Ribbon Communications Inc. Q1 FY2026 earnings call

• Bruce noted that the first quarter revenue was in line with expectations and that visibility into customers' plans for the rest of the year and confidence in second half growth had improved since the start of the year. Sales in the first quarter were near the midpoint of guidance, but there was a shift in mix resulting in lower gross margins and earnings. - In the IP Optical Networks business, there were key wins in several strategic areas such as the rapidly growing data center interconnect space with three new wins across multiple geographies, five new project awards from major energy producers and distributors, an award for a major fiber network expansion across three countries in Africa, and more than 30 customers in the US who had deployed IP and optical products awarded BEAD grants. - In the Cloud and Edge segment, there was full commercial deployment of the cloud-native SBC solution with a leading service provider in Japan, a new partnership with Amazon Web Services, expansion in the financial services vertical within the enterprise market by adding a new top 20 bank in the US to the customer base, and good progress in preparing to launch the new AIOps and automation platform Acumen with lead customer Optimum

IP Optical Networks: First quarter revenues were $63 million, a 14% decrease compared to the prior year, driven mainly by lower sales in Asia Pacific and reduced maintenance revenue. Encouragingly, IP optical bookings in the quarter were strong at 1.5 times. First quarter non-GAAP gross margin for IP optical was 28.4%, similar to the previous year but lower than the target level due to the higher mix of India revenues and fixed cost absorption. IP optical networks adjusted EBITDA for the quarter was a loss of $16 million, a $1.7 million higher loss than the prior year. Cloud and Edge: Generated first quarter revenue of $100 million, down 8% year over year. Non-GAAP gross margins were 56.8%, down 575 basis points from the prior year. As a result, adjusted EBITDA for the segment was $8 million, or 8% of revenue, and down $12 million year on year. Consolidated revenue in the first quarter of 2026 was $163 million, a decrease of 10% from the prior year, driven by the factors mentioned. Consolidated non-GAAP gross margin was 45.8% in the quarter, down 280 basis points year-on-year. Adjusted EBITDA was a loss of $8 million, and the non-GAAP net loss was $8 million

• For the second quarter, Ribbon expects revenue in a range of $185 to $195 million and adjusted EBITDA in a range of $9 million to $14 million. - The company is confident in stronger performance starting this quarter, with anticipation of growth across practically all regions and broad-based improvement across most of its markets in the second half of 2026, including a return to higher deployment levels at Verizon. There are also expectations of growth in the enterprise and government market sectors, exponential growth in data traffic and broadband infrastructure projects, and continued strong customer interest in the Acumen AIOps initiatives

Q: Michael Genovese asked about the timing of Verizon's improvement being stronger in the second half of the year than the first half.

A: Bruce responded that they don't expect a significant increase in revenue from Verizon in the second quarter, but the improvement in deployment rates will progressively improve throughout the quarter. Growth in the second quarter is focused on enterprise customers in North America and the EMEA region, and then in the second half, there will be growth around Verizon growth, the US federal market, the Asia-Pac region, and a stronger second half in Europe.

Q: Tim Savageau asked about segment growth in Q2 by segment and year-over-year declines.

A: Bruce said both segments are expected to grow in the second quarter, with the IP optical segment likely to grow more than the Cloud and Edge segment. Regarding year-over-year declines, in the Cloud and Edge segment, it was not due to one specific thing but a number of smaller projects. In the IP optical segment, the decline in the first quarter was from the European market and some in North America, with India being the strongest part.

Q: Another question about the DCI opportunity materiality.

A: Bruce explained that the data center interconnect space was not a big focus area a few years ago but they have launched new products and are growing into the market. It's small for them currently but they see it as a stronger growth path ahead, though revenue forecasting is hard at this point as they are building wins as they go