Sign in
EN

EXTREME NETWORKS INC (EXTR)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered revenue of $310.2M (+15.2% YoY; +1.1% QoQ) and non-GAAP EPS of $0.22, beating Wall Street consensus EPS and revenue; CFO noted EPS beat vs $0.21 and revenue exceeded the high end of guidance . Q1 consensus: EPS $0.2145*, revenue $295.7M*; actuals: EPS $0.22, revenue $310.2M .
  • Gross margin compressed on component cost inflation (memory/optics, copper/aluminum) and tariffs; management implemented mid-single-digit price increases effective Nov. 1 to recover costs, targeting exit gross margin +100–200 bps from current levels by year-end .
  • FY26 revenue guidance raised to $1,247–$1,264M (from $1,228–$1,238M), while Q2 guidance calls for $309–$315M revenue and $0.23–$0.25 non-GAAP EPS, signaling a seventh straight sequential revenue growth at the midpoint .
  • SaaS ARR grew 24% YoY to $216.2M, with strong interest in Extreme Platform ONE and Wi‑Fi 7; bookings rose 21% YoY, and MSP partners increased to 61, supporting a recurring revenue mix and visibility via deferred revenue ($618M total; SaaS deferred $327M) .
  • Near-term stock catalysts: execution on margin recovery and Q2 guide, Platform ONE adoption proofs, and Investor Day on Nov 10 (strategy and LT model update) .

What Went Well and What Went Wrong

  • What Went Well
    • Revenue growth for the sixth consecutive quarter; Q1 revenue $310.2M (+15.2% YoY) with SaaS ARR $216.2M (+24.2% YoY). CEO: “six consecutive quarters of revenue growth… gaining share”; bookings up 21% YoY, adoption of Platform ONE ahead of expectations .
    • Competitive wins and regional momentum: major APAC government backbone (Fabric over SD‑WAN), EMEA wins like Exyte and Gateshead Council, and U.S. venue wins (T‑Mobile Center, Hyatt Maldives), underscoring differentiation of Fabric and Wi‑Fi 7 .
    • Clear product differentiation and AI platform narrative: “agentic, conversational, multimodal AI” with service agent reducing manual effort by up to 95%; unique cloud‑choice flexibility vs competitors .
  • What Went Wrong
    • Gross margin pressure: non-GAAP GM 61.3% (−240 bps YoY; −100 bps QoQ) due to component inflation and tariffs; management is lifting prices to offset and targets recovery over FY26 .
    • Free cash flow usage (−$20.9M) tied to one-time legal settlements; cash decreased to $209.0M (−$22.7M QoQ), net cash to $7.8M, though management expects cash flow recovery through the year .
    • GAAP gross margin and GAAP operating margin suffered versus last year; GAAP GM 60.6% (63.0% last year) and GAAP OM 3.6% (−1.8% last year), reflecting the cost headwinds and upfront investments in Platform ONE .

Financial Results

MetricQ3 2025Q4 2025Q1 2026Q1 2026 Consensus
Revenue ($USD Millions)$284.5 $307.0 $310.2 $295.7*
GAAP Diluted EPS ($)$0.03 $(0.06) $0.04 —
Non-GAAP Diluted EPS ($)$0.21 $0.25 $0.22 $0.2145*
GAAP Gross Margin (%)61.7% 61.6% 60.6% —
Non-GAAP Gross Margin (%)62.3% 62.3% 61.3% —
GAAP Operating Margin (%)3.6% −0.4% 3.6% —
Non-GAAP Operating Margin (%)14.1% 15.2% 13.3% —

Note: Asterisked values retrieved from S&P Global.*

Segment revenue breakdown

MetricQ3 2025Q4 2025Q1 2026
Product Revenue ($USD Millions)$178.1 $191.9 $194.0
Subscription & Support Revenue ($USD Millions)$106.4 $115.1 $116.2

KPIs and cash metrics

MetricQ3 2025Q4 2025Q1 2026
SaaS ARR ($USD Millions)$184.0 $207.6 $216.2
Free Cash Flow ($USD Millions)$24.2 $75.3 $(20.9)
Cash and Cash Equivalents ($USD Millions)$185.5 $231.7 $209.0
Net Cash ($USD Millions)$3.0 $51.7 $7.8
Shares Repurchased ($USD Millions; Shares)$13.0; 0.85M $25.0; 1.5M $12.0; ~0.6M

