Calix, Inc. Q3 FY2025 earnings call

• Michael Weening discussed Calix Connections where they celebrated customer-driven innovation, launched the Calix Agent Workforce in partnership with Google, and highlighted record revenue, 7th consecutive quarter of margin improvement, 20 new customers, and RPO growth.
• Cory Sindelar detailed Q3 financials, including $265M revenue, 10% sequential growth, RPO metrics, and non-GAAP gross margin. He provided Q4 guidance with revenue between $267M and $273M, slight gross margin increase, and OpEx expected to increase for AI investments but return to target model by end 2026.
• Emphasis on AI as an advantage, 15 years and $2B investment in platform infrastructure, launch of third-generation platform with Google, Connections on Demand virtual program, customer success team revamp, and internal AI focus for operational improvement.

In the third quarter of 2025, Calix achieved record revenue of $265 million, reflecting a 10% sequential quarterly growth. RPOs grew 2% sequentially to a record $355 million, with current RPOs at $141 million, up 5% sequentially and 28% year-over-year. Non-GAAP gross margin reached a record 57.7%, representing a 90 basis point sequential quarterly increase. Revenue contribution is broad-based across various customer segments with no single dominant customer driving performance.

• Q4 revenue guidance: $267 million to $273 million, with midpoint reflecting 2% sequential growth.
• Non-GAAP gross margin guidance for Q4 midpoint shows a slight increase from Q3, reflecting customer and product mix.
• OpEx expected to increase sequentially related to AI investments, but expected to return to target financial model by end of 2026.
• Fiscal '25 gross margin improvement exceeds the target financial model's 100 basis points to 200 basis points.

• Factors causing actual results to differ from forward-looking statements as outlined in SEC filings.
• Uncertainties in BEAD program timing and funding dynamics.
• Permitting and labor issues affecting network construction timelines.

Q: How to contextualize the strong revenue performance and its sustainability?

A: It's driven by broad-based demand across nearly 1,200 customers, with customers winning more subscribers, leading to incremental revenue and growth.

Q: What are the implications of the innovation cycle on investment?

A: $2B investment in platform infrastructure has laid the foundation for AI integration, enabling customers to scale, and international expansion with Google partnership presents significant growth opportunities.

Q: How is the Agentic AI being monetized?

A: Not a la carte, but through accelerating the business model, with customers acquiring subscribers faster and rolling out services quicker, which translates to increased RPOs.

Q: What is the impact of the BEAD program?

A: More constructive than expected, with a lens shape deployment curve, some BEAD revenue expected next year but sizing unclear.

Q: What is the timing and monetization of BEAD?

A: BEAD money is expected to flow in 2026, with 5-10% of award value relevant, and significant incremental opportunity through subscriber wins.

Q: Any update on the breakout of appliance vs software business?

A: Stated goal remains end of 2026 for a detailed breakout.

Q: What customer segments are driving Q4 growth?

A: Broad-based demand across all customer segments.

Q: What are the risks and upside?

A: No major risks identified, with AI providing a competitive advantage and focus on subscriber growth and monetization as key upside drivers.