Dave King

Dave King asked about Extreme Networks' strategy in response to Cisco's partnership with NVIDIA, seeking to understand Extreme's 'countermeasure.' He also sought clarification on the gross margin impact from component price increases, specifically the 100 basis points impact, and the effectiveness of the mid-single-digit price increases in offsetting these costs. Finally, he inquired about any foreign exchange (FX) impact during the quarter.

Answer

President and CEO Edward B. Meyercord clarified that Extreme Networks is focused on bringing AI *to* networking (AI-powered automation, agentic platform) rather than building networks *for* AI systems, emphasizing their leadership and competitive advantages in this area. Executive Vice President and CFO Kevin Rhodes detailed that gross margin was impacted by expedite fees, higher component costs (including China tariffs), and increased prices for metals like copper and aluminum. He confirmed the mid-single-digit price increases, effective November 1st, are intended to offset these costs, with full effect in Q3 and Q4 FY26. Mr. Rhodes stated there was 'very little' FX impact due to hedging.

Dave King questioned Extreme Networks' strategy in response to Cisco's recent partnership with NVIDIA. He also sought clarification on the gross margin impact from component price increases, specifically asking if the roughly 100 basis points impact was accurate, and if the mid-single-digit price increases would sufficiently offset these costs. Additionally, he asked about any foreign exchange (FX) impact on the company's financials.

Answer

President and CEO Ed Meyercord clarified that Extreme Networks focuses on "bringing AI to networking" using AI tools for enhanced performance and visibility, rather than "building networks for AI systems" like Cisco's partnership. He highlighted Extreme's agentic AI platform and service agent as key differentiators. EVP and CFO Kevin Rhodes confirmed the component cost impact was around 100 basis points, attributing it to expedited deliveries, higher component costs, China tariffs, and increased metal prices. He stated that the mid-single-digit price increases, effective November 1, are designed to offset these costs, with full effect in Q3 and Q4. Rhodes also noted very little FX impact due to balance sheet hedging.