A10 Networks, Inc. Q4 2025 earnings call

Thank you, and thank you all for joining us today. This call is being recorded and webcast live and may be accessed for at least 90 days via the A10 Networks website at a10networks.com. Hosting the call today are Dhrupad Trivedi, A10's President and CEO, and CFO, Michelle Caron. Before we begin, I would like to remind you that shortly after the market closed today, A10 Networks issued a press release announcing its fourth quarter 2025 financial results. Additionally, A10 published a presentation and supplemental trended financial statements. You may access the press release, presentation, and trended financial statements on the investor relations section of the company's website.

During the course of today's call, management will make forward-looking statements, including statements regarding projections for future operating results, demand, industry and customer trends, macroeconomic factors, strategy, potential new products and solutions, our capital allocation strategy, profitability, expenses and investments, positioning, and our dividend program. These statements are based on current expectations and beliefs as of today, February 4, 2026. These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control, that could cause actual results to differ materially, and you should not rely on them as predictions of future events. A10 does not intend to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law. For a more detailed description of these risks and uncertainties, please refer to most recent 10-K and quarterly report on Form 10-Q.

Please note that with the exception of revenue, financial measures discussed today are on a non-GAAP basis, unless otherwise noted, and have been adjusted to exclude certain charges. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for prepared remarks in accordance with GAAP and may be different from non-GAAP financial measures presented by other companies. A reconciliation between GAAP and non-GAAP measures can be found in the press release issued today and on the trended quarterly financial statements posted on the company's website at www.a10networks.com. Now, I would like to turn the call over to Dhrupad Trivedi, President and CEO of A10 Networks.

Thank you, Tom, and thank you all for joining us. Today, A10 reported record, quarterly, and full-year revenue results. These results reinforce A10's strategic position. A key contributor continues to be the sustained investment in environment supporting AI-driven workloads. As customers scale high-performance computing, inference platforms, and data-intensive applications, they are increasingly focused on traffic management, availability, and security at massive scale. These requirements play directly to A10's strengths. For the full year, revenue grew 11% year-over-year, outpacing growth rates across much of our competitive landscape and underscoring the increasing relevance of our portfolio with customers. We enter 2026 with momentum supported by macro trends as a result of our agile strategy, strong execution, and excellent industry reputation. Increasingly, we are considered a foundational piece in the development of AI and other infrastructure, in addition to being a critical component for customers operating their current environments.

As our customers grow, we grow. In the fourth quarter, we delivered $80.4 million in revenue, our largest single quarter ever. Revenue expanded 8.3% year-over-year in spite of an unusually strong seasonal fourth quarter last year. Our investments in targeting North America customers has resulted in this portion of our business growing faster than over-

Great, great. In the fourth quarter, we delivered $80.4 million in revenue, our largest single quarter ever. Revenue expanded 8.3% year-over-year, in spite of an unusually strong seasonal fourth quarter last year. Our investments in targeting North America customers has resulted in this portion of our business growing faster than our overall revenue, and we continue to be well-positioned with these customers while maintaining our geographic and customer diversity. Our global diversification continues to enable consistent performance despite macro variability. For full year 2025, we delivered revenue of $290.6 million, up 11% year-over-year, and adjusted EBITDA of $86 million, which represents 29.6% of revenue. These are all company records and continue to demonstrate the inherent strength of our strategy, operating model, and disciplined execution.

Security-led solutions are now sustainably at our long-term goal of 65% of total revenue. This shift reflects not only the breadth of our portfolio, but the increasingly central role security and encrypted traffic play in legacy networks as well as next-generation networks. During the quarter, we closed a win with a large global data and analytics software provider, serving customers across highly regulated industries. The customer was experiencing rapidly rising encrypted traffic volumes, driven by platform expansion and recent acquisitions, creating both performance and cost challenges. A10 was selected for its ability to deliver high-performance solutions, supporting the next-generation network with hardware acceleration and improved security, enabling the customer to consolidate infrastructure, support future growth, and materially improve cost efficiency. We also closed a significant new win with a large global airline operating highly distributed mission-critical digital platforms.

The customer was focused on improving automation, performance, and centralized management across a complex hybrid environment while reducing operational costs at scale. A10 was selected for its ability to deliver state-of-the-art cybersecurity, resilient next-generation networking solutions with deep automation, while supporting consistent performance and availability across an always-on customer-facing operating model. Importantly, these wins are representative of the type of demand that aligns well with our operating model and our strategic growth drivers. They reflect customers prioritizing performance, security, and efficiency at scale. Use cases where A10 can deliver strong value without incremental complexity or disproportionate cost. We continue to drive a disciplined operating model that balances targeted investment with margin expansion, converting growth into profitability and cash, while dynamically reinvesting in strategic priorities. As previously noted, investing in organic growth is one of our strategic priorities, in addition to returning capital to shareholders.

We have reallocated our research and development budgets, focusing on accelerating some of our future AI-related solutions and integrating AI across all our offerings, supporting current and future growth. We remain committed to our long-term operating model, driving revenue growth more than 10%, adjusted EBITDA margins of 26%-28%, and EPS growth faster than revenue growth. A10 is well positioned to serve our customers, and our solutions are well aligned with the dynamic needs of today's customers. Today, A10 works with nine of top 10 telecom operators, eight of the top 10 cloud providers, and more than 7,000 customers globally. The investment cycle to support AI specifically and network capacity generally continues to drive sustained demand. A10 is positioned to grow with our customers, and our proven capabilities and industry-leading total cost of ownership are helping us win new business as well.

With that, I'd like to turn the call over to Michelle Caron, our Chief Financial Officer, to review the numbers in more detail. After that, I will discuss our 2026 outlook. Michelle?

