What Calix (CALX) Said on Its Q3 Earnings Call

Key Points

• Calix reported record third-quarter revenue of $302 million, up 14% year over year, and record software and services revenue of $52 million, up 19%. Its fourth-quarter revenue outlook implies 19% full-year growth, while projected full-year non-GAAP EPS of $1.76 represents 30% growth.
• Customer adoption of Calix’s AI platform accelerated: Calix One contracts more than doubled sequentially and RPO reached a record $396 million. The company is expanding AI offerings and targeting new markets, including multi-dwelling units and hospitality.
• Higher memory costs weighed on appliance margins, and Calix expects supply-chain pressures to remain volatile into 2027; it is applying surcharges to recover costs. The company is also pursuing operating leverage through internal AI initiatives and repurchased $50 million of shares in the quarter.

Calix NYSE: CALX reported record third-quarter revenue and software and services revenue, while outlining plans to expand its artificial intelligence offerings, enter additional markets and pursue operating leverage through internal AI productivity initiatives.

The company reported non-GAAP revenue of $302 million for the third quarter of 2026, up 3% sequentially and 14% from a year earlier. Chief Financial Officer Cory Sindelar said software and services revenue reached a record $52 million, rising 3% from the prior quarter and 19% year over year.

Calix guided for fourth-quarter revenue of $311 million to $317 million. At the midpoint, the company said full-year revenue growth would reach 19%. Fourth-quarter non-GAAP earnings per share are expected to range from $0.41 to $0.49; at the midpoint, Calix projected full-year non-GAAP EPS of $1.76, representing 30% growth from the prior year.

AI Contracts and RPO Growth

President and CEO Michael Weening said customer adoption of the company’s AI platform accelerated during the quarter. Calix One contracts signed in the third quarter more than doubled from the preceding quarter, while remaining performance obligations, or RPOs, reached a record $396 million, up 2% sequentially and 12% year over year.

Sindelar said Calix changed the methodology used to report RPOs after launching its Customer Supply Assurance Program. Under the program, customers provide non-cancelable appliance orders in exchange for price assurance over a specified period. Because those appliance commitments would be included in RPOs, Calix excluded contracts with durations of one year or less to keep the metric focused on software and services.

The change also excluded $6 million of short-duration software and service contracts that had been included in earlier periods. Without the adjustment, software and services RPOs would have increased 4% sequentially and 13% from a year earlier, Sindelar said.

Weening said the increase in Calix One contracts reflected customers committing to the company’s AI roadmap. He said Calix aims to provide customers with AI tools that offer security, predictable costs and workflow-based returns on investment.

New AI and Market Expansion Initiatives

Calix recently introduced the Calix Communications Language Model, or CLM, and Calix Gems. The company said the offerings are intended to deliver communications-specific AI intelligence across its cloud platform, network products and subscriber-premise devices.

Weening said Calix plans to develop specialized models for functions including cybersecurity, Wi-Fi management and network operations. He also said the technology could be consumed by larger service providers that operate customized infrastructure environments.

The company is also expanding its SmartLife offerings to prplOS, an operating-system standard used by some larger service providers. Calix expects to make its broader premises operating system prplOS-certified in early 2027, according to Weening.

Calix also discussed its SmartMDU initiative, which targets multi-dwelling-unit properties. Weening said the company expects a November product release and another release in February that is intended to bring SmartMDU to a more complete level of functionality. The company plans to pursue managed service providers serving apartment buildings and expand into hospitality during 2027.

• Calix expects to deliver more product capabilities in 2027 than it delivered across 2025 and 2026 combined, according to Weening.
• The company is pursuing international opportunities, though Weening said these sales cycles can extend 18 to 36 months and are more likely to contribute to revenue in 2027 and 2028.
• Calix continues to work with two large North American Tier 1 customers, Weening said, without naming them.

Margins, Component Costs and Operating Leverage

Third-quarter non-GAAP gross margin was 53.5%. Software and services gross margin reached a record 67.2%, up 340 basis points sequentially, driven by subscriber growth and optimization of the company’s third-generation platform.

Non-GAAP appliance gross margin was 50.7%, down 220 basis points sequentially, primarily because of higher memory component costs. For the fourth quarter, Calix guided for consolidated non-GAAP gross margin of 52.25% to 54.75%, reflecting component-cost expectations as well as customer and product mix.

Sindelar said the company is applying surcharges to new orders and expects to recover a greater share of higher memory costs during the fourth quarter as it works toward gross-profit neutrality on the increases. However, he said the supply-chain environment could remain volatile through 2027, with pressures extending beyond memory components.

Non-GAAP operating expenses totaled $124 million, or 41% of revenue, compared with 42% of revenue in the prior quarter. Calix expects fourth-quarter operating expenses of $129.5 million to $131.5 million, including costs associated with its annual ConneXions customer conference and five additional days in the quarter.

Sindelar said that, excluding the seasonal conference impact, the company expects operating expenses as a percentage of revenue to continue moving toward 40% and below as it deploys AI internally. Calix’s stated long-term baseline remains 15% annual revenue growth, and the company is working to accelerate its operating-leverage objectives into 2027.

Balance Sheet and Cash Flow

Calix ended the quarter with $155 million in cash and investments after spending $50 million to repurchase 1.4 million shares. Following quarter-end, the company increased its stock repurchase authorization by $100 million, in addition to the $44 million remaining at the end of the third quarter.

Days sales outstanding were 38 days and inventory turns were 2.8. Sindelar said Calix has added more than $75 million of inventory over the past 12 months to support customer demand and product availability. He said the company does not expect to require the same level of inventory commitment in 2027, which could support improved free cash flow over time.

About Calix (NYSE:CALX)

Calix, Inc provides cloud, software and broadband access solutions to communications service providers. Its technology helps broadband operators deploy, manage and monetize high-speed internet and related services for residential and business customers.

The company's offerings include broadband access systems, subscriber premise equipment, cloud-based software and analytics, and managed services. Its portfolio supports fiber, fixed wireless and other broadband networks, while enabling providers to deliver services such as Wi-Fi management, network security, connected home applications and business connectivity.

Founded in 1999 and headquartered in San Jose, California, Calix serves broadband service providers primarily in North America, with customers and operations in other international markets.

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