A10 Networks, Inc. Q3 FY2025 earnings call

Key Points

• Q3 revenue grew nearly 12% year-over-year. Trailing 12-month growth from enterprise customers in North America outpaced overall company growth. Americas region revenue increased 25% trailing 12-month, driven by AI infrastructure investment.
• EBITDA margins expanded from 26.7% to 29.3%, non-GAAP operating margin from 22.6% to 24.7%. Non-GAAP gross margin was 80.7%, in line with goals. Operating expenses were $41.8 million, resulting in an operating margin of 24.7%.
• GAAP net income for the quarter was $12.2 million or $0.17 per diluted share. Non-GAAP net income was $16.7 million or $0.23 per diluted share. Diluted weighted shares decreased due to share buyback. Adjusted EBITDA was $21.9 million, 29.3% of revenue.
• First 9 months of 2025 revenue was $210.2 million, up 12.1% Y/Y. Non-GAAP net income YTD was $47.2 million or $0.64 per diluted share. Board approved $0.06 quarterly cash dividend to be paid December 1, 2025.

In the third quarter of 2025, revenue was $74.7 million. Product revenue was $43.1 million, representing 58% of total revenue and grew 17% year-over-year. Service revenue was $31.6 million, 42% of total revenue, and grew 6% year-over-year. Security-led revenue in product revenue exceeded the long-term target of 65% of total revenue. The Americas region accounted for 65% of global revenue. Enterprise customers were 36% of Q3 revenues, while service provider revenue (64% of total) was weighted towards cloud providers, aligned with AI infrastructure build-out.

Forward-Looking Statements

• Full-year 2025 growth expected at 10%.
• 2026 expected to sustain high single-digit growth, with EBITDA margins targeting 26%-28% and EPS growth faster than top-line growth.

Risks

• Macro-related uncertainties such as interest rates, tariffs, and other uncontrollable factors that could impact actual results differing from projections.

Q: How is security-led revenue tracking and what's the long-term goal?

A: Security-led revenue exceeded 65% in Q3, and the long-term goal is to maintain around 65% while not losing infrastructure revenue.

Q: Impact of F5 data breach on customer discussions?

A: Increased customer interest in alternatives to ensure infrastructure resilience, but no negative impact on A10 spending by customers.

Q: Factors in North American AI infrastructure upside?

A: Large customers investing aggressively in AI infrastructure, with broad-based engagement with enterprise customers globally for long-term benefits.

Q: Thoughts on 2026 top-line and bottom-line?

A: 2026 expected to sustain high single-digit growth, navigating uncertainties like interest rates and tariffs, with focus on 26%-28% EBITDA margins and EPS growth faster than top-line.