEAR has a strong Growth Score of A, but a lower Momentum Score of C, and a Value Score of B, placing it in the second quintile for the value investment strategy. The overall aggregate VGM Score is A, which is significant for investors not focused on a single strategy [3]. Group 3: Outlook - NETGEAR holds a Zacks Rank of 3 (Hold), suggesting an expectation of an in-line return from the stock in the upcoming months [4].

Core Viewpoint - NETGEAR, Inc. reported a first-quarter 2025 non-GAAP earnings per share of 2 cents, exceeding the Zacks Consensus Estimate of a loss of 35 cents, and showing improvement from a non-GAAP loss of 28 cents per share in the same quarter last year [1] Financial Performance - NETGEAR generated net revenues of $162.1 million, surpassing the consensus estimate by 6.6% and exceeding the company's guidance of $145-$160 million, although revenues declined 1.5% year-over-year [2] - The company reported an adjusted gross margin increase to 35% from 29.5% year-over-year, while non-GAAP operating loss was $2.6 million compared to an operating income of $16 million in the prior year [8] Segment Performance - Revenues from the NETGEAR for Business (NFB) segment increased by 15.4% year-over-year to $79.2 million, despite a 2% sequential decline, driven by demand for ProAV managed switch products [5] - The Mobile segment revenues decreased by 23.5% year-over-year and 10.9% sequentially to $21.5 million, while Home Networking revenues fell 8.7% year-over-year and 20.8% sequentially to $61.4 million, primarily due to seasonality [6] Regional Performance - Net revenues from the Americas were $107.8 million, accounting for 66% of total revenues, down 2% year-over-year; revenues from Europe, the Middle East, and Africa were $32.1 million, up 3%; and revenues from the Asia Pacific region were $22.2 million, down 5.5% year-over-year [9] Cash Flow and Share Repurchase - For the quarter ended March 31, 2025, NETGEAR used $8.8 million in cash from operations and had $392 million in cash and cash equivalents, with total current liabilities of $241.9 million; the company repurchased 254,000 shares worth $7.5 million during the quarter [10] Guidance - For the second quarter of 2025, NETGEAR predicts net revenues between $155 million and $170 million, with gross margin expected to remain stable or decrease slightly [4][11]

Company Performance - NETGEAR, Inc. reported quarterly earnings of $0.02 per share, exceeding the Zacks Consensus Estimate of a loss of $0.35 per share, and compared to a loss of $0.28 per share a year ago, representing an earnings surprise of 105.71% [1] - The company posted revenues of $162.06 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 6.57%, although this is a decrease from year-ago revenues of $164.59 million [2] - Over the last four quarters, NETGEAR has surpassed consensus EPS estimates four times and has topped consensus revenue estimates four times as well [2] Stock Outlook - NETGEAR shares have declined approximately 13.9% since the beginning of the year, while the S&P 500 has decreased by 5.5% [3] - The current consensus EPS estimate for the upcoming quarter is -$0.28 on revenues of $150.72 million, and for the current fiscal year, it is -$0.75 on revenues of $680.79 million [7] Industry Context - The Computer - Networking industry, to which NETGEAR belongs, is currently ranked in the top 27% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Cisco Systems, a competitor in the same industry, is expected to report quarterly earnings of $0.91 per share, reflecting a year-over-year change of +3.4%, with expected revenues of $14.05 billion, up 10.6% from the previous year [9]