NETGEAR, INC. Q4 FY2025 earnings call

NETGEAR turned the corner in 2025 with revenue growth since 2020 and record gross margins, achieving full-year non-GAAP profitability. In the enterprise business, they acquired two software teams and the software stack for ProAV solutions, launched ProAV health services, and grew partner total to 524 by year-end. For consumer, they delivered innovative products, launched a new mobile app, and saw ARR grow 18% in Q4 to over $40 million with 558,000 recurring subscribers. The fourth quarter had enterprise demand growing double digits, non-GAAP gross margin reached 41.2%, a record, and non-GAAP EPS was $0.26. They also repurchased about $50 million in shares in 2025.

In the fourth quarter of 2025, the enterprise segment generated revenue of $89.4 million, down 1.6% sequentially but up 10.6% year over year, accounting for 49% of the total revenue. The consumer segment had net revenue of $93.1 million, down 8.4% year over year and 0.7% sequentially. For the full year 2025, net revenues were $699.6 million, up 3.8% compared to the prior year. The enterprise business saw an 18.8% growth in top line, while the consumer business declined by 7.3% due to a 23.3% drop in sales to service providers and associated products. The enterprise gross margin was 51.4%, a record high, and up 750 basis points year over year. The consumer segment's gross margin was 31.4%, up 750 basis points year over year thanks to an improved mix of Wi-Fi 7 products and strength in the direct-to-consumer channel.

NETGEAR expects first-quarter 2026 net revenue to be in the range of $145 million to $160 million. There is an expected headwind of around 100 basis points to gross margin mainly due to rising memory costs. GAAP operating margin is expected to be in the range of negative 16.3% to negative 13.3%, and non-GAAP operating margin in the range of negative 6% to negative 3%. Service provider revenue is expected to be around $20 million, a decline of approximately 35% compared to 2025.

Memory shortage is a significant risk. For consumer, memory represents a higher percentage of the bill of materials and products have lower gross margins, with impact on the second half of 2026 uncertain. For enterprise, memory is a smaller percentage but challenges are escalating, and the impact on the second half is uncertain.

Q: Adam Tindle asked about the potential impact of holding memory prices constant in the back half and competitive dynamics in consumer.

A: C.J. Prober said there are various mitigation efforts on consumer like pulling back on promotions, and enterprise is full steam ahead with price increases.

Q: Tore Svanberg inquired about channel inventory and ProAV managed switches.

A: Bryan D. Murray said retail inventory is in line with expectations, and C.J. Prober noted ProAV managed switches have burned down backlog and sell-through growth over 25%.

Q: Jay Goldberg asked about operating leverage and ARR.

A: Bryan D. Murray mentioned ARR was over $40 million in Q4 with 558,000 recurring subscribers, and C.J. Prober talked about enterprise growth and operating leverage from ProAV and go-to-market transformation.