What Management Said
Read the full Q2 2026 transcript ↗Please note that with the exception of revenue, financial measures discussed today are on a non-GAAP basis, unless otherwise noted, and may have been adjusted to exclude certain charges. A10 continues to deliver top and bottom-line growth driven by the increasing relevance of our platform to the demands of next-generation networking. In June, we acquired TrojAI, an AI security company that helps organizations secure, test, and govern AI applications and agentic workflows. This acquisition adds two layers to our platform, red teaming, which uses AI to probe models and agents for vulnerabilities at build time, as well as real-time protection at runtime.
We generated 15.5% revenue growth in the second quarter on a year-over-year basis and 14.5% growth year to date. This marked our fourth quarter of double-digit growth in the last five. As a result, we have increased our full-year outlook to 12%-14% for the full year versus previous guidance of 10%-12%, reflecting continued confidence in the demand environment ahead. Through this period of improving demand, our operating discipline has remained constant.
We balance targeted investment with EPS expansion, and we delivered on both goals in the second quarter. Our goal is to convert growth into profitability and cash while continuing to invest in the technical capabilities this demand environment requires with earnings per share growth exceeding revenue growth. As a reminder, with the exception of revenue, all of the metrics discussed on this call are on a non-GAAP basis, unless otherwise stated. Year to date, our revenue was $155.1 million, an increase of 14.5%.
What went well
- Revenue grew 15.5% year-over-year to $80.1 million, the fourth quarter of double-digit growth in the last five, prompting A10 to raise its full-year revenue outlook to 12%-14% from 10%-12%.
- A10 announced a significant expansion of its long-standing relationship with Microsoft -- a long-term partnership with mutual performance commitments -- validating the platform's relevance and deepening both commercial and product alignment.
- Product revenue (the lead indicator of new business) was especially strong, growing about 25% year-over-year against a tough comparison, driven by security-led offerings and enterprise wins.
- The company acquired TrojAI, an AI-security company adding build-time red-teaming and runtime protection for AI applications and agentic workflows, complementing its next-generation networking and security roadmap.
- Profitability met business-model goals: non-GAAP gross margin of 80.3%, operating margin of 25.5%, adjusted EBITDA of $25.4 million (30.5% of revenue), and non-GAAP net income of $18.7 million ($0.25 diluted EPS versus $0.21 a year ago); full-year EPS growth guidance was raised to 14%-16%.
- Free cash flow was $26.9 million in the quarter as prior-quarter timing items recovered, and A10 returned $6.7 million to shareholders (dividends plus buybacks) while holding $357.3 million in cash and marketable securities.
What went wrong
- Service-provider demand remained uneven: EMEA was impacted by the geopolitical environment and Japan (within APJ) faced macroeconomic pressures weighing on spending cycles, even as Americas service-provider spend began to normalize.
- Customer concentration remained elevated, with the largest end customer around 37% of revenue (expected to be a similar level in the just-reported quarter), tied to completing a major rollout.
- The company continues to navigate industry-wide supply-chain cost and delivery challenges, particularly elevated memory prices/constraints expected to persist for many more quarters.
