Industry Overview - The momentum of the artificial intelligence (AI) infrastructure segment is expected to continue into 2026, supported by a bullish demand scenario [1] - Concerns exist regarding the overstretched valuations of major AI companies, including both infrastructure developers and application implementers [1] Company Highlights Calix Inc. (CALX) - Calix reported quarterly adjusted earnings of $0.39 per share, surpassing the Zacks Consensus Estimate of $0.38, and showing significant growth from $0.08 per share a year ago [6] - Quarterly revenues reached $272.45 million, exceeding the Zacks Consensus Estimate by 0.90% [6] - The company has integrated AI into its cloud platform to enhance operations and service delivery for broadband service providers [8] - Expected revenue and earnings growth rates for Calix are 15.6% and 41.5%, respectively, for the current year [9] Teradata Corp. (TDC) - Teradata reported quarterly adjusted earnings of $0.74 per share, beating the Zacks Consensus Estimate of $0.55, and up from $0.53 per share a year ago [11] - Total revenues were $421 million, exceeding the Zacks Consensus Estimate by 6.52% [11] - The company is expected to benefit from improved annual recurring revenue (ARR) growth, cost savings, and productivity measures [12] - Teradata's expected revenue and earnings growth rates are -2.1% and -3.9%, respectively, for the current year [16] Lumen Technologies Inc. (LUMN) - Lumen reported fourth-quarter adjusted earnings of $0.23 per share, contrasting with a Zacks Consensus Estimate of a loss of $0.21 [17] - Total revenues were $3.041 billion, down 8.7% year over year, and missed the Zacks Consensus Estimate by 1.4% [17] - The company secured $13 billion in AI-linked Private Connectivity Fabric (PCF) deals, boosting demand for its network-as-a-service (NaaS) solutions [18][19] - Lumen's expected revenue and earnings growth rates are -12.4% and 15.4%, respectively, for the current year [21]

Core Insights - Calix Inc. has launched the next generation of Calix Engagement Cloud on the Calix Platform, enhancing service providers' ability to deliver personalized offers to residential and business subscribers [1] - The new features of Engagement Cloud enable providers to target the right subscribers more efficiently and launch personalized campaigns aimed at increasing customer lifetime value (CLV) and average revenue [1] Company Developments - The latest enhancements to the Engagement Cloud provide a faster and clearer method for service providers to engage with subscribers [1] - The focus on personalized campaigns is expected to drive growth in customer lifetime value and average revenue for service providers [1]

Core Insights - Calix, Inc. announced that its President and CEO, Michael Weening, will deliver a keynote at the MWC26 Barcelona, focusing on the "Architects of the AI Age" session [1] Company Presence - Calix's participation at MWC, recognized as the world's largest and most influential connectivity event, follows the recent launch of its AInative platform, indicating a strategic push in the AI and connectivity space [1]

Core Insights - Calix (CALX) shares have declined by 11.9% following the release of its fourth-quarter 2025 results, primarily due to a disappointing outlook for the first quarter of 2026 [1][10] Financial Performance - In the fourth quarter of 2025, Calix reported non-GAAP earnings of 39 cents per share, exceeding the Zacks Consensus Estimate by 1.75%, compared to 8 cents in the same quarter the previous year [2][10] - Non-GAAP revenues reached $272.4 million, surpassing the consensus mark by 0.90%, and showed a 3% increase sequentially and a 32% increase year-over-year, driven by strong demand from broadband experience provider (BXP) customers [3][10] - Appliance revenues were $225.8 million, accounting for 82.9% of total revenues, reflecting a year-over-year increase of 35.8% and a 2% sequential increase [4] - Software and Services revenues amounted to $46.6 million, contributing 17.1% of total revenues, with a year-over-year increase of 17.2% and a 7% sequential increase [5] Margins and Expenses - The non-GAAP gross margin expanded by 250 basis points year-over-year to 58%, with the appliance gross margin at 57.4%, up 120 basis points sequentially and 380 basis points year-over-year [6] - The non-GAAP software and services gross margin was 61.3%, down 390 basis points sequentially and 240 basis points year-over-year, mainly due to dual cloud costs during the transition to the third-generation platform [7] - Sales and marketing expenses as a percentage of revenues decreased by 350 basis points to 21.9%, while research and development expenses decreased by 230 basis points to 17.3% [7][8] Cash Flow and Balance Sheet - As of December 31, 2025, cash and cash equivalents were $388.1 million, an increase from $339.6 million as of September 27, 2025 [9] - The company generated cash flow from operations of $46.046 million and free cash flow of $40 million in the reported quarter, compared to $32.314 million and $27 million in the previous quarter, respectively [11] Guidance - For the first quarter of 2026, Calix expects non-GAAP revenues between $275 million and $281 million, indicating a 2% growth at the midpoint from the prior quarter [12] - The company anticipates non-GAAP earnings between 34 cents and 40 cents per share, with a projected non-GAAP gross margin between 56.25% and 58.25%, reflecting a decline of 75 basis points from the previous quarter [13]

