Executive Summary

Q3 delivered revenue of $184.6M (+0.9% y/y, +8.2% q/q) with record non-GAAP gross margin of 39.6% and non-GAAP EPS of $0.12; GAAP EPS was $(0.17). Results were above the high end of guidance on both the top line and non-GAAP operating margin .
Beat Street: revenue $184.6M vs $172.7M consensus*, EPS $0.12 vs $(0.09); EBITDA better than expected at $(3.35)M vs $(5.21)M. Drivers were stronger Enterprise mix, Pro AV ASP/unit strength, and improved supply . Values retrieved from S&P Global*.
Enterprise revenue rose 15.7% y/y to $90.8M with non-GAAP gross margin of 51.0%; AV partnerships reached ~500 and blue‑chip wins (Fortune 10 retailer, Boeing, South African Parliament, University of Wales, Fox Sports) supported momentum .
Q4 guidance: revenue $170–$185M; non‑GAAP operating margin −2.0% to 1.0%; ~150 bps gross margin headwind from rising DDR4 memory costs; opex slightly reduced as facilities costs normalize .
Capital allocation and balance sheet: repurchased ~$20.0M (~815k shares at $24.55) and ended Q3 with $326.4M in cash and short‑term investments, providing flexibility to support the transformation and opportunistic buybacks .

What Went Well and What Went Wrong

What Went Well

Record non‑GAAP gross margin of 39.6%, up 180 bps q/q and 850 bps y/y; “sixth consecutive quarter” above high end of revenue and non‑GAAP operating margin guidance .
Enterprise strength: revenue $90.8M (+15.7% y/y), non‑GAAP gross margin 51.0% (+630 bps y/y); “Pro AV units and ASPs were each up materially year over year” .
Subscription KPIs: ARR reached $37.9M (+17.2% y/y) with 560k recurring subscribers; Armor Plus mix helped subscription expansion .

Quote: “We delivered record non-GAAP gross margin for the second consecutive quarter... allowing us to achieve positive non-GAAP operating income... and non-GAAP earnings for the third consecutive quarter.” — CJ Prober, CEO .

What Went Wrong

Mobile revenue down 20.7% y/y to $21.1M; service provider channel “remains highly competitive” despite improved segment margins .
Supply constraints on managed switches limited full capture of Enterprise demand; backlog persisted and is expected to normalize by Q1 2026 .
Non‑GAAP opex increased to $69.2M (+25.1% y/y) driven by HQ move and strategic hiring; Q4 gross margin faces ~150 bps headwind from DDR4 memory EOL .

Financial Results

Key financials (sequential and y/y trajectory)

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$162.060	$170.532	$184.561
GAAP Gross Margin (%)	34.8%	37.5%	39.1%
Non-GAAP Gross Margin (%)	35.0%	37.8%	39.6%
GAAP Operating Margin (%)	(7.9)%	(5.6)%	(3.8)%
Non-GAAP Operating Margin (%)	(1.6)%	(0.7)%	2.1%
GAAP EPS ($)	$(0.21)	$(0.22)	$(0.17)
Non-GAAP EPS ($)	$0.02	$0.06	$0.12

Actuals vs Wall Street Consensus (S&P Global)

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue Consensus Mean ($USD Millions)	$152.242*	$162.060*	$172.656*
Revenue Actual ($USD Millions)	$162.060	$170.532	$184.561
Primary EPS Consensus Mean ($)	$(0.37)*	$(0.15)*	$(0.0867)*
Primary EPS Actual ($)	$0.02	$0.06	$0.12
EBITDA Consensus Mean ($USD Millions)	$(11.469)*	$(7.229)*	$(5.214)*
EBITDA Actual ($USD Millions)	$(6.410)*	$(6.996)*	$(3.353)*

Values retrieved from S&P Global*.

Segment breakdown (non‑GAAP)

Segment Metric	Q3 2024	Q2 2025	Q3 2025
Enterprise Revenue ($M)	$78.530	$82.621	$90.838
Enterprise Gross Margin (%)	44.7%	46.7%	51.0%
Enterprise Contribution Margin (%)	20.5%	19.3%	24.9%
Home Networking Revenue ($M)	$77.740	$67.503	$72.647
Home Networking Gross Margin (%)	21.8%	29.5%	27.7%
Home Networking Contribution Margin (%)	(4.7)%	4.7%	2.1%
Mobile Revenue ($M)	$26.584	$20.408	$21.076
Mobile Gross Margin (%)	18.3%	29.1%	31.0%
Mobile Contribution Margin (%)	(4.1)%	0.7%	1.4%

KPIs

KPI	Q1 2025	Q2 2025	Q3 2025
Cash & ST Investments ($USD Millions)	$391.927	$363.472	$326.383
Days Sales Outstanding (DSO)	78	77	79
Inventories ($USD Thousands)	$157,898	$157,305	$166,561
Headcount	636	707	753
Non‑GAAP Diluted Shares (mm)	30.253	30.424	29.782