- Service-provider revenue excluding Microsoft declined in 2025 and is expected to be only slightly better in 2026, reflecting a still-recovering rather than robust service-provider backdrop.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Revenue growth | FY2026 | 12%-14% |
| EPS growth | FY2026 | 14%-16% |
| Free cash flow | FY2026 | Expected to grow year-over-year from ~$65M in 2025 |
| Service provider (ex-Microsoft) | FY2026 | Slightly better than 2025 (North America improving, Japan flat-to-worse, Europe neutral) |
| Quarterly dividend | Q3 2026 | $0.06 per share (payable September 1, 2026) |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +15.5% to $80.1M | Fourth double-digit-growth quarter in five, driven by security-led product growth and enterprise strength amid AI infrastructure build-outs. |
| Product revenue | +~25% to $49M (61% of revenue) | New-business lead indicator; commercial/product enhancements and longer-term AI roadmap conversations broadened engagement. |
| Service revenue | $31.1M (39% of revenue) | Recurring maintenance base; grows slower than product when new business is being won. |
| Enterprise vertical | 60% of Q2 revenue (~half on TTM) | Deliberate balanced-growth strategy; enterprise and service provider increasingly face the same AI-driven workloads. |
| Americas region | 68% of global revenue | Deliberate focus on the Americas driven by AI infrastructure build-outs and enterprise strength. |
| Non-GAAP operating margin | 25.5% | Balanced targeted investment in AI/security innovation with EPS expansion; opex of $43.9M. |
| Non-GAAP EPS | $0.25 diluted vs $0.21 | Net income of $18.7M on 75.7M diluted shares; EPS growth outpacing revenue growth. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Next-generation networking with integrated security | Advanced traffic management foundation | AI is erasing the distinction between enterprise and service-provider networks; A10 positions one architecture, one operating model, and one security framework for both, with AI-driven burst/high-volume traffic and new threat vectors as multi-year secular drivers. | — |
| Microsoft relationship expansion | Multi-year customer categorized as service provider | Expanded to a long-term partnership with mutual performance commitments and deeper operational/product integration; no pre-buys, and new enterprise-categorized business is now being done with Microsoft on a different product set (no historical revenue reclassified). | — |
| AI security via TrojAI | Integrating security into offerings | TrojAI adds red-teaming (build-time) and runtime protection for AI models and agents; near term it strengthens the bundle, but the roadmap points to native AI-security solutions that can be sold standalone within one to two years. | — |
| Enterprise pipeline and on-prem AI | Building enterprise commercial capabilities | Pipeline quality and size improved versus 90 days ago with six-to-nine-month enterprise sales cycles expected to convert in late 2026/early 2027; on-prem and sovereign AI (enterprises running their own models) is a two-to-three-year demand driver given A10's any-form-factor delivery. | — |
| Supply chain and memory costs | — | Management has stabilized memory-cost pressure over the last couple of quarters and prioritizes customer satisfaction and on-time delivery, expressing confidence in delivering EPS even as constraints are expected to persist for many quarters. | — |
Q&A Summary
Gray Powell (BTIG) asked how the drivers of consistently strong product-revenue growth have changed and about the duration of the current spending cycle, plus whether Q2 saw pull-forward like the prior quarter.
CEO Dhrupad Trivedi said product revenue leads new business, driven by commercial/product enhancements winning enterprise opportunities and longer-term AI roadmap conversations broadening product engagement. He clarified the prior 'pull-forward' was project-timeline-driven, not borrowed demand, and there was no concern about demand being pulled from future quarters in Q2.
Christian Schwab (Craig-Hallum) asked about growth drivers tied to rising AI traffic, the Microsoft expansion, and whether localized on-prem enterprise AI is a meaningful future driver.
Trivedi framed three parts: AI-driven burst/high-volume traffic and new threats are a multi-year driver tied to AI usage (not just data-center builds); the Microsoft expansion reflects deeper multi-year roadmap alignment; and on-prem/sovereign enterprise AI is a two-to-three-year opportunity given A10's ability to deliver across any form factor.
Hamed Khorsand (BWS Financial) asked whether Microsoft required pre-buys, how A10 manages Microsoft's large revenue share, and whether memory prices are a higher earnings drag.
Trivedi said there were no pre-buys -- the agreement is aligned to Microsoft's demand and joint long-term work -- and noted the rest of the business excluding a few macro-pressured countries is also growing near double digits. On memory, he said A10 has managed the cost pressure over recent quarters, prioritizing customer delivery while still delivering EPS.
Michael Romanelli (Mizuho) asked how the broader pipeline compares to 90 days ago and what made TrojAI the right acquisition.
Trivedi said the pipeline is better in size and quality, with service-provider North America improving and complex enterprise deals (six-to-nine-month cycles) expected to convert in late 2026/early 2027; TrojAI brought a strong technical team and solution aligned to A10's roadmap, adding capability now and enabling native AI-security offerings over the next one to two years.
Simon Leopold (Raymond James) sought to confirm Microsoft remains in the service-provider vertical, the ~37% largest-customer concentration, and how to think about service provider ex-Microsoft in 2026.
Trivedi confirmed no historical reclassification (Microsoft service-provider revenue stays in that segment) though new enterprise-categorized Microsoft business exists on a different product set; the largest customer will be a similar ~37% level in the Q2 10-Q; and service provider ex-Microsoft should be slightly better than 2025 (North America improving, Japan flat-to-worse, Europe neutral).
More on A10 Networks, Inc.
Reported 2026-08-05 · figures from the A10 Networks, Inc. Q2 2026 earnings call.
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