A10 Networks, Inc. Aktie

Good afternoon, and welcome to the A10 Networks Third Quarter 2026 Financial Results Conference Call. [Operator Instructions]

It is now my pleasure to turn the floor over to your host, Tom Baumann. The floor is yours.

Thank you, and thank you all for joining us today. This call is being recorded and webcast live and may be accessed for at least 90 days via the A10 Networks website at a10networks.com.

Hosting the call today are Dhrupad Trivedi, A10's President and CEO; and CFO, Michelle Caron.

Before we begin, I would like to remind you that shortly after the market closed today, A10 Networks issued a press release announcing its third quarter 2026 financial results. Additionally, A10 published a presentation and supplemental trended financial statements. You may access the press release, presentation and trended financial statements on the Investor Relations section of the company's website.

During the course of today's call, management will make forward-looking statements, including statements regarding projections for future operating results, demand, industry and customer trends, macroeconomic factors, strategy, potential new products and solutions, our capital allocation strategy, profitability, expenses and investments, positioning and our dividend program. These statements are based on current expectations and beliefs as of today, November 5, 2026.

These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control, that could cause actual results to differ materially, and you should not rely on them as predictions of future events. A10 does not intend to update information containing these forward-looking statements whether as a result of new information, future events or otherwise, unless required by law. For a more detailed description of these risks and uncertainties, please refer to our most recent 10-K and quarterly report on Form 10-Q.

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. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP and may be different from non-GAAP financial measures presented by other companies. A reconciliation between GAAP and non-GAAP measures can be found in the press release issued today and on the trended quarterly financial statements posted on the company's website at a10networks.com.

Now I would like to turn the call over to Dhrupad Trivedi, President and CEO of A10 Networks.

Thank you, Tom, and thank you all for joining us today. The third quarter was another record quarter for A10 with revenue up 22.6% and profitability that enabled us to consistently exceed our stated performance goals. We continue to win business and gain market share in our key growth markets of advanced network security and next-generation networking. Strong year-to-date results and sustained demand for our solutions gives us the confidence to raise our guidance for the second time this year.

A10 is well positioned at the intersection of advanced networking and security. The growth of AI is increasing the volume and complexity of network traffic, making our portfolio increasingly relevant. Customers need to distribute application requests and connect employees to external AI services reliably. Our next-generation networking solutions help them meet those needs. They also need to defend against DDoS and other attacks that could disrupt access to AI and other shared enterprise applications. Our A10 Defend portfolio helps protect the availability of these critical services with industry-leading performance.

We are also seeing demand for solutions that secure the use and development of AI and help enterprises manage AI access, routing and costs. A Fortune 50 financial services company with over 40,000 employees is using A10's AI firewall, both to help protect employees accessing public AI tools and to govern AI traffic in their internal and external-facing applications.

The deployment illustrates how leading enterprises are moving agentic AI into production at scale with approximately 800 enterprise agentic AI applications connected to our guardrail solution. These include internal and external-facing applications, with the largest application being external-facing. Roughly 50,000 sessions are routed through the solutions each day under unified customized policies.

In another example, a global information and analytics provider is using A10's AI red-teaming capability to test AI models and applications for vulnerabilities. By probing systems for potential weaknesses before deployment, the company can better assess AI-related risks and strengthen its security practices as it expands its use of AI.

These examples reflect how both A10's core portfolio and newer AI solutions can help customers meet mission-critical needs in an increasingly complex environment. Our growth is not solely predicated upon build-out of new data centers. It is in fact linked to growth in traffic, expansion of security and responsible use of AI.

Our deep partnership with our largest strategic customers continues to contribute to our growth. Through this relationship, A10's technology helps protect cloud infrastructure supporting enterprises across industries and geographies. That infrastructure enables AI applications alongside other mission-critical workloads, extending A10's role in helping keep the services businesses and consumers [ who ] rely on availability.

Demand across the rest of the business was broad-based and related to our core differentiation and increasing relevance to evolving needs for networking and security. EMEA and APJ revenue grew at double-digit levels on a year-over-year basis. Overall revenue, excluding our largest customer, grew at a double-digit rate in the quarter.

At the same time, we are converting demand into greater profitability and cash generation. Our goal is to sustain growth while investing in the capabilities this demand environment requires. We remain on track for non-GAAP earnings per share growth to outpace revenue growth.

I'd now like to turn the call over to Michelle Caron, our Chief Financial Officer, to discuss our financial results in greater detail.

