Extreme Networks, Inc. Q2 FY2026 earnings call

Key Points

• Second quarter marked seventh straight quarter of revenue growth driven by strong demand for AI-powered platform, with 14% year-over-year revenue increase to $318 million, exceeding guidance.
• Cloud subscription momentum lifted SaaS ARR to 25% growth. Closed 34 deals over a million dollars.
• Key differentiators include end-to-end campus fabric with features like zero-touch provisioning and subsecond convergence, Platform One with agentic AI core, true cloud choice, and best-in-class Wi-Fi solutions.
• Had large wins across verticals and geos, including retail, education, healthcare, and sports. MSP partners nearly doubled, billings up over three times year over year.
• Launched Extreme Partner First program. Attracting top talent, retention at all-time highs.

Revenue for the second quarter was $318 million, a 14% year-over-year increase. Product revenue saw double-digit year-over-year growth for the fourth consecutive quarter. SaaS ARR was $227 million, achieving a 25% year-over-year growth. Subscription and support revenue reached $120 million, up 12% year over year. SaaS deferred revenue was $334 million, a 15% year-over-year increase. Overall, deferred recurring revenue climbed to $628 million, a 9% year-over-year improvement. Non-GAAP gross margin was 62%, an increase of 70 basis points from the last quarter.

Third Quarter

• Revenue expected to be in the range of $309 million to $314 million.
• Gross margin expected to be in the range of 61% to 61.4% due to professional services deployments.
• Operating margin expected to be in the range of 13.6% to 14.8%, and earnings per share expected to be in the range of $0.23 to $0.25.

Full Fiscal Year 2026

• Revenue expected to be in the range of $1.262 billion to $1.270 billion (midpoint suggests 11% year-over-year growth).
• Earnings per share expected to be in the range of $0.98 to $1.02.
• Expect to grow profit faster than revenue, with expected profitability growth of around 20% on double-digit revenue growth for the year.

Forward-looking statements involve risks that can cause actual results to differ from those anticipated. Risks are described in the company's 10-Ks and 10-Q filings. Supply chain disruptions and component shortages could impact operations, but Extreme has strategies like replacement and finding alternative sources of supply to mitigate these risks.

Q: Talk about share gain evidence and go-to-market restructuring.

A: Use third-party analysts like 650 Group and Dell'Oro, growing at three times market in enterprise. Norman Rice in sales brought discipline, 19 pods for direct sales, marketing overhaul by Monica Kumar.

Q: Importance of AI and Platform One.

A: AI is top of mind, Extreme has agentic AI platform core, doubled Platform One subscription bookings forecast.

Q: Share gain in Wi-Fi and switching.

A: Each project unique, fabric technology differentiates, wins in Japan and with government customers due to fabric over SD-WAN.

Q: Memory prices and customer reaction.

A: 7% price increase was nonissue, size advantage helps in sourcing components, found alternative DDR4 chips.

Q: ARR strength and sales process.

A: Strength in Platform One, simple licensing model, customers embrace cloud management and AI.

Q: EMEA strength and regulation.

A: Data sovereignty a differentiator, government spend returning, new EMEA sales leader.

Q: Ruckus rumors and tariffs.

A: Always look at potential assets, tariffs a nonissue as Extreme manages supply chain.

Q: Long-term growth and gross margins.

A: Expect continuation of double-digit growth, product margins improving, professional services lower margin impact.

Q: Pricing, demand, and margin.

A: Price increases impact later, guided range reflects professional services and pricing decisions, product margins expected to improve.