Can Allot's Strong SECaaS Momentum Fuel Continued ARR Growth?

Core Insights - Allot Ltd. (ALLT) is experiencing significant growth in its Cybersecurity-as-a-Service (SECaaS) business, which is becoming the primary growth driver for the company, with an annual recurring revenue (ARR) increase of approximately 60% year over year in Q3 2025 [1][10] Group 1: SECaaS Growth and Revenue - SECaaS accounted for around 28% of Allot's total revenues in Q3 2025, with expectations to rise to 30% if current trends persist, indicating a positive outlook for the company's future [2] - Recurring revenues represented 63% of total revenues in Q3 2025, up from 58% a year ago, reflecting an improvement in revenue quality [2] - Key drivers of SECaaS growth include the addition of new subscribers from large Tier-1 telecom customers and upselling additional services to existing customers, supported by new offerings like OffNetSecure [3][10] Group 2: Future Projections - If telecom partners continue to scale SECaaS services and user adoption remains stable, the momentum could sustain Allot's ARR growth in the upcoming quarters, with revenue growth estimates of approximately 10.3% for 2025 and 13.3% for 2026 [4] - The Zacks Consensus Estimate for Allot's full-year 2026 earnings suggests a year-over-year increase of 15.9%, with recent upward revisions in estimates [15] Group 3: Competitive Landscape - Allot faces competition from Cisco Systems and F5 in network traffic management and security, with Cisco leveraging its extensive networking and security portfolio [5] - Cisco's recent collaboration with NVIDIA aims to develop an AI-native wireless network stack for future 6G networks, enhancing telecom operators' capabilities [6] - F5 competes through its application delivery and security solutions, offering products designed for efficient network traffic management [7] Group 4: Valuation and Price Performance - Allot's shares have declined by 4.2% over the past three months, contrasting with an 11.3% decline in the Zacks Internet - Software industry [8] - The company trades at a forward price-to-sales ratio of 4.05, which is lower than the industry's average of 4.7 [12]