Thank you, Dhrupad. 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. A full reconciliation of GAAP to non-GAAP results are provided in our press release and on our website.

Let me now turn to the results. As Dhrupad noted, Q3 results reflect encouraging demand globally and our continued ability to convert growth into significant cash generation. We delivered revenue growth of 22.6% to a quarterly record of $91.5 million. Year-to-date, our revenue was $246.7 million, an increase of 17.4%.

Turning to mix, product revenue in the third quarter was $58.5 million or 64% of total revenue, while service revenue was $33 million or 36% of total revenue. From a product mix perspective, security-led revenue continues to drive product revenue growth and meet our long-term goals at 65% of total revenue. From a vertical perspective, enterprise customers represented 58% of Q3 revenue and approximately half of total revenue on a trailing 12-month basis. Stronger enterprise growth reflects progress toward our goal of diversifying our revenue mix.

Service provider spend in the Americas has begun to normalize, but remains below historical levels, representing an opportunity for incremental growth. We're confident that our service provider relationships around the world remain a strong foundation for continued growth, and we're not seeing our share of this market erode.

From a geographic perspective, our Americas region represented 64% of global revenue. This reflects our deliberate focus on the Americas as a growth region, driven by AI infrastructure build-outs and strength in the enterprise markets. We're also seeing improving results from international markets this quarter. Customer satisfaction and on-time delivery remain our top priorities as we navigate input cost and delivery challenges, like everyone else in the industry.

We delivered record non-GAAP gross profit of $73.3 million in Q3 and non-GAAP gross margin came in at 80% of revenue. Operating expenses were $47.8 million as we continue to prioritize investments in AI-facing innovation, next-gen networking and security. Operating margin was 27.8%, resulting in net income of $23.6 million or $0.33 per basic and $0.31 per diluted share, compared to $0.23 in the year-ago period. Our Q3 diluted weighted share count was 75.7 million shares.

We generated a quarterly record for free cash flow. And on a year-to-date basis, free cash flow was $57.5 million, an increase of 18% year-on-year. We continue to expect full year free cash flow to grow year-over-year in the range of $74 million to $77 million from approximately $64 million a year ago. Adjusted EBITDA was $29.5 million or 32% of revenue, consistent with our business model goals.

Turning to our balance sheet, cash and marketable securities were $360.4 million as of September 30 and deferred revenue was $157 million. During the quarter, we paid $4.4 million in cash dividends and repurchased $23 million worth of shares, returning a total of $27.4 million to shareholders. The Board has approved a quarterly cash dividend of $0.06 per share, to be paid on December 1, 2026 to shareholders of record on November 16, 2026. The company has $30.1 million remaining on its $75 million share repurchase authorization.

I'll now turn the call back to Dhrupad for an update on our 2026 outlook and closing comments.

Thank you, Michelle. Our results reflect broad-based demand for A10's networking and security solutions as customers respond to rising traffic, expanding AI deployments and increasingly complex security needs. We are focused on supporting that demand while investing in our portfolio, strengthening profitability and generating cash.

Based on our year-to-date performance, demand visibility and the current supply environment, we are updating our full year 2026 outlook. We expect revenue growth of approximately 16% year-over-year, compared with our prior outlook of 12% to 14%. Note that this is roughly 400 to 500 basis points better than our largest competitor and our peer group. Demand from our largest customer remains healthy and stable. Our outlook also implies continued year-over-year growth in the fourth quarter across rest of the business.

We expect full year non-GAAP adjusted EBITDA margin to exceed 30% and non-GAAP diluted EPS of $1.08 to $1.10, representing a year-over-year growth of 20% to 22% and outpacing revenue growth, in line with our operating philosophy.

We also discussed in today's press release our longer-term organic target. Our progress, expanding global opportunity and continued execution give us confidence in setting a long-term target of $500 million in annual revenue through organic growth and $2 in annual non-GAAP EPS for fiscal year '29. We remain confident in our strategy and in our ability to capture customer demand while protecting the long-term earnings power of the business.

With that, I'll turn the call back to the operator to open the line for questions.

[Operator Instructions] First question from Gray Powell with U.S. Bank.

Congratulations on the great results here. It was really nice to see. So I guess my main question is on product revenue. So growth has been excellent this year. In fact, I think it's the best product revenue growth you've seen in at least 8 years, maybe longer. My model doesn't quite go back that far. Just how should we think about the sustainability of that growth over the next 12 months, particularly as you face tougher comps? And the 14% organic commentary, that was really helpful. I'm just trying to make sure that we have building blocks correct as we think about next year.

