Radware Ltd. Q3 FY2026 earnings call

• Record Revenue & Growth: Achieved $84.4M in Q3 revenue (+12% YoY) and 32 cents non-GAAP EPS, marking the eighth quarter of double-digit growth over nine quarters.
• AI Security Expansion: Launched new capabilities including Exploit Shield for runtime protection against newly discovered vulnerabilities, MCP server protection for AI agent integration, and Agent Trust Management (Serve AI) to control AI agent actions.
• Market Validation: Named a leader by IDC in Web Application and API Protection and by QKS Group in DDoS Mitigation and AI Maturity.
• On-Premise Momentum: Defense Pro X benefits from infrastructure refresh cycles; secured a major deal with a global cloud provider to expand DDoS protection capacity.
• Platform Integration: Consolidated WAF, API, and DDoS protection into a unified cloud platform, driving competitive wins such as a large payment infrastructure deal in the Americas.

Revenue reached a record $84.4 million, up 12% year-over-year. The Americas contributed $39.6 million (47% of total revenue), EMEA contributed $25.6 million (30%), and APAC contributed $19.2 million (23%). All regions achieved double-digit year-over-year growth. Cloud ARR grew 21% to $107 million, representing 41% of total ARR ($266 million). Gross profit was $68.7 million with an 81.4% margin.

• Q4 2026 Revenue Guidance: Expected between $88 million and $90 million.
• Q4 2026 Non-GAAP Operating Expenses: Expected between $57 million and $58 million.
• Q4 2026 Non-GAAP Diluted EPS: Expected between $0.34 and $0.35.
• Tax Rate Outlook: Effective tax rate expected to be between 14% and 15% in the coming quarter.

• Currency Fluctuations: Appreciation of the Israeli shekel against the US dollar negatively impacted operating income and net income by approximately $4.6 million in Q3.
• Supply Chain & Costs: Foreign exchange headwinds, product mix shifts, and supply chain cost pressures continue to impact gross margins.
• Competitive Landscape: The AI security space is fragmented with over 20 startups and large players entering the market, particularly in agentic AI protection.
• Macroeconomic Uncertainty: Global economic conditions and changing demand for products remain potential risks to future performance.

Q: Joe Gallo asked about the timeline for AI security products to impact growth and current customer adoption levels.

A: Roy Zisapel explained that while AI-driven vulnerability discovery is driving immediate demand for Exploit Shield and API security, the broader 'agentic AI' protection market is a 2027 opportunity. He noted that pipeline creation is rising now, but real scale is expected next year. Guy Avidan added that there is no reason to expect the current double-digit growth trajectory to slow down given the ARR momentum.

Q: George Notter inquired about the return on sales/marketing investments and the strategy for expanding scrubbing center capacity.

A: Roy Zisapel stated that S&M expenses as a percentage of revenue have declined due to leverage, confirming strong ROI. Regarding infrastructure, he highlighted a capital-efficient model using proprietary ASICs to build massive POPs without heavy server costs. Guy Avidan noted that despite increased CapEx for new POPs, free cash flow remains robust at $12.4 million this quarter.

Q: Jeffrey Hobson asked if AI security represents a distinct sales motion with different competitors or if it integrates into existing AppSec conversations.

A: Roy Zisapel differentiated the use cases: shortening vulnerability-to-protection time aligns with existing WAF/API sales, whereas agentic AI protection involves a fragmented market of many startups. He emphasized that attackers are using AI to automate exploit development, forcing enterprises to adopt dynamic, algorithmic defenses like Exploit Shield to mitigate heightened risks.