Allot Q1 Earnings Call Highlights

Key Points

• Revenue growth accelerated in Q1, with Allot reporting $26.4 million in revenue, up 14% year over year, marking its third straight quarter of double-digit growth. Management said strength in its cybersecurity-first strategy, especially SECaaS, is supporting a mid-teens growth outlook.
• SECaaS is becoming a bigger driver of the business, with revenue rising 71% to $8.7 million and reaching 33% of total revenue. SECaaS annual recurring revenue climbed to $33.7 million, and the company expects at least 40% growth in SECaaS revenue for 2026.
• Profitability and cash flow improved sharply, as non-GAAP operating income rose to $2.6 million and operating cash flow hit a quarterly record of $10.6 million. Allot ended the quarter with $98 million in cash and no debt, and it reaffirmed full-year 2026 revenue guidance of $113 million to $117 million.

Allot NASDAQ: ALLT reported a stronger start to 2026, with management pointing to accelerating revenue growth, expanding cybersecurity revenue and record operating cash flow during the company’s first-quarter earnings call.

Chief Executive Officer Eyal Harari said first-quarter revenue rose 14% year over year, marking the company’s third consecutive quarter of double-digit revenue growth. He attributed the performance to Allot’s “cybersecurity-first strategy,” particularly growth in its Security as a Service, or SECaaS, business.

“We clearly have transformed Allot into a profitable growth company,” Harari said, adding that stronger visibility into recurring revenue gives the company confidence in maintaining a mid-teens revenue growth trajectory over the coming year.

SECaaS Becomes Larger Share of Revenue

Chief Financial Officer Liat Nahum said Allot generated $26.4 million in first-quarter revenue, up 14% from the prior-year period. SECaaS revenue totaled $8.7 million, up 71% year over year, and represented 33% of total revenue, compared with roughly one-fifth of revenue a year earlier.

Allot’s SECaaS annual recurring revenue reached $33.7 million as of March 31, 2026, an increase of 59% year over year. Overall, recurring revenue represented 67% of total first-quarter revenue.

Harari said the growing SECaaS business is supported by stronger end-user adoption of cybersecurity services delivered through telecom operators. He said Allot is working with existing communications service provider customers to expand cybersecurity adoption while also pursuing new carrier partnerships.

In the question-and-answer session, Harari said SECaaS growth is expected to be relatively linear through the year, with most near-term growth coming from existing customers that have already launched services. New customer wins during 2026 are expected to contribute more meaningfully to 2027 results, given the time required for implementation and service ramp-up.

Profitability and Cash Flow Improve

Allot reported a non-GAAP gross margin of 71.3% in the quarter, up from 70.4% in the first quarter of last year. Nahum said the improvement reflected the higher contribution from SECaaS, though she noted that quarterly gross margin can vary depending on product mix. The company continues to expect gross margin for 2026 to remain in the range of 70%.

Non-GAAP operating expenses were $16.2 million, compared with $15.9 million a year earlier. Nahum said the increase reflected selective investments in sales and marketing to support pipeline development and in research and development tied to Allot’s product roadmap, especially its cybersecurity offerings.

Non-GAAP operating income rose to $2.6 million, representing a 9.9% operating margin, compared with $0.4 million and a 1.8% margin in the prior-year quarter. Non-GAAP net profit was $3.1 million, or $0.06 per diluted share, compared with $0.8 million, or $0.02 per diluted share, a year earlier.

The company generated $10.6 million in operating cash flow, which management described as a quarterly record. Nahum said the result reflected profitability, strong collections and one-time advance payments tied to milestones in several major SMART deals. Those payments also contributed to an increase in deferred revenue, which she said is expected to materialize as revenue during the year.

Allot ended the quarter with $98 million in cash, short-term bank deposits, restricted deposits and investments, up from $88 million at the end of 2025, and no debt.

SMART Platform Remains a Complementary Business

Harari said Allot’s SMART product line remains an important part of the company’s unified cybersecurity and network intelligence platform. The company is executing on multimillion-dollar projects won in recent quarters, including deployments and upgrades involving its SG-Tera III platform with tier 1 operators.

During the quarter, Allot secured a significant SG-Tera III win, described by Harari as a multimillion-dollar upgrade deal with an existing tier 1 customer. He said the win underscored demand for the platform, which provides network traffic visibility and control and serves as a foundation for advanced cybersecurity and value-added services.

Harari said the SMART pipeline remains healthy, with opportunities from existing customers planning upgrades to SG-Tera III and from new customer engagements. He said multi-year SMART projects provide revenue visibility into 2026, 2027 and beyond, although SMART revenue can fluctuate between quarters depending on project milestones.

AI Threats Drive Product Development Focus

Management repeatedly highlighted artificial intelligence as both a cybersecurity risk and an area of internal operational focus. Harari said AI is expanding the cyberattack surface for consumers, small businesses and enterprises, and that Allot’s network-native cybersecurity offering is positioned to protect users without requiring end-user configuration.

In response to analyst questions, Harari said Allot is investing in additional cybersecurity engines, including capabilities such as network firewall, DDoS protection and identity protection. He also said the company is examining how to protect consumers and small businesses from AI-related threats such as fraud, impersonation and phishing attempts generated by AI tools.

Harari said Allot is also looking at AI tools internally to improve R&D efficiency, accelerate time to market and create more automated processes across the organization. He said the company’s goal is to use AI to support product differentiation while maintaining operating efficiency.

Company Reaffirms 2026 Guidance

Allot reaffirmed its full-year 2026 revenue guidance of $113 million to $117 million. Both Harari and Nahum said that after the strong first quarter, the company is increasingly confident toward the upper end of that range.

The company also said it now has enough visibility to predict 40% or more SECaaS revenue growth in 2026. Nahum said Allot expects continued profitability improvement for the year, despite planned increases in sales and marketing and modest increases in R&D expenses.

Harari said Allot’s board regularly reviews capital allocation, with three main priorities: investing in organic growth, pursuing strategic acquisitions and returning capital to shareholders. He said the company’s cash position and lack of debt provide flexibility to keep investing in long-term growth.

About Allot NASDAQ: ALLT

Allot Ltd. is a provider of network intelligence and security solutions designed for service providers and enterprises worldwide. The company delivers software and cloud-based services that enable customers to gain real-time visibility into network traffic, enforce security policies and optimize bandwidth usage. Its platforms support a wide range of applications, from DDoS protection and threat prevention to subscriber experience management and network analytics.

Allot's product portfolio includes managed solutions for mobile and fixed-line operators, as well as cloud-native services that can be deployed across private, public and hybrid environments.

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