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Revenue ($USD Millions)	Q4 2025	$165–$180 (Q3 2025 guide issued on 7/30)	$170–$185	Raised (midpoint +$5M)
GAAP Operating Margin (%)	Q4 2025	(11.0)%–(8.0)% (Q3 2025 guide)	(7.3)%–(4.3)%	Raised
Non‑GAAP Operating Margin (%)	Q4 2025	(5.5)%–(2.5)% (Q3 2025 guide)	(2.0)%–1.0%	Raised
Gross Margin Headwind (bps)	Q4 2025	N/A	~150 bps (DDR4 memory cost pressure)	New
GAAP Tax ($USD Millions)	Q4 2025	$0.8–$1.8 (Q3 2025 guide)	$(0.5)–$0.5	Lowered
Non‑GAAP Tax ($USD Millions)	Q4 2025	$(0.5)–$0.5 (Q3 2025 guide)	$0.5–$1.5	Raised
Operating Expenses	Q4 2025	N/A	Slightly reduced as facilities costs normalize	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Pro AV demand & supply	Strong demand; supply constraints; backlog; AV partnerships >400 (Q1) and ~460 (Q2)	Double‑digit end‑user demand; managed switch revenue +16% q/q; AV partners ~500	Improving supply; ecosystem expanding
Segment reporting change	N/A	Move to two segments starting Q4: NETGEAR Enterprise & NETGEAR Consumer	Structural simplification
DDR4 memory costs	N/A	~150 bps GM headwind in Q4 as major suppliers EOL DDR4	New headwind
Tariffs/regulatory	Vast majority exempt from tariffs (Q1/Q2)	“Remain largely exempt from tariffs”; increased U.S. scrutiny of TP-Link potentially aiding wins	Supportive narrative
Subscriptions/ARR	Ongoing transformation to higher ASP Armor; ARR growth strategy (Q2)	ARR $37.9M (+17.2% y/y), 560k subscribers; growing D2C (≈15% of Home Networking sales)	Positive mix, recurring base rising
Security/Exium SASE	Exium acquisition completed (Q2)	Launch of SME-tailored all‑in‑one SASE + hybrid firewall; integrating into Insight	Expanding software/services
Channel/partners	AV Professional Services launched (Q2)	New partner program/portal; focus to be “easiest to do business with”	GTM strengthening

Management Commentary

Strategic transformation: “Sixth consecutive quarter... above the high end of guidance.” Record non‑GAAP gross margin and sustained non‑GAAP profitability reinforce transformation progress .
Enterprise platform: Building integrated networking + security targeted at SMEs/MSPs, combining device firmware, cloud management, and Exium‑based security in a simple UX at affordable price points .
Capital allocation: “Plan to continue to opportunistically repurchase shares... at a minimum to offset dilution” .
Tariffs & positioning: “Remain almost completely exempt from tariffs” and winning deals as a “U.S.-based public company trusted partner” .

Q&A Highlights

Gross margin outlook: ~150 bps headwind across businesses from DDR4 memory EOL; more acute in Home Networking initially .
Revenue guidance spread: Upside levers include improving supply on Pro AV managed switches and holiday promotional success in Home Networking; safety stock expected by Q1 .
Regulatory backdrop: Multiple U.S. government actions scrutinizing TP‑Link; management sees rising customer preference for NETGEAR as trusted domestic supplier .
2026 modeling and seasonality: Public estimates viewed as “reasonable”; expect mid‑teens sequential decline in consumer side from Q4 to Q1; Enterprise less seasonal .
Channel/partner program: Launching partner program and portal to make NETGEAR “the easiest company to do business with” .
Monetization of security: Emphasis on recurring software revenue (cloud management, security, support/services) to expand margins in Enterprise networking .

Estimates Context

Q3 beat: Revenue $184.6M vs $172.7M consensus*; EPS $0.12 vs $(0.09); EBITDA $(3.35)M vs $(5.21)M. Sequentially, NTGR beat revenue and EPS in Q1 and Q2 as well*. Values retrieved from S&P Global*.
Implications: Consensus likely to revise up on Enterprise strength and margin realization; near‑term Q4 gross margin headwind and supply constraints may temper magnitude of upward revisions .

Key Takeaways for Investors

Mix shift toward Enterprise and recurring software/services is expanding margins and driving consistent upside to guidance; monitor Pro AV supply normalization into Q1 2026 .
Near‑term caution: DDR4 memory costs create ~150 bps gross margin headwind in Q4; expect opex to normalize as facilities costs stabilize .
Structural simplification to two segments (Enterprise and Consumer) beginning Q4 should enhance transparency and highlight Enterprise profitability .
Strong balance sheet and buyback capacity ($326.4M cash/STI; $20M repurchases in Q3) provide optionality for continued shareholder returns .
Subscriptions gaining traction: ARR $37.9M (+17.2% y/y) and 560k recurring subscribers underpin higher‑margin, less cyclical revenue streams .
Catalysts: Continued Pro AV outperformance, new security offerings (Exium SASE), partner program ramp, and potential regulatory tailwinds vs certain competitors .
Watch Q4 print vs tightened margin guidance and supply progress; any upside pull‑in on managed switches or stronger holiday retail could support another beat .

NETGEAR, INC. (NTGR)·Q3 2025 Earnings Summary