A10 Networks, Inc. Q2 FY2025 earnings call

• A10 aligned strategy with evolving cybersecurity landscape, focusing on high performance and advanced security for Service Provider and Enterprise customers.
• Second quarter benefited from normalized Service Provider spending and strategic investments in Enterprise and AI infrastructure.
• EBITDA as a percent of revenue grew year-over-year while investing in new areas.
• Two AI products won top awards at Interop Event in Japan.
• Comprehensive A10 Defend portfolio provides hybrid DDoS protection, threat intelligence, etc., integrated into a single solution.
• Well-diversified across regions and verticals, navigating market volatility while maintaining profitability and shareholder returns.

Second quarter revenue was $69.4 million, up 15% year-over-year. Product revenue was $39.2 million (56% of total revenue), Services revenue was $30.2 million (44% of total revenue). Trailing 12-month total revenue grew 11% year-over-year, with Enterprise up 8% and Service Provider revenue increasing 14%. Total deferred revenue increased to $144.4 million, and renewal rates on eligible contracts remain above 90%.

• Management remains confident in delivering annual revenue growth in the high single-digit range.
• Will continue to navigate choppy market conditions, focusing on execution and aligning investments with long-term growth expectations.
• Actively leveraging competitive advantage in AI solutions for large data center projects.

• Forward-looking statements involve risks and uncertainties beyond control that could materially affect actual results. Detailed in most recent 10-K and quarterly report on Form 10-Q.

Q: Congratulations on the good results. How to think about sustaining recent momentum and sustainability of Service Provider segment?

A: Product revenue growth is a lead indicator; on Enterprise side, penetrating larger customers helps. On Service Provider, outside North America making progress, within North America some customers normalizing spending but not all yet.

Q: Commentary on linearity in Q2 and insights on July?

A: Didn't see unusual linearity difference; entering Q3, customers on track with no major noise between quarters.

Q: Potential materiality and contribution from Microsoft award?

A: It's a deep relationship with a key customer, highlighting partnership in cloud and AI; our solution is relevant to global cloud leader.

Q: Telcos' CapEx increase from Big Beautiful Bill and tailwinds?

A: Separate North America vs rest of world; interest rate and consumer sentiment could encourage telcos, and A10 benefits from increased CapEx and growing share of wallet with security solutions.

Q: Elaboration on AI global leaders?

A: Multiple customers, including North American and EMEA/Japan players building AI infrastructure.

Q: Foreign exchange impact this quarter?

A: Very small advantage, less than 100 basis points, mainly from Japanese yen exposure.

Q: Percentage of revenue AI driven and when AI drives double-digit growth?

A: Growth from customers building AI-related data centers now; AI firewall and analytics in early phase, translating to revenue in 2026 and beyond.

Q: Enterprise growth by geo and customer type?

A: Enterprise growth in North America higher than global 8%; focus on large Enterprise customers in financials, gaming, tech sectors with complex networks and security concerns.

Q: ThreatX integration and impact?

A: ThreatX is easy to set up, integrated into portfolio; helps access different buyers, early days but promising, with process starting and early indicators positive.