Core Viewpoint - Calix (CALX) has experienced significant selling pressure, resulting in an 11.9% decline over the past four weeks, but analysts anticipate improved earnings in the near future [1] Group 1: Technical Analysis - The Relative Strength Index (RSI) is utilized to determine if CALX is oversold, with a reading of 29.34 indicating potential exhaustion of selling pressure [2][5] - Stocks oscillate between overbought and oversold conditions, and the RSI helps identify potential price reversals, suggesting that CALX may present entry opportunities for investors [3] Group 2: Fundamental Indicators - Analysts have raised earnings estimates for CALX by 10.1% over the last 30 days, indicating a positive trend that typically leads to price appreciation [7] - CALX holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks, further supporting the potential for a near-term turnaround [8]

Core Viewpoint - Calix (CALX) shows potential for significant upside, with a mean price target of $82 indicating a 54.8% increase from its current price of $52.96 [1] Price Targets and Estimates - The mean estimate consists of six short-term price targets with a standard deviation of $6, where the lowest estimate is $75.00 (41.6% increase) and the highest is $90.00 (69.9% increase) [2] - A low standard deviation suggests a strong agreement among analysts regarding the stock's price movement [9] Analyst Sentiment and Earnings Estimates - Analysts are optimistic about CALX's earnings prospects, as indicated by a positive trend in earnings estimate revisions, which have increased by 10.1% over the past month [11][12] - CALX holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimates [13] Caution on Price Targets - Solely relying on consensus price targets for investment decisions may not be wise, as analysts' price targets can often be overly optimistic due to business incentives [3][8][10]

Financial Data and Key Metrics Changes - Calix reported record revenue of $272 million for Q4 2025, a sequential increase of 3% and a year-over-year growth of 32% [9] - The company surpassed $1 billion in annual revenue for the first time, reflecting a 20% growth over 2024 [9] - Non-GAAP gross margin reached a record 58%, marking the eighth consecutive quarter of margin improvement [11] - Remaining performance obligation (RPO) reached a record $385 million, up 9% sequentially and 18% year-over-year [9] Business Line Data and Key Metrics Changes - The addition of 25 new customers in Q4 demonstrates broad-based adoption of Calix's solutions [9] - Current RPOs also hit a record at $152 million, representing an 8% sequential increase and a 26% rise from the same period last year [10] - The company has ceased providing metrics such as platform adoption and customer size that were proxies for progress during the early adopter phase [10] Market Data and Key Metrics Changes - The company is entering a sustained growth phase for 2026 and beyond, with demand visibility at an all-time high [8] - The BEAD program presents an opportunity size for Calix between $1 billion and $1.5 billion, with 85% of funds allocated to fiber-based deployments [15][16] Company Strategy and Development Direction - Calix launched the third generation of its platform in December 2025, with over 300 customers already migrated [6] - The company aims to leverage its partnership with Google Cloud to deploy its platform globally, whether hosted by Calix or as a private instance for large customers [7] - The focus is on expanding into new global markets and large customers with private clouds, enhancing operational efficiency for broadband experience providers [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the multi-year growth opportunity ahead, with revenue guidance for Q1 2026 projected between $275 million and $281 million [15] - The transition to the third-generation platform is on track, with expectations for strong non-GAAP gross margins despite some near-term impacts from customer mix and cloud costs [17] - Management emphasized the importance of AI capabilities in driving business outcomes and enhancing customer experiences [32] Other Important Information - The company generated record free cash flow of $40 million for the quarter, maintaining positive quarterly free cash flow for over five years [12] - Calix's balance sheet remains strong, with cash and investments totaling $388 million, an increase of $48 million sequentially and $91 million year-over-year [13] - The board authorized an increase of $125 million in the stock repurchase plan, reflecting confidence in the demand environment [14] Q&A Session Summary Question: Revenue growth outlook for 2026 - Management indicated that the revenue growth outlook for 2026 remains in the range of 10%-15%, with high visibility on BEAD contributions [22][23] Question: New market expansion and international opportunities - Management confirmed that while new market contributions are not yet included in the numbers, confidence in international expansion is high following the platform launch [26][29] Question: Timing of monetization for the third-generation platform - Management expects to see monetization ramp up in the second half of 2026 as the platform becomes fully commercialized [81][83] Question: Contribution from BEAD program - Management noted that while BEAD could add significant revenue, it may also come at the cost of other projects due to limited industry resources [76][77] Question: Agent Workforce Cloud revenue ramp - Management stated that the revenue ramp from Agent Workforce Cloud will begin to materialize as the platform is fully deployed, with significant customer interest already noted [64][70]

