A10 Networks delivered a strong second quarter of 2026, with revenue growing 15.5% year-over-year to $80.1 million -- its fourth double-digit-growth quarter in the last five -- and raised its full-year outlook to 12%-14% revenue growth (from 10%-12%) and 14%-16% EPS growth (from 12%-14%). Product revenue, the lead indicator of new business, grew about 25% against a tough comparison, powered by security-led offerings and enterprise strength as AI infrastructure build-outs drive higher, burstier traffic and new security threats. The company framed AI as erasing the distinction between enterprise and service-provider networks and positioned its unified next-generation networking-plus-security platform to serve both. Two strategic moves stood out: a significant expansion of its long-standing Microsoft relationship into a long-term partnership with mutual performance commitments and deeper product integration, and the acquisition of TrojAI to add AI-security red-teaming and runtime protection. Profitability remained healthy and on-model, with non-GAAP gross margin of 80.3%, operating margin of 25.5%, adjusted EBITDA of $25.4 million (30.5% of revenue), and non-GAAP diluted EPS of $0.25 versus $0.21 a year earlier, alongside $26.9 million of free cash flow and $357.3 million of cash and marketable securities. Watch items included uneven service-provider demand (EMEA geopolitical pressure and Japan macro weakness, with Americas normalizing), elevated customer concentration (largest customer around 37% of revenue), and persistent memory-cost and supply-chain pressures that management has so far managed while prioritizing on-time delivery and EPS. The enterprise pipeline improved in size and quality, with deals expected to convert in late 2026 and early 2027.
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 second quarter 2026 financial results. Additionally, A10 published a presentation, 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, August 5th, 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 our most recent Form 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 may 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 results prepared 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. I'd 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 continues to deliver top and bottom-line growth driven by the increasing relevance of our platform to the demands of next-generation networking. From our foundation in advanced traffic management solutions to our more recent focus on integrating security in all our offerings, we have built exactly the platform that today's customers need to address the host of challenges impacting their operations. AI is creating new challenges for customers across the industry: greater traffic volume, expanding security threats, and the need for lower latency. Our focus on next-generation networking, which combines advanced application management with integrated security, represents the future of A10 and increasingly the standard our industry is being held to. Subsequent to the quarter, we announced a significant expansion of our relationship with Microsoft.
This agreement reflects a shared commitment to a long-term partnership with mutual performance commitments on both sides. As a result, we are more firmly aligned with the long-term roadmap of this industry leader. It also serves as powerful validation of A10's relevance to the customer and market and speaks to the depth of the relationship we have built over multiple years. We also continued to advance our product roadmap. In June, we acquired TrojAI, an AI security company that helps organizations secure, test, and govern AI applications and agentic workflows. This acquisition adds two layers to our platform, red teaming, which uses AI to probe models and agents for vulnerabilities at build time, as well as real-time protection at runtime. We generated 15.5% revenue growth in the second quarter on a year-over-year basis and 14.5% growth year to date.
This marked our fourth quarter of double-digit growth in the last five. As a result, we have increased our full-year outlook to 12%-14% for the full year versus previous guidance of 10%-12%, reflecting continued confidence in the demand environment ahead. AI continues to erase the distinction between how enterprises and service providers build their networks. Today, enterprises and service providers face the same workloads, performance demands, and security requirements. We have built our platform for exactly this world. One architecture, one operating model, one security framework across both segments. Through this period of improving demand, our operating discipline has remained constant. We balance targeted investment with EPS expansion, and we delivered on both goals in the second quarter.
Our goal is to convert growth into profitability and cash while continuing to invest in the technical capabilities this demand environment requires with earnings per share growth exceeding revenue growth. We remain on track to do just that. With that, I'd like to turn the call over to Michelle Caron, our Chief Financial Officer, to review the numbers in more detail.
Thank you, 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. Let me now turn to the results. As Dhrupad noted, Q2 results were aligned with our business model goals. We delivered revenue growth of 15.5% to $80.1 million. Year to date, our revenue was $155.1 million, an increase of 14.5%. Turning to mix, product revenue in the second quarter was $49 million, or 61% of total revenue, while service revenue was $31.1 million, or 39% of total revenue. From a product mix perspective, security-led revenue continues to drive product revenue growth and meet our long-term goals as a percentage of total revenue. From a vertical perspective, enterprise customers represented 60% of Q2 revenues.
On a trailing 12-month basis, enterprise represents approximately half of total revenue, in line with our previously stated corporate goals of driving balanced growth. Service provider spend in the Americas has begun to normalize. EMEA service provider demand was impacted by the geopolitical environment, while Japan, within our APJ region, continues to experience macroeconomic pressures that are impacting spending cycles. We remain confident that our service provider relationships around the world remain a strong foundation for continued growth within international markets. Both verticals align with our strategy and reflect the strength of our offerings supporting AI infrastructure build-outs. From a geographic perspective, our Americas region represented 68% of global revenue. This reflects our deliberate focus on the Americas as a growth region driven by AI infrastructure build-outs and strength in the enterprise market. Non-GAAP gross margin was 80.3%, in line with our stated goals. Operating expenses were $43.9 million.
As we continued to prioritize investments in AI-facing innovation, next-gen networking, and security. Operating margin was 25.5%, resulting in net income of $18.7 million, or $0.26 per basic and $0.25 per diluted share, compared to $0.21 in the year-ago period. Q2 diluted weighted share count was 75.7 million shares. We generated $26.9 million in free cash flow in the quarter as the Q1 timing items we noted recovered as expected. On a year-to-date basis, free cash flow was $26.2 million. We continue to expect full year free cash flow to grow year-over-year from approximately $65 million in 2025. Adjusted EBITDA was $25.4 million, 30.5% of revenue, consistent with our business model goals. Turning to the balance sheet, cash and marketable securities were $357.3 million as of June 30th, and deferred revenue was $154.8 million. We continue to return meaningful capital to shareholders.
During the quarter, we paid $4.3 million in cash dividends and repurchased $2.4 million worth of shares, returning a total of $6.7 million to shareholders. The board has approved a quarterly cash dividend of $0.06 per share to be paid on September 1st, 2026, to shareholders of record on August 15th, 2026. The company has $53 million remaining on its $75 million share repurchase authorization. Consistent with the industry, we continue to navigate cost and delivery challenges related to the supply chain. Customer satisfaction and on-time delivery remain our top priorities, and the strength of our business model gives us the confidence to raise our EPS outlook even as we navigate near-term cost dynamics. I'll now turn the call back to Dhrupad for an update on our 2026 outlook and closing comments.
Thank you, Michelle. A10 continues to strengthen its position as a partner of choice for next-generation networks, and we are positioned to benefit from multiple durable secular catalysts. We continue to invest to enhance our position across our portfolio while preserving profitability and shareholder returns. Based on the results through six months and our visibility ahead, we are increasing our full year 2026 outlook. We now expect 2026 full year revenue to increase by 12%-14% on a year-over-year basis, up from 10%-12%, and EPS growth of 14%-16%, up from 12%-14% previously. Operator, you can now open the call up for questions.