Aviat Networks NASDAQ: AVNW reported third-quarter fiscal 2026 revenue of $100.0 million, adjusted EBITDA of $4.4 million and non-GAAP earnings per share of $0.06, as management pointed to project timing issues tied to conflict in the Middle East and late-quarter demand shifts among several Tier 1 customers.
President and CEO Pete Smith said quarterly results were “impacted by the conflict in the Middle East,” which led to “certain project pushouts and unfavorable end-of-quarter demand shifts in several Tier 1 customers totaling approximately $9 million in revenue.” Despite the disruption, Smith said the company maintained a trailing 12-month book-to-bill ratio above 1.0 and reduced inventories by $4.0 million versus the December quarter.
Management highlights growth drivers: MDU, utilities and BEAD
In the U.S., Smith said the company is seeing “reason for optimism” in coming quarters due to improved visibility into a multi-dwelling unit (MDU) initiative, increased utility spending related to rising power demand, and the approaching Broadband Equity Access and Deployment (BEAD) program.
On the MDU opportunity, Smith said Aviat has “increased confidence in the level of commitment to this project from our Tier 1 customer,” adding that the company believes it has “secured a favored position as the supplier of choice.” He said installations are underway and expected to continue through the remainder of the fourth quarter, though management expects “a larger step-up during fiscal 2027.” In response to a question from Lake Street’s Jason Schmidt, Smith said Aviat has “live deployments in more than 5 markets” and would be “comfortable saying it’s an 8-figure opportunity in fiscal year 2027,” while cautioning that the size will depend on subscriber adoption.
Utilities were also a key focus. Smith said private networks remain Aviat’s largest segment and described utilities as the second-largest customer group within that segment. He noted Aviat’s product development efforts, including an “ultra-high-powered 11 GHz radio” and the 2024 acquisition of 4RF, and said the outlook for utilities is “quite robust.” Smith cited “recent industry reports” indicating utilities could deploy $1.4 trillion in capital spending plans over the next five years, with about half going to transmission and distribution—areas where Aviat’s hardware supports “smart grid connectivity and management, substation monitoring and security, crew communications, and wildfire detection.” He said the utility segment is “approaching 10% of our overall business” and that discussions with large U.S. utilities suggest this growth opportunity may persist for years.
On BEAD, Smith said customers continue to indicate purchase orders should begin in mid to late calendar 2026, consistent with what the company has communicated for about a year. He said 46 of 56 states and territories have signed final award agreements and that approved deployment spend to date totals about $20 billion. Smith estimated Aviat’s opportunity depends on how much funding goes to fixed wireless access, which he put at 10% to 15% of award dollars, and said the allocation to wireless has been increasing. Feedback from four wireless internet service provider customers with BEAD wins suggests calendar 2027 could see the largest ramp in purchase orders for Aviat, he said.
Revenue declines year-over-year; margins pressured by mix and volume
CFO Andy Schmidt said third-quarter revenue was $100.0 million, down from $112.6 million in the year-ago quarter. For the first nine months of fiscal 2026, revenue was $318.8 million compared with $319.3 million in the prior-year period.
- North America: $46.2 million in Q3 (46.2% of total), with year-to-date revenue of $151.7 million, up 1.4% versus the prior year period.
- International: $53.8 million in Q3 (53.8% of total), with year-to-date revenue of $167.1 million versus $169.7 million a year earlier.
Gross margin fell year-over-year in the quarter to 29.3% on a GAAP basis and 29.4% on a non-GAAP basis, compared with 34.9% GAAP and 35.8% non-GAAP in the prior-year quarter. Schmidt attributed the change primarily to “volume, regional, and product mix.” For the first nine months, gross margins were “consistent with the prior year,” with GAAP gross margin of 31.7% and non-GAAP gross margin of 32.1%.
In the Q&A with ROTH Capital Partners’ Scott Searle, Schmidt said the company did not see margin pressure from pricing. “We didn’t see gross margins drop due to price compression. Not at all,” Schmidt said, adding that the company expects a seasonally strong fourth quarter and a return to “expected performance” once volumes normalize.
Profitability, taxes and balance sheet updates
Schmidt said third-quarter GAAP operating expense was $28.3 million, down from $30.0 million a year earlier. Non-GAAP operating expense was $26.4 million, $0.8 million lower than the prior-year period. Operating income was $0.9 million on a GAAP basis and $3.0 million non-GAAP, versus $9.3 million GAAP and $13.0 million non-GAAP in the year-ago quarter.
Third-quarter GAAP net loss was $2.1 million, while non-GAAP net income was $0.7 million. GAAP loss per share was $0.16 and non-GAAP EPS was $0.06. Adjusted EBITDA was $4.4 million, or 4.4% of revenue. For the first nine months, adjusted EBITDA was $24.8 million, up 12.5% year-over-year.
Schmidt also discussed the company’s tax position, noting Aviat ended fiscal 2025 with “over $450 million of net operating losses,” which he said should support minimal cash tax payments “for the foreseeable future.” He added that Aviat believes there is a “reasonable possibility” it could release a “significant portion” of a valuation allowance against certain foreign deferred tax assets within the next few quarters, potentially creating a one-time GAAP income benefit in the quarter of release, though timing is uncertain and “reasonable” within the next four quarters.
On the balance sheet, Schmidt reported $78.1 million in cash and marketable securities at quarter-end and $104.3 million of outstanding debt, resulting in net debt of $26.1 million. The company lowered unbilled receivables for a second consecutive quarter, reducing the balance by $5.4 million sequentially to $85.3 million. Inventories declined by $4.0 million sequentially, while accounts payable fell by $33.3 million as the company used cash to pay down obligations. Aviat repurchased about 20,000 shares for $0.5 million during the quarter.
Guidance updated; Middle East conflict and freight dynamics noted
Smith updated full-year fiscal 2026 guidance, citing year-to-date results and the outlook for the fourth quarter “inclusive of the war-induced pushouts.” Aviat now expects:
- Full-year revenue: $428 million to $440 million
- Full-year adjusted EBITDA: $35 million to $40 million
Smith said the third-quarter challenge began in early March and is “timing related,” and he added that the company expects “normalization of demand in Q4.” When asked whether the roughly $9 million in pushouts would be recognized in the fourth quarter, Smith said some had already shipped early in the quarter but that the company wanted to remain conservative given the ongoing conflict.
Management also addressed freight and component considerations. Smith linked freight inflation to constraints tied to jet fuel supply, and in response to questions about inflationary inputs, he said memory is a small part of the bill of materials for microwave radios and that the company would look to offset inflation through pricing and other measures. He added the company may buy ahead on certain “trailing edge CPUs” if needed, though he said such issues have not yet affected Aviat.
Closing the call, Smith said the Middle East conflict “was certainly a drag on demand and margins,” but added that the company is “very excited about our growth programs” and expects them to make a more meaningful impact in fiscal 2027, including contributions from MDU, BEAD, utilities, and product platform expansion.
About Aviat Networks NASDAQ: AVNW
Aviat Networks, Inc is a specialist in wireless transport solutions, designing, manufacturing and selling microwave networking products that enable the secure and reliable transmission of data, voice and video. The company's offerings address mission-critical communications needs for a broad range of end markets, including telecommunications service providers, utilities, government agencies and enterprises. Its product portfolio spans high-capacity packet microwave radios, IP transport systems and network management software.
Aviat's core product lines include the WTM series of packet microwave platforms, which deliver scalable throughput and advanced resilience features, and the Eclipse packet microwave systems, which combine broadband capacity with synchronization, security and quality-of-service capabilities.
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