Financial Data and Key Metrics Changes - Calix reported record revenue of $272 million for Q4 2025, a sequential increase of 3% and a year-over-year growth of 32% [9] - The company surpassed $1 billion in annual revenue for the first time, reflecting a 20% growth over 2024 [9] - Non-GAAP gross margin reached a record 58%, marking the eighth consecutive quarter of margin improvement [11] - Remaining performance obligation (RPO) reached a record $385 million, up 9% sequentially and 18% year-over-year [9] Business Line Data and Key Metrics Changes - The addition of 25 new customers in Q4 demonstrates broad-based adoption of Calix's solutions [9] - Current RPOs also reached a record at $152 million, representing an 8% sequential increase and a 26% rise from the same period last year [10] - The company has ceased providing metrics such as platform adoption and customer size that were proxies for progress during the early adopter phase [10] Market Data and Key Metrics Changes - The company is entering a sustained growth phase for 2026 and beyond, with demand visibility at an all-time high [8] - The BEAD program presents an opportunity size for Calix between $1 billion and $1.5 billion, with 85% of funds allocated to fiber-based deployments [15][16] Company Strategy and Development Direction - Calix launched the third generation of its platform in December 2025, with over 300 customers migrated as of the call [6][7] - The company aims to leverage its partnership with Google Cloud to deploy its platform globally, whether hosted by Calix or as a private instance for large customers [7] - The focus is on expanding into new global markets and large customers with private clouds, enhancing operational efficiency for Broadband Experience Providers [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the multi-year growth opportunity ahead, with revenue guidance for Q1 2026 projected between $275 million and $281 million [15] - The transition to the third-generation platform is on track, with expectations for strong non-GAAP gross margins despite near-term impacts from customer mix and cloud costs [17] - Management emphasized the importance of AI capabilities in driving business outcomes and enhancing customer engagement [31][88] Other Important Information - The company generated record free cash flow of $40 million for the quarter, maintaining positive quarterly free cash flow for over five years [12] - Calix's balance sheet remains strong, with record cash and investments of $388 million at year-end [13] - The company plans to host an Investor Day on February 24th to share more about its strategy and long-term growth opportunities [18] Q&A Session Summary Question: Revenue growth outlook for 2026 - Management indicated that the revenue growth outlook for 2026 remains in the range of 10%-15%, with high visibility on BEAD contributions [22][23] Question: New market expansion and international opportunities - Management confirmed that while new market contributions are not yet included in the numbers, they are confident in the potential for growth as the platform is fully deployed [26][29] Question: Timing of monetization for the third-generation platform - Management expects to see monetization ramp up in the second half of 2026 as the platform becomes fully commercialized [81][83] Question: Contribution of BEAD program to revenue - Management noted that while BEAD could add significant revenue, it may also come at the cost of other projects due to limited industry resources [75][77] Question: Agent Workforce Cloud revenue ramp - Management indicated that the revenue ramp from the Agent Workforce Cloud will begin to materialize as the platform is fully rolled out, with significant customer interest already noted [64][70]

