What Allot (ALLT) Said on Its Q3 Earnings Call

Key Points

• Revenue grew 16% to $30.6 million, marking Allot’s fifth consecutive quarter of double-digit growth. SECaaS revenue rose 37% to $9.9 million, while SMART products also posted double-digit growth.
• Allot raised the midpoint of its 2026 revenue outlook, narrowing the range to $116 million–$118 million, and expects SECaaS revenue to grow more than 40% this year. SECaaS annual recurring revenue was $38.8 million, up 41% year over year.
• Non-GAAP operating income increased to $3.9 million, and operating cash flow rose to $7.4 million. Allot ended September with $112 million in cash, deposits and investments and no debt, and began a $40 million share repurchase program.

Allot NASDAQ: ALLT reported third-quarter revenue growth of 16% and raised the midpoint of its full-year revenue outlook, as its security-as-a-service business expanded and existing customers placed orders for its SMART products.

Revenue rose to $30.6 million in the quarter, the company’s fifth consecutive quarter of double-digit growth, CEO Eyal Harari said. Security-as-a-Service, or SECaaS, revenue increased 37% year over year to $9.9 million, representing 33% of total revenue, CFO Liat Nahum said.

Allot narrowed its 2026 revenue guidance to $116 million to $118 million, the upper end of its previous range, and said it expects SECaaS revenue to grow more than 40% for the year. Harari said the company expects to continue growing its top line in 2027, though management did not provide formal guidance for next year.

Recurring Revenue and Customer Growth

SECaaS annual recurring revenue reached $38.8 million as of Sept. 30, up 41% from a year earlier. Nahum said 64% of total third-quarter revenue was recurring.

Growth in SECaaS was led by Asia Pacific, where revenue nearly doubled year over year, Nahum said. Allot also won a new SECaaS deal with a telecommunications provider in Southeast Asia during the quarter.

Harari said the quarterly increase in SECaaS recurring revenue was driven mostly by carriers adding subscribers to services already deployed. He said the pace of adoption can depend on carriers’ marketing campaigns and promotions.

Over a longer period, Harari said, growth also comes from customers adding capabilities. He cited a provider expanding protection from mobile customers to small businesses and another offering Off-Net security. The new Asian carrier win will take time to implement and launch, he said, but could contribute to growth in 2027 and beyond.

Allot’s SMART business also recorded double-digit growth. Harari said the company received expansion orders from existing customers and had been executing on a backlog built by earlier wins. Those orders have a higher proportion of software and services, supporting gross margins, he said.

Profitability and Cash Flow

On a non-GAAP basis, third-quarter operating income was $3.9 million, compared with $3.7 million a year earlier. The operating margin was 12.9%, down from 14% in the prior-year quarter but improved from the first two quarters of 2026, according to management.

Non-GAAP net profit was $4.7 million, or 9 cents per diluted share, compared with $4.6 million, or 10 cents per diluted share, a year earlier. Non-GAAP gross margin was 71.9%, compared with 72.2% in the prior-year quarter.

Non-GAAP operating expenses rose to $18 million from $15.4 million a year earlier. Nahum attributed the increase primarily to planned research and development investment, higher sales and marketing spending, and nonrecurring professional fees and tax-related items from prior periods. Operating expenses nevertheless fell to 59% of revenue from 62% in the preceding quarter.

Operating cash flow rose to $7.4 million from $4 million a year earlier, bringing the nine-month total to $26.4 million. Allot ended September with $112 million in cash, deposits and investments, up from $88 million at the end of 2025, and had no debt, Nahum said. The company also began its $40 million share repurchase program during the quarter, buying 213,000 shares for $1.6 million.

Security Products and Outlook

Allot recently announced capabilities for protecting SIM-enabled internet-of-things devices through its NetworkSecure service. Harari said the technology lets telecommunications providers offer network-based protection without installing security software on each device. He said existing customers helped inform the product’s development because they lacked adequate solutions for protecting IoT services.

The company also announced during the quarter that it is a founding member and chair of a Post-Quantum Communications Consortium supported by the Israel Innovation Authority. Harari said the group, which includes NVIDIA and academic institutions, aims to develop technologies to protect communications networks against future quantum computing threats.

Asked about carrier purchasing behavior, Harari said operators continue to manage capital and operating expenses tightly, with no recent acceleration in that trend. He said cybersecurity is receiving higher priority and that Allot is seeing more inbound inquiries about security services.

Nahum said the company expects gross margin to remain around current levels in coming quarters, subject to product mix, and continues to anticipate improving profitability. Management plans to provide more detail on 2027 guidance after the fourth quarter.

About Allot (NASDAQ:ALLT)

Allot Ltd. develops network intelligence, optimization and cybersecurity solutions for communications service providers, enterprises and public-sector organizations. Its software and platforms help customers manage network traffic, monitor service performance and protect users and networks from online threats. Its offerings include network traffic management and analytics, as well as security services such as protection against distributed denial-of-service attacks and threats delivered through domain name system (DNS) traffic.

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