Extreme Networks, Inc. Q3 FY2026 earnings call

• Third quarter marks fifth consecutive quarter of double-digit revenue growth, outpacing market leaders. • Strong sales execution and differentiated technology, including enterprise fabric and AI-powered platform driving share gains. • Resolved memory supply needs for near and long term, allowing meeting customer demand and stabilizing gross margins. • Returned $50 million to shareholders through share repurchases. • Revenue beat high end of guidance at $317 million, up 11% year over year. • SaaS ARR at $236 million, up 29% year over year. • Wi-Fi 7 contribution to wireless product revenue increased. • Strong bookings across all regions, including 44 customers spending over $1 million. • New partner program delivers 20% higher profitability versus largest competitor. • Played role in marquee events like Artemis II lunar spaceflight launch and NCAA Men's Final Four. • Strong momentum with MSP program, MSP billings grew 26% quarter over quarter with over 70 active partners.

Product revenue increased 12% year-over-year, representing eight quarters of growth. Cloud subscription momentum lifted SAS ARR to $236 million, an increase of 29% year-over-year. Wi-Fi 7 grew meaningfully in its contribution to wireless product revenue, representing 37% of total wireless unit shipments in the quarter, up from 27% last quarter. Geographically, strong performance in EMEA and APAC, with Americas also solid. Vertically, strength in education, healthcare, manufacturing, and sports and entertainment.

• Q4 revenue expected to be in range of $330 million to $335 million, gross margins 61.8% to 62.2%, operating margin 15.2% to 16.1%, earnings per share 28 cents to 30 cents. • Full fiscal year 2026 revenue expected in range of $1,275,000,000 to $1,280,000,000, midpoint suggesting 12% year-over-year growth. • Full fiscal year 2026 gross margins expected 61.8% to 61.9%, operating margin 14.7% to 14.9%, earnings per share $1.02 to $1.04 per share.

• Forward-looking statements involve risks and uncertainties that can cause actual results to differ, including risks described in 10-K and 10-Q filings. • Impact of competitive environment, including Cisco's growth outside networking, HP Juniper integration complexity. • Potential impact of supply chain dynamics and component costs on gross margins and product availability. • Macro factors like geopolitical issues (e.g., war with Iran) could impact shipments and projects in certain regions.

Q: On SAS momentum and seasonality in Q4, A: Kevin mentioned expecting SaaS ARR growth in 20% to 30% range, with platform one adoption driving momentum.

Q: On competitive front, who are seeing success against and why, A: Ed mentioned winning against virtually all competitors, primarily Cisco and HPE, with fabric, platform one, and ease of use in complex environments.

Q: On course margin and professional installation projects, A: Kevin and Ed discussed a couple of professional projects pushed to Q4 and Q1, with variables impacting gross margin and teams aggressively managing costs.

Q: On memory situation, A: Ed stated no near-term or long-term memory issues, with committed supply through fiscal 27 and into 28, and new sources of supply coming.

Q: On supply chain dynamics and price increases, A: Kevin discussed price increases offsetting costs, with typical quotes open for 30-60 days, and feeling confident about stabilizing and growing gross margins.

Q: On U.S. market and share gains, A: Ed mentioned Americas had strong bookings despite revenue stats, with bookings growth significantly higher than total revenue growth.

Q: On gross margin and alternative parts, A: Ed and Kevin discussed securing memory at better prices through various initiatives, with efforts opening door for new supply and potential competitive advantage.

Q: On cloud and services attach rates and HP Juniper share gains, A: Kevin mentioned platform one launch driving higher attach rates, and Ed discussed opportunities in channel with HPE Juniper disruption but materialization not yet meaningful.

Q: On long-term growth rates and EMEA war impact, A: Eric was told long-term growth rate outlook remains, and Ed discussed EMEA projects impacted but recovering, with Middle East being a smaller piece of business.