Jay Goldberg

Jay Goldberg asked about the structural changes driving NETGEAR's operating leverage, noting the significant EPS beat on a small revenue beat in Q4 2025, and the trajectory for achieving higher operating margins. He also sought confirmation that these underlying drivers remain intact despite near-term memory challenges, particularly for the enterprise segment, and requested the latest ARR and subscriber figures.

Answer

CFO Bryan Murray attributed operating leverage to continued enterprise investment, OpEx growth outpacing revenue in 2026 (then aligning in 2027), record gross margins (41.2%) boosted by a professional license acquisition, and the long-term goal of enterprise reaching 65% of total business. CEO C.J. Prober highlighted Pro AV sell-through growth and investments in enterprise networking and security. Prober confirmed that enterprise drivers are intact, while consumer will use OpEx levers to mitigate memory impact, maintaining long-term optimism. Murray provided Q4 ARR at just over $40 million and 558,000 recurring subscribers.

Jay Goldberg asked about the structural change in NETGEAR's business, noting a small revenue beat but a significant EPS beat in Q4 2025, implying high operating leverage. He sought clarification on how this operating leverage will be built over time and the trajectory towards higher operating margins, acknowledging near-term memory problems. He also asked for a repeat of the ARR and subscriber numbers.

Answer

CFO Bryan Murray explained that investments are primarily in enterprise, with OpEx growth outpacing revenue in 2026 to fund long-term benefits, subsiding in 2027. He attributed Q4's strong performance to record gross margins (over 41%) and the acquisition of a professional license for the AV product portfolio, which adds 150 basis points of gross margin expansion. He reiterated the long-term goal of enterprise reaching 65% of the overall business. CEO C.J. Prober added that while ProAV sell-through grew over 25%, other enterprise businesses are in transformation, with high conviction in their potential. Prober confirmed the underlying trajectory for enterprise remains intact despite memory disruptions, while consumer will see OpEx levers pulled to limit dilution to operating income. Murray then provided the requested numbers: Q4 ARR was just over $40 million, and recurring subscribers were 558,000.

Jay Goldberg from Seaport Research Partners asked for an update on the Home Networking business strategy, the key drivers of the record gross margin and its sustainability, and the progress of the company's software insourcing initiative.

Answer

CEO Charles (CJ) Prober described the Home Networking market as a 'dogfight' but noted NETGEAR is now better positioned with its expanded product portfolio, including the new Orbi 370. He also confirmed the software insourcing initiative is progressing well, leading to better quality and faster execution. CFO Bryan Murray attributed the record 37.8% gross margin to a strong NFB business mix and getting past higher-cost inventory, stating he expects margins to remain in the mid-to-high 30% range.