Financial Data and Key Metrics Changes - Calix reported record revenue of $272 million for Q4 2025, a sequential increase of 3% and a year-over-year growth of 32% [9] - The company surpassed $1 billion in annual revenue for the first time, reflecting a 20% growth over 2024 [9] - Non-GAAP gross margin reached a record 58%, marking the eighth consecutive quarter of margin improvement [11] - Remaining performance obligation (RPO) reached a record $385 million, up 9% sequentially and 18% year-over-year [9] - Free cash flow for the quarter was $40 million, with a record cash and investments total of $388 million, an increase of $48 million sequentially and $91 million year-over-year [12] Business Line Data and Key Metrics Changes - The addition of 25 new customers in Q4 demonstrates broad-based adoption of Calix's solutions [9] - Current RPOs were also a record at $152 million, representing an 8% sequential increase and a 26% rise from the same period last year [10] - The company has aligned its financial metrics to reflect the growth and value of its model, separating appliance revenue and gross margin from recurring software and services revenue [10] Market Data and Key Metrics Changes - The company is entering a sustained growth phase for 2026 and beyond, with demand visibility at an all-time high [7][8] - The BEAD program presents a significant opportunity for Calix, with an expected size of $1 billion to $1.5 billion, primarily focused on fiber-based deployments [14][15] Company Strategy and Development Direction - Calix launched its third-generation platform in December 2025, with over 300 customers migrated, aiming for full migration by the end of Q1 2026 [5][6] - The company is focusing on expanding into new global markets and large customers with private clouds, enhancing its operational capabilities [7] - The strategic partnership with Google Cloud allows for deployment flexibility, whether hosted by Calix or as a private instance for large customers [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory for 2026, expecting sequential revenue growth despite traditional seasonal trends [13] - The company anticipates non-GAAP gross margin to remain strong, with some near-term impacts due to customer mix and overlapping cloud costs during the transition to the new platform [16] - Management emphasized the importance of AI capabilities in driving business outcomes and enhancing customer engagement [31][86] Other Important Information - Calix's culture and operational discipline have been recognized with multiple awards, reflecting the company's commitment to customer success [6] - The company has a disciplined capital allocation process, with a significant increase in its stock repurchase plan authorized by the board [13] Q&A Session Summary Question: Revenue growth outlook for 2026 - Management indicated that the revenue growth outlook for 2026 remains in the range of 10%-15%, with confidence in achieving higher than the low end [21][22] Question: New market expansion and international opportunities - Management noted that while new market contributions are not yet included in the numbers, confidence in international expansion is high following the platform launch [25][27] Question: Timing of monetization for the third-generation platform - Management expects to see monetization ramp up in the second half of 2026, with significant contributions from the Agent Workforce Cloud [79][82] Question: Contribution from the BEAD program - Management clarified that while the BEAD program presents an opportunity, it may not be fully incremental to the current run rate business due to resource constraints in the industry [74][76] Question: High appliance margins and software margins outlook - Management explained that high appliance margins are due to the company's investment in an abstracted operating system, while software margins are expected to exceed 70% as the dual cloud costs are lifted [50][51]

Earnings Performance - Calix reported quarterly earnings of $0.39 per share, exceeding the Zacks Consensus Estimate of $0.38 per share, and significantly up from $0.08 per share a year ago [1] - The earnings surprise for this quarter was +1.75%, following a previous quarter where earnings were $0.44 per share against an expectation of $0.34, resulting in a surprise of +29.41% [2] - Over the last four quarters, Calix has consistently surpassed consensus EPS estimates [2] Revenue Performance - The company posted revenues of $272.45 million for the quarter ended December 2025, surpassing the Zacks Consensus Estimate by 0.90% and up from $206.12 million year-over-year [3] - Calix has also topped consensus revenue estimates in each of the last four quarters [3] Stock Performance and Outlook - Calix shares have increased by approximately 5.8% since the beginning of the year, outperforming the S&P 500's gain of 1.9% [4] - The future performance of the stock will largely depend on management's commentary during the earnings call and the earnings outlook [4][5] - The current consensus EPS estimate for the upcoming quarter is $0.38 on revenues of $271.94 million, and for the current fiscal year, it is $1.91 on revenues of $1.14 billion [8] Industry Context - The Internet - Software industry, to which Calix belongs, is currently ranked in the top 32% of over 250 Zacks industries, indicating a favorable outlook [9] - Historical data suggests that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1 [9]