Thanks, Dhrupad. As a reminder, with the exception of revenue, all of the metrics discussed on this call are on a non-GAAP basis, unless otherwise stated. A full reconciliation of GAAP to non-GAAP results are provided in our press release and on our website. So now let me turn to the results.... As Dhrupad had noted, we delivered a strong Q4 and entered 2026 with encouraging momentum. Fourth quarter revenue grew 8.3% to $80.4 million. This was a record revenue level for A10. From a mix perspective, product revenue accounted for 61% of total revenue, and service revenue represented 39%. Product revenue of $48.8 million grew 13% year-over-year, and typically is representative of future revenue trends.

Within our product revenue category, the fourth quarter achieved our long-term target of generating more than 65% of our total revenue from security-led solutions. This demonstrates our ability to deliver differentiated solutions, leveraging our strengths in performance, scale, and reliability. Looking at our major verticals, enterprise customers represented 42% of Q4 revenues. The Americas continued to outpace overall enterprise revenue growth for the company, in line with our stated strategy. Service provider revenue, which was 58% of total revenue, was weighted towards cloud providers, further indication of our success in strategically aligning our offerings with AI infrastructure build-out. In fact, non-cloud service provider revenue was flat year over year, reflecting an ongoing mix shift as customers prioritize security and next-generation networking initiatives over legacy infrastructure.

A10 has evolved its solutions to be well-positioned to capture legacy refresh demand as this market transition progresses and customers resume investment while continuing to align with their evolving priorities around performance, scale, and security. From a geographical perspective, our Americas region represented 64% of global revenue, reflecting the benefits of A10's investments in our enterprise segment and strength of AI infrastructure build-out. Macro-related headwinds, such as persistent inflation and threat of tariffs in rest of the world, were more than offset by strength in Americas. Q4 operating results reflected our continued investment in our strategic initiatives, as well as our financial discipline. Non-GAAP gross margin was 80.8%, in line with our stated goals of 80%-82%.

Operating expenses were $43.6 million, with an operating margin of 26.6%, reflecting increased investments, mainly in R&D, focusing on next-generation networking and security. Our non-GAAP effective tax rate was 15.7%, resulting in net income of $19.1 million, or $0.26 a share. Q4 diluted weighted share count was 72.7 million shares. Adjusted EBITDA was $24.9 million, 31% of revenue. We generated $22.7 million in cash flow from operations in Q4, with CapEx coming in at $6.7 million, bringing free cash flow for quarter four in at $16 million. We've continued to invest in the business while also returning capital to our shareholders. Now I'll turn to the full year results.

Revenue grew 11% to $290.6 million, with non-GAAP gross margin coming in at 80.6%. At the same time, we delivered record Adjusted EBITDA of $86 million, or 29.6%, reflecting disciplined execution and a highly productive operating model. Net income was $66.3 million, or $0.90 a share, and was up from $64.8 million, or $0.86 a share in the prior year, while we invested significantly throughout the year in strategic investments such as AI and security. As a result of this, we were still able to increase EPS on a year-over-year basis. Our growth was driven by increased demand for security-led revenue, which represented 72% of total revenue for the year.

Revenue from the Americas increased 30% for the year, while revenue from EMEA increased 12%, offsetting a decline in revenue from APJ, where the region has been experiencing macroeconomic headwinds such as low GDP growth, persistent inflation, and concerns with tariffs. We continue to have deep customer relationships in these regions to preserve our geographic diversity. Turning to the balance sheet, cash and marketable securities were $378 million as of December 31, and our deferred revenue was $142.8 million.

During the year, we paid $17.4 million in cash dividends and repurchased $68.9 million worth of shares, returning a total of $86.3 million to shareholders. The board has approved a quarterly cash dividend of $0.06 per share to be paid on March 2, 2026, to shareholders of record on February 16, 2026. The company has $53.4 million remaining on its $75 million share repurchase authorization. Now, we're closely monitoring the broader supply environment, including the memory segment, which has been widely discussed across the industry by customers, partners, and competitors alike. Based on our supply management processes, we don't expect this to impact the delivery to our customers, and we continue to navigate cost pressures alongside our suppliers and our customers.

As a result, we've taken proactive steps around supply planning, supplier engagement, and component flexibility to mitigate potential impacts. We deployed similar measures in previously supply-constrained environments, such as 2020, so we feel well positioned to navigate this dynamic. I look forward to speaking with many of you in the coming weeks, gathering your feedback on our strategy and operations. I'll now turn the call back to Dhrupad for a discussion of our 2026 outlook and closing comments.

Thank you, Michelle. The results for the fourth quarter and full year validate the strategic investments we have made over the past half decade to reposition A10 as a valuable partner for addressing the new and emerging challenges related to the evolving technology environment. The demands AI brings to a data center or a CSP are challenges that A10 has a proven track record of addressing. We facilitate East-West traffic, efficiently managing workloads and dynamically prioritize traffic, emphasizing high throughput and low latency, all with integrated security. As a result, A10 is positioned squarely in front of multiple durable secular catalysts. We are investing to enhance our position across our portfolio. Our business model dynamically allocates resources to address changing market conditions while preserving profitability and shareholder return. In the press release we issued today, we laid out our initial 2026 outlook.

On a full year basis for 2026, we expect to deliver both top and bottom line growth, including revenue growth of 10%-12% over 2025 levels. We also expect non-GAAP gross margin in line with historical trends and within our stated business model goals of 80%-82% while navigating input cost pressures. We expect to expand our net and EBITDA margins from current levels, and we expect EPS growth to exceed our revenue growth rate. We will provide additional strategic and solution context around our growth drivers and market positioning at an upcoming Investor Day, including a deeper discussion of the factors that drive these expectations. Operator, you can now open the call up for questions.