A10 Networks Q2 Earnings Call Highlights

Key Points

• Strong Q2 performance: Revenue rose 15.5% to $80.1 million, while non-GAAP net income increased to $0.25 per share and free cash flow reached $26.9 million.
• Growth investments expanded: A10 strengthened its Microsoft partnership and acquired TrojAI to add AI red-teaming and real-time runtime protection capabilities.
• Full-year outlook raised: The company now expects 2026 revenue growth of 12%–14% and EPS growth of 14%–16%, citing improving enterprise demand and AI-driven networking and security requirements.

A10 Networks NYSE: ATEN reported second-quarter revenue growth of 15.5% as demand for its application networking and security offerings benefited from AI-related traffic, latency and security requirements. The company raised its full-year revenue and earnings outlook, citing results through the first half and visibility into demand.

Revenue for the second quarter totaled $80.1 million, while year-to-date revenue reached $155.1 million, up 14.5% from the prior-year period. President and CEO Dhrupad Trivedi said the quarter marked the company’s fourth period of double-digit growth in the past five quarters.

Profitability, Cash Flow and Capital Returns

Chief Financial Officer Michelle Caron said product revenue was $49 million, representing 61% of quarterly revenue, while service revenue was $31.1 million, or 39% of revenue. Security-led revenue continued to support product growth, she said.

On a non-GAAP basis, A10 Networks reported an 80.3% gross margin and operating expenses of $43.9 million. Operating margin was 25.5%, and net income was $18.7 million, or $0.25 per diluted share, compared with $0.21 per share in the year-earlier quarter.

Adjusted EBITDA was $25.4 million, equal to 30.5% of revenue. The company generated $26.9 million in free cash flow during the quarter, bringing year-to-date free cash flow to $26.2 million. Caron said A10 expects full-year free cash flow to increase from approximately $65 million in 2025.

Cash and marketable securities totaled $357.3 million as of June 30, while deferred revenue was $154.8 million. During the quarter, A10 paid $4.3 million in dividends and repurchased $2.4 million of shares, for a total of $6.7 million returned to shareholders. The board approved a quarterly dividend of $0.06 per share, payable Sept. 1 to shareholders of record Aug. 15. The company had $53 million remaining under its $75 million share repurchase authorization.

Microsoft Agreement and AI Security Acquisition

Trivedi said A10 expanded its relationship with Microsoft after the quarter ended. He described the agreement as a long-term partnership that includes mutual performance commitments and closer alignment with Microsoft’s roadmap.

He said the agreement did not include pre-buy requirements, and that its economics are tied to Microsoft’s demand, rollout forecasts and a more operationally integrated relationship. A10 has historically categorized Microsoft business as service provider revenue, although Trivedi said some newer Microsoft business is classified in the enterprise category because it involves a different product set.

The company also acquired TrojAI in June. Trivedi said the AI security company adds capabilities for red teaming—using AI to test models and agents for vulnerabilities during development—and real-time runtime protection for AI applications and agentic workflows.

He characterized the acquisition as a way to strengthen A10’s existing portfolio while providing capabilities that can be sold separately or incorporated into broader offerings. Over the next one to two years, the company expects to pursue AI-focused solutions that are not dependent on customers using all of its existing products.

Enterprise Mix and Geographic Demand

Enterprise customers accounted for 60% of second-quarter revenue, Caron said. On a trailing 12-month basis, enterprise represented about half of total revenue, consistent with A10’s objective of creating balanced growth across enterprise and service provider markets.

The Americas accounted for 68% of global revenue, reflecting the company’s focus on the region, AI infrastructure build-outs and enterprise demand. Caron said service provider spending in the Americas has started to normalize, while EMEA demand was affected by geopolitical conditions and Japan faced macroeconomic pressures that have extended spending cycles.

During the question-and-answer session, Trivedi said the service provider pipeline in North America showed modest improvement. He said the company expects service provider business excluding Microsoft to be slightly better in 2026 than it was in 2025, with improvement in North America partly offset by conditions in Japan and neutral trends in Europe.

Trivedi also said enterprise sales cycles for the company’s large customers generally run six to nine months. The enterprise pipeline has improved compared with 90 days earlier, he said, adding that A10 expects more benefit from that activity later in 2026 and into early 2027.

Outlook Raised

A10 raised its full-year 2026 revenue growth forecast to 12% to 14%, from prior guidance of 10% to 12%. The company now expects earnings per share growth of 14% to 16%, compared with its earlier forecast of 12% to 14%.

Trivedi said AI is increasing network traffic volumes, creating more complex and bursty workloads, raising latency requirements and expanding security risks. He said A10’s strategy is centered on providing advanced application management and integrated security across enterprise and service provider environments.

The company continues to manage supply-chain cost and delivery challenges, including potential memory supply and pricing constraints. Trivedi said A10 has managed those issues in recent quarters and remains focused on customer satisfaction and on-time delivery while maintaining its earnings objectives.

About A10 Networks (NYSE:ATEN)

A10 Networks, Inc NYSE: ATEN, headquartered in San Jose, California, designs and sells networking and security solutions that accelerate application performance and protect data across on-premises, cloud and hybrid environments. Founded in 2004, the company's offerings target enterprises, service providers and cloud operators seeking high availability, secure access and optimized traffic delivery for critical applications.

The company's core portfolio includes application delivery controllers (ADCs) for load balancing and traffic management, advanced distributed denial-of-service (DDoS) protection appliances, SSL inspection solutions and carrier-grade NAT (CGNAT) platforms.

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