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Net Revenue (GAAP) ($M)Q2 2026N/A$309–$315 New
GAAP Gross Margin (%)Q2 2026N/A60.8–61.4 New
GAAP Operating Margin (%)Q2 2026N/A2.6–4.0 New
GAAP EPS ($)Q2 2026N/A$0.03–$0.06 New
Non-GAAP Gross Margin (%)Q2 2026N/A61.4–62.0 New
Non-GAAP Operating Margin (%)Q2 2026N/A13.4–14.6 New
Non-GAAP EPS ($)Q2 2026N/A$0.23–$0.25 New
Diluted Shares (M)Q2 2026N/A135.7 New
Total Net Revenue (GAAP) ($M)FY 2026$1,228–$1,238 $1,247–$1,264 Raised
SaaS ARR Growth YoY (%)FY 2026Low‑20s target Low‑20s target Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 FY25)Current Period (Q1 FY26)Trend
AI/technology initiatives (Platform ONE)Q3: ~100 pre-orders; focus on AI agents across lifecycle . Q4: GA launch; live Platform ONE demos; strong early feedback .Adoption ahead of expectations; service agent released; agentic, conversational, multimodal architecture emphasized .Strengthening adoption and pipeline.
Supply chain/components & tariffsQ4: pricing stable; categories exempt; limited pull-forward .Memory/optics costs, copper/aluminum inflation, 100% China tariffs; price increases Nov. 1 to recover costs .Near-term headwinds, mitigation underway.
Product performance (Wi‑Fi 7)Q4: 30% of wireless units; revenue growth in wireless .Ongoing adoption cited in customer wins and benefits .Sustained momentum.
Regional trendsQ4: APAC largest bookings quarter ever; EMEA +21% YoY .Continued APAC, EMEA wins (government, Exyte, Gateshead) .Positive across regions.
MSP programQ3: 48 partners . Q4: 53 partners .61 partners; new commercial models ~14% of new subscription bookings .Expanding partner base and contribution.
Competitive dynamicsQ4: Opportunities from HPE/Juniper disruption; Cisco program changes .Continued hiring from competitors; customer/channel confusion benefiting Extreme; Cisco partner overhaul .Tailwinds from industry disruption.
Subscription marginsQ4: Recurring revenue 36%; visibility via deferred revenue .Subscription margins expected in ~80% range; upfront cloud spend for Platform ONE .Structurally accretive mix.
Regulatory/legal—One-time legal settlements impacted FCF; now behind .Transitory cash headwind.

Management Commentary

  • “Six consecutive quarters of revenue growth and three straight quarters of double-digit year-over-year gains… a positive sign that we are gaining share. ARR is up 24% year-over-year… highlighted by significant wins this quarter.” — Ed Meyercord, CEO .
  • “We achieved earnings per share of $0.22, exceeding… consensus of $0.21… bookings in the quarter grew 21% year-over-year… non-GAAP gross margin was 61.3%… impacted by industry-wide increases in component costs…” — Kevin Rhodes, CFO .
  • “Extreme Platform ONE… uses agentic conversational and multimodal AI… service agent… reduces manual effort by up to 95%… position us to drive growth and expand market share” — CEO .
  • “We raised price to offset component cost increases… expect to exit with gross margins up 100 to 200 basis points from current levels.” — CFO .
  • On differentiation: “What you guys do in six minutes is taking Cisco six hours to do.” — CEO recounting large enterprise POC .

Q&A Highlights

  • Gross margin pressures and recovery plan: component inflation (memory/optics), tariffs, expedite fees; price increases Nov. 1 across SKUs (low-to-mid single digits) to recover costs, aiming for GM back to 63%+ by year-end .
  • Competitive landscape: HPE/Juniper integration delays and roadmap confusion; Cisco partner program overhaul disenfranchises mid-tier partners—creating share capture opportunities .
  • Platform ONE traction: early adoption ahead of expectations; metrics to be shared post first-wave releases; bookings recognized over time .
  • Subscription margin outlook: near-term cloud spend for agentic AI; subscription margins expected in ~80% range over time; recurring revenue visibility via deferred revenue .
  • Guidance clarifications: Q2 midpoint implies sequential growth (312 vs. 310); linearity in Q1 strong, limited pull-forwards; investor day to detail LT model (Nov 10) .

Estimates Context

  • Q1 FY26 actual vs consensus: Revenue $310.2M vs $295.7M* (beat), non-GAAP diluted EPS $0.22 vs $0.2145* (beat). CFO separately noted the EPS beat vs $0.21 consensus .
  • Forward estimates: Q2 FY26 consensus revenue $312.3M* and EPS $0.2410*, broadly aligned with guidance; FY26 consensus revenue $1,257.1M* and EPS $1.005* [GetEstimates].
  • Implication: Street models likely to adjust upward on FY26 revenue after guide raise and on near-term margin trajectory if price increases flow-through as planned .

Note: Asterisked values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue and EPS beats with raised FY26 revenue guidance signal sustained demand and improving execution; near-term narrative hinges on margin recovery and price increases flowing through Q3/Q4 .
  • Platform ONE and Fabric differentiation are winning larger deals (APAC government, EMEA industrials) and driving ARR growth; watch for adoption metrics post first-wave release and AI Summit/Investor Day updates .
  • Component cost inflation and tariffs pressured GM; management response (pricing, supply chain tactics) targeted to lift GM by 100–200 bps by year-end—track GM progression vs guidance .
  • Recurring revenue and deferred revenue provide visibility; SaaS ARR up 24% YoY and MSP footprint (61 partners) support durable mix and margin accretion over time .
  • Cash flow expected to recover after one-time legal payments; monitor FCF normalization and net cash trajectory as inventory/CCC improve .
  • Competitive disruption (HPE/Juniper integration, Cisco partner changes) is a tailwind; pipeline quality and win rates should remain elevated—look for share gains in public sector and hospitality .
  • Near-term catalysts: Q2 print vs guide, GM trajectory into H2, concrete Platform ONE adoption metrics, and strategic detail at Nov 10 Investor Day .