Yes. So as we look at our product growth rate, I think that is really a good indicator of us being able to win new business as well as continue to replenish customers with new solutions. There is nothing unusual in the last 2 or 3 years where we draw some artificial refresh cycle or something like that, right? So it is a natural evolution of demand.

As we look on a long-term trend, you are correct, the product growth percentage reflects vitality in the products and customer acceptance of new solutions as well as competitive wins. So we feel pretty good that that is not based on a trend that is going to come and go. It's more broad-based. And if we can drive more of kind of a replacement cycle, that's great, but that is not [ what ] we are counting upon to get the next 2 to 3-year growth.

Okay. Great. And then my follow-up question would be, so you called out, I think, double-digit growth excluding your largest customer. Just in ballpark terms, give or take, is that how we should think about that segment going forward?

So I would say that you should think of that as that segment can support that double-digit growth going forward. In the next 4 quarters or 6 quarters, we probably will have to balance and optimize, right, if there is supply constraints, on what we choose or prioritize.

But what that is meant to indicate is our growth is not a result of one company doing something, but it's more broad-based, and that we will obviously continue to prioritize customers and high-growth potential as we go through every quarter. But I think it's more meant to be an indicator that the demand is much more broad-based versus single customer based.

Next question comes from Hamed Khorsand with BWS Financial.

Could you just talk about the return of your international customers, if this was pent-up demand as far as what was in the pipeline before or if these are new projects that you're now being included in?

So I would say, Hamed, that there's 2 aspects to it. I would say one is, obviously, we are all living in a constrained environment in some ways. And it's not a big revenue impact for us, but obviously, we prioritize customers as we need to. So part of it was not pent-up demand, I would say, but sort of natural variation in demand. Because our historical customer base is service providers and there is a kind of CapEx cyclic variation in demand, whether it's in Asia or Europe and U.S. And so some of it was kind of being able to service that demand.

And second was balancing that fulfillment, right, while keeping our largest customers satisfied as well.

Okay. And then could you just talk about your accounts receivables declining in the quarter? That was great to see, but is that sustainable? And what's a good area for us to expect that the balance of the year?

Yes. So Hamed, our quarter benefited from the timing of cash receipts in that quarter. We're still on track to deliver the cash flow that I talked about a few minutes ago for the full year, between $75 million to $77 million -- or $74 million to $77 million in cash flow. So it was a timing related to this quarter bringing the DSO to 49 days.

Next question comes from Gian Conti with Deutsche Bank.

Congrats again on the quarter. Maybe just one on the guide, I'm not sure if you answered this. But what are the main drivers behind the $500 million revenue target? How much comes from your largest customer compared to the rest of the business? What depends on new wins? I'd love to really unpack that.

And then maybe a few thoughts on how did the business grow this quarter if you exclude your largest customer?

Okay. Yes. So we said it in the script, so business grew more than 10% excluding our largest customer. And our competitors and peers are growing 400 to 500 basis points lower than that. So that's the first answer to your question.

Second is, obviously, we expect this growth to be broadly based, which is why we are confident in that. If you look at our actuals and what we have done year-to-date, which is higher than 14%, we feel pretty confident that 14% is a good number for us.

And yes, I think, obviously, and we are highly aligned with a large customer who apparently is also the best positioned in terms of the backlog they have on AI receivables versus the cash they are generating, and they are the only cash flow positive like category in that world. So we feel pretty good about that. And if you look through the data, I think I probably -- we have addressed all your questions quantitatively in the earnings release.

That concludes our Q&A session. I will turn it back over to Dhrupad Trivedi for closing comments.

Thank you, and thank you to all of our employees around the world, customers and shareholders for joining us today and for your continued support. I remain confident in our strategic orientation with security and next-generation networking spending patterns. Thank you for your time and attention.

Ladies and gentlemen, this concludes your conference call for today. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Good afternoon, everyone, and welcome to the A10 Networks Second Quarter 2026 Financial Results. [Operator Instructions]

It is now my pleasure to turn the floor over to your host, Tom Baumann of FNK Investor Relations. Tom, the floor is yours.

Thank you, and thank you all for joining us today. This call is being recorded and webcast live and may be accessed for at least 90 days via the A10 Networks website at a10networks.com.

Hosting the call today are Dhrupad Trivedi, A10's President and CEO; and CFO, Michelle Caron.

Before we begin, I would like to remind you that shortly after the market closed today, A10 Networks issued a press release announcing its second quarter 2026 financial results. Additionally, A10 published a presentation, supplemental trended financial statements. You may access the press release, presentation and trended financial statements on the Investor Relations section of the company's website.

During the course of today's call, management will make forward-looking statements, including statements regarding projections for future operating results, demand, industry and customer trends, macroeconomic factors, strategy, potential new products and solutions, our capital allocation strategy, profitability, expenses and investments, positioning and our dividend program.

These statements are based on current expectations and beliefs as of today, August 5, 2026. These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control that could cause actual results to differ materially, and you should not rely on them as predictions of future events.

A10 does not intend to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. For a more detailed description of these risks and uncertainties, please refer to our most recent 10-K and quarterly report on Form 10-Q.

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. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP and may be different from non-GAAP financial measures presented by other companies.

A reconciliation between GAAP and non-GAAP measures can be found in the press release issued today and on the trended quarterly financial statements posted on the company's website at www.at10networks.com.

Now I'd like to turn the call over to Dhrupad Trivedi, President and CEO of A10 Networks.

Thank you, Tom, and thank you all for joining us today.

A10 continues to deliver top and bottom line growth driven by the increasing relevance of our platform to the demands of next-generation networking. From our foundation in advanced traffic management solutions to our more recent focus on integrating security in all our offerings, we have built exactly the platform that today's customers need to address the host of challenges impacting their operations.

AI is creating new challenges for customers across the industry, greater traffic volume, expanding security threats and the need for lower latency. Our focus on next-generation networking, which combines advanced application management with integrated security represents the future of A10 and increasingly, the standard our industry is being held to.

Subsequent to the quarter, we announced a significant expansion of our relationship with Microsoft. This agreement reflects a shared commitment to a long-term partnership with mutual performance commitments on both sides. As a result, we are more firmly aligned with the long-term road map of this industry leader. It also serves as a powerful validation of A10's relevance to the customer and market and speaks to the depth of the relationship we have built over multiple years.

We also continue to advance our product road map. In June, we acquired TrojAI, an AI security company that helps organizations secure, test and govern AI applications and agentic workflows. This acquisition adds 2 layers to our platform, Red Teaming, which uses AI to probe models and agents for vulnerabilities that build time as well as real-time protection at run time.

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 5. And as a result, we have increased our full year outlook to 12% to 14% for the full year versus previous guidance of 10% to 12%, reflecting continued confidence in the demand environment ahead.

AI continues to erase the distinction between how enterprises and service providers build their networks. Today, enterprises and service providers face the same workloads, performance demands and security requirements. We have built our platform for exactly this world, one architecture, one operating model, one security framework across both segments.

Through this period of improving demand, our operating discipline has remained constant. We balanced 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, and we remain on track to do just that.

With that, I'd like to turn the call over to Michelle Caron, our Chief Financial Officer, to review the numbers in more detail.

Thank you, Dhrupad.

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. A full reconciliation of GAAP to non-GAAP results are provided in our press release and on our website.

Let me now turn to the results. As Dhrupad noted, Q2 results were aligned with our business model goals. We delivered revenue growth of 15.5% to $80.1 million. Year-to-date, our revenue was $155.1 million, an increase of 14.5%.

Turning to mix. Product revenue in the second quarter was $49 million or 61% of total revenue, while service revenue was $31.1 million or 39% of total revenue. From a product mix perspective, security-led revenue continues to drive product revenue growth and meet our long-term goals as a percentage of total revenue.

From a vertical perspective, enterprise customers represented 60% of Q2 revenues. On a trailing 12-month basis, enterprise represents approximately half of total revenue, in line with our previously stated corporate goals of driving balanced growth.

Service provider spend in the Americas has begun to normalize. EMEA service provider demand was impacted by the geopolitical environment, while Japan within our APJ region continues to experience macroeconomic pressures that are impacting spending cycles.

We remain confident that our service provider relationships around the world remain a strong foundation for continued growth within international markets. Both verticals align with our strategy and reflect the strength of our offerings supporting AI infrastructure build-outs.

From a geographic perspective, our Americas region represented 68% of global revenue. This reflects our deliberate focus on the Americas as a growth region, driven by AI infrastructure build-outs and strength in the enterprise market.

Non-GAAP gross margin was 80.3%, in line with our stated goals. Operating expenses were $43.9 million as we continue to prioritize investments in AI-facing innovation, next-gen networking and security.

Operating margin was 25.5%, resulting in net income of $18.7 million or $0.26 per basic and $0.25 per diluted share compared to $0.21 in the year ago period. Q2 diluted weighted share count was 75.7 million shares.

We generated $26.9 million in free cash flow in the quarter as the Q1 items -- as the Q1 timing items we noted recovered as expected. On a year-to-date basis, free cash flow was $26.2 million. We continue to expect full year free cash flow to grow year-over-year from approximately $65 million in 2025. Adjusted EBITDA was $25.4 million, 30.5% of revenue, consistent with our business model goals.

Turning to the balance sheet. Cash and marketable securities were $357.3 million as of June 30, and deferred revenue was $154.8 million. We continue to return meaningful capital to shareholders. During the quarter, we paid $4.3 million in cash dividends and repurchased $2.4 million worth of shares, returning a total of $6.7 million to shareholders.

The Board has approved a quarterly cash dividend of $0.06 per share to be paid on September 1, 2026, to shareholders of record on August 15, 2026. The company has $53 million remaining on its $75 million share repurchase authorization.

Consistent with the industry, we continue to navigate cost and delivery challenges related to the supply chain. Customer satisfaction and on-time delivery remain our top priorities and the strength of our business model gives us the confidence to raise our EPS outlook even as we navigate near-term cost dynamics.

I'll now turn the call back to Dhrupad for an update on our 2026 outlook and closing comments.

Thank you, Michelle.

A10 continues to strengthen its position as a partner of choice for next-generation networks, and we are positioned to benefit from multiple durable secular catalysts. We continue to invest to enhance our position across our portfolio while preserving profitability and shareholder returns.

Based on the results through 6 months and our visibility ahead, we are increasing our full year 2026 outlook. We now expect 2026 full year revenue to increase by 12% to 14% on a year-over-year basis, up from 10% to 12% and EPS growth of 14% to 16%, up from 12% to 14% previously.

Operator, you can now open the call up for questions.

[Operator Instructions] Our first question is coming from Gray Powell of BTIG.

Congratulations on the really strong set of results.

Thank you.

Okay. So on product revenue growth, it's consistently been strong. It's the last 18 months, 25% growth in Q2 versus a tough comp last year. I thought that was particularly impressive. Can you maybe talk about how the drivers of growth on the product side have been changing this year versus last year? And then just how should we think about the duration of the spending cycle that you're currently benefiting from?

Yes. No, great question. And I think as we have said before, when we get new customer or new business, product revenue is the lead indicator.

And relative to your question, Gray, 2 things, right? So A, over the last several quarters, we have spoken about things that we are strengthening on the commercial side and the product side to be able to better address and win opportunities, including in the enterprise segment, right? So that's one aspect of where as we get new business, the product growth is the lead driver and grows faster than service at that point.

Second, I would say, is as we have continued to engage customers with longer-term road map and solutions related to what they can do with AI when they actually deploy it in the next 2, 3 years, that has also naturally led to broader conversations with other products that they could be engaging with us today while they do that.

So, I think those 2 dimensions have helped us kind of drive that product growth a little bit more substantially. And our goal is obviously to continue to maintain that as much as we can.

Okay. That's really helpful. And then just, I guess, it's a related question. The last quarter, you called out some pull-forward dynamics with your largest customer. So, I guess I was a little bit surprised to see product growth accelerate in Q2. Can you maybe just talk about what surprised you the most in the quarter? And was there any similar pull-forward dynamics in Q2 to what you saw last quarter?

Yes. No, fair point. And I think maybe a minor subtlety there, right? So the pull-forward dynamic was not sort of a relocation of demand. It had more to do with supporting a significant project that had a time line that needed to be completed. So when I look at Q2, similarly, I would say, right, we continue to balance the customer needs and deployment needs. But there's no concern that this is demand from outer quarters that's coming into the period, if that's helpful.

And our next question is coming from Christian Schwab of Craig-Hallum Group.

Great quarter and outlook. Can you just give a better description and discussion on the growth drivers, which appear to be a large degree of increased traffic that is going through the network, in particular, through enterprises as AI adoption is accelerating. And is that also part of the expansion of the Microsoft relationship?

And in addition to that, as more and more traffic becomes localized on the enterprise and as enterprise deploy specific AI applications that they run dedicated on their networks versus going to the cloud? Should we think of that as a meaningful growth driver for you over time?

Yes. No, great question, Christian. So I think I'll maybe talk about that in 3 parts, right? So first, as you mentioned, right, our approach is around the notion of helping whatever type of company uses the product that when there is more traffic, more complicated traffic and people are worried about latency, that's a good fit for our solutions independent of what exact application may be.

So certainly, the growth in traffic driven in some part due to AI, which is much more burst traffic, high-volume traffic and different than what we used to see. It results in 2 parts. One is just managing that traffic efficiently and with low latency. And second is dealing with the new kinds of threats that arise because of the use of AI by not even enterprise, but by everybody on the network.

So that is certainly one of the drivers. And I would say we see that as kind of a sustainable thing for several years because it's related ultimately not to who's building how many data centers, it's linked to our people using AI, right? And I think we all can answer that for ourselves. So that's clearly one of the drivers.

Second, I think you talked about Microsoft. And obviously, we have been partnered with them, and it's been a great customer for us for a long period of time. The expansion is that over the next couple of years' time frame, again, we are more and more aligned on the road map that as they build out their own architecture and infrastructure that we are continuing to be embedded with them in broader areas than we used to before, right? So, it's continuing to expand that.

At the same time, obviously, we are very focused on ensuring we do our part to help them continue to be successful. So that's simply kind of a reflection and joint commitment from both sides that we want to make it work for an extended period of time, and this is just a reflection of that. And ultimately, it has to be that we have to deliver the right technology they need, and we are obviously focused on that from a technical point of view.

The last point you mentioned actually is an interesting one. So I would say this is not a big demand driver immediately, but certainly, in the next 2 to 3 years, as you see in the news, a large enterprise, particularly chooses to do sometimes their own models or because of sovereign AI reasons outside of U.S. as well, they choose to do actually more things on-prem than even in the cloud. Our solution can go across all of that.

So as we see uptake in the next 2, 3 years with enterprise doing more AI, like inference AI and generally, the large ones preferring to do their own, we see that obviously as a strength for us, again, based on the nature of our solution and the ability that we have maintained how we deliver these capabilities in any kind of form factor.

Great. I just have 1 more question. Regarding your first sustainable growth driver as more complicated traffic and latency is security threats are a huge issue. Your success there, can you just remind us who your first or second biggest competitor for those products are?

I think -- so I think there's 2 class of people that we would compete with, right? So one is traditional companies that deliver infrastructure products, obviously, are also trying to add similar capabilities. So that would be 1 category of that, right? And I would say, though, the way we are approaching it, we try to do it based on our differentiation. So we believe we can be competitive.

The second part of that is, which is an evolving market is because of the nature of funding, there is a lot of small and start-up companies that is trying to compete in those slots. But ultimately, I think the -- one of the factors that plays into it is, would you trust -- if you're a large bank, "Would you trust your data to an AI with a 6-person team, right?" So I think -- and if you do, then the technology has to be really, really good.

So I think the balance for us is we overlap with both. The direct competition, I would say, though, would be with companies that do networking and infrastructure, trying to add on AI products and capabilities.

And our next question is coming from Hamed Khorsand of BWS Financial.

So first off, were there any prebuy requirements on the part of Microsoft for the expanded relationship? And how are you going to manage the business given that Microsoft is so large of a percentage of revenue at this point?

Yes. So I think the agreement that we have is linked to more their demand and us working jointly with them in a much more longer time frame. So there's no prebuys or anything like that. It's very much aligned with their business needs, rollout forecast and us being much more operationally intertwined than before as well as the product side.

The second part of your question, Hamed, I would say is if you put aside that and maybe where 1 or 2 countries where there's macro issues, our overall business, excluding those factors is also growing close to double digits, right? So, it's not that this is the only place that is growing.

So, our objective continues to be to increase our relevance more and more in enterprise, obviously, including cloud and AI as well as maintain durability where we should also benefit when service provider CapEx rebounds and does better, right? So, we are not loosing those slots. We are maintaining those positions. But obviously, we are taking advantage of the current spending profile of customers by quarter.

Okay. And then is there a higher drag on earnings because of where memory prices is? Or have you been able to stabilize that?

Great question. So, I think we have been able to maintain it in the last couple of quarters as people talk about that memory