Radware Ltd. Q3 FY2025 earnings call

• Cloud security was a key growth driver with cloud security ARR climbing to $89 million, up from $72 million in Q3 2024, and cloud ARR growth accelerating to 24% year-over-year.
• Opened 2 additional cloud security centers in Q3 and plans to open 3 more in Q4, with total 8 centers opened in 2025.
• Go-to-market strategy gained momentum with North America fully ramped, seeing 28% year-over-year revenue growth, and solid business with OEM partners.
• DefensePro X refresh cycle grew ~40% year-over-year with several 7-digit refresh deals secured.
• Radware's leadership in application security recognized with being named a leader in relevant reports.

Cloud security ARR climbed to $89 million in Q3 2025, up from $72 million in Q3 2024, with cloud ARR growth accelerating to 24% year-over-year. Subscription revenue grew 21% and rose to 52% of total revenue in Q3 2025. Regionally, Americas revenue was $35.4 million, up 28% year-over-year, representing 47% of total revenue; EMEA revenue was $22.8 million, down 10% year-over-year, accounting for 30% of total revenue; APAC revenue was $17.1 million, up 3% year-over-year, contributing 23% of total revenue.

• Expect total revenue for Q4 2025 to be in the range of $78 million to $79 million.
• Expect Q4 2025 non-GAAP operating expenses to be between $52.5 million to $53.5 million.
• Expect Q4 2025 non-GAAP diluted net earnings per share to be between $0.29 and $0.30.
• Total ARR growth is a guiding indicator for future revenue growth, with cloud ARR growth being a main growth engine.

• Impact from changing or severe global economic conditions.
• General business conditions and ability to address changes in the industry.
• Changes in demand for products.
• Timing and amount of orders and other risks detailed in Radware's filings.

Q: Congratulations on the strong results. First off, I was wondering if you could talk about how you feel your operations are going now. You mentioned that North America fully ramped and the 2 centers opened, plus another 3. Going forward, do you think there will be any other areas that you want to reorganize? Or are you satisfied with the level you're at now?

A: Thanks, Chris. So I think given our progress in North America, we actually would like to ramp our investments further. We see the potential. I think we've discussed it last quarter that given the momentum in cloud and the opportunities we see, we are planning to continue to increase there. I think still we will see that with good output on the profitability. But we are definitely very optimistic about North America and about us actually investing more for growth. That's on the sales and go-to-market side. And with that, across the world, we are continuing to expand the cloud security platform, the R&D investments there. We really feel there's a big opportunity.

Q: Can you just talk through the demand environment that you saw in the quarter? How did it compare to 2Q and what assumptions you're baking into your 4Q guide?

A: Okay. I think the demand across enterprise and carriers across the world was solid. I don't think it improved or degraded from previous quarters. We do see strong environment going into Q4. We're actually very encouraged with what we are seeing. As it relates to guidance, I think Guy mentioned it and I'll let him talk about it more, but we see the ARR -- the total ARR growth, we're seeing as our guiding indicator for future revenue growth. And having that at 8%, that's how we're guiding forward. Of course, we have additional appliance deals and CapEx deals that can take it higher. But overall, short-term guidance is based on our total ARR growth.

Q: Can you just talk through the demand environment that you saw in the quarter? How did it compare to 2Q and what assumptions you're baking into your 4Q guide?

A: Yes. So as Roy already mentioned, we have a pretty good visibility since currently around 82% of our business is based on recurring. So ARR is a very good indicator for guidance. But we also have now, after 1 month into the quarter, pretty good visibility about demand, which we feel pretty good. We posted 24% growth on cloud ARR and we're back to the levels we used to see, let's say, 2 years ago. And we always mentioned going to 25%, but we're not saying 25% is the ceiling. So we think this is the main growth engine for us and it will continue to grow.

Q: This is Jeff Hopson on for Ryan Koontz from Needham. Congrats on the strong performance in North America. Kind of talking about the competitive landscape like you were earlier, some of your large competitors have been focused on other things besides security like cloud computing, So I was just curious if this kind of presents an opportunity for you to gain more customers who may be focused on just security and not some of these other offerings that they have?

A: Yes. I think it's a great question and that's exactly what we are talking with customers. Actually, while some of our larger competitors are, I would say, broadening their offering and, by that, not necessarily staying as focused on application, API, data center security, we're actually double downing there. And the reason is we see more complicated attacks, more AI-based attacks, more challenges. And it's an extremely critical area for our customers. So we continue to broaden the algorithmic moat that we're building. We continue to broaden the competitive advantages there. And therefore, we feel very good about the competitive positioning and the long-term strategy that we have. So we see a huge amount of opportunities. The market is the TAM and the SAM is huge for us versus our current revenues. And therefore, we continue to focus there, double down on security. I've mentioned API now as the third wave of growth. That's where we are investing.

Q: And maybe just a follow up on the AI piece. You've been adding capabilities to SOC X. You announced the vulnerability you guys found in ChatGPT. Just kind of curious where we are with AI. And is it still just driving conversations? Or is it getting to that point of driving production and your AI offering, SOC X, could start to meaningfully contribute?

A: Yes. So I think we're using AI today on the general availability capabilities, mainly to improve the security we provide to our customers. So like you mentioned, SOC X is our agentic AI on the platform that automatically detects and mitigates for our customers' attacks by detecting early and providing recommendations or automatic modification to the security posture. In that sense, our customers are enjoying faster time to resolution. They are able also in a conversational way talk to our platform and understand exactly what's happening and what the recommendations are. So to summarize, we're using a lot of AI and Gen AI in the platform to improve the security we provide to the customer. I do believe there might be also good opportunities in protecting the AI systems of our customers. To that end, you mentioned that we uncovered a major vulnerability in OpenAI agents, and we're working on these problems. And I'm sure we will update you in the coming quarters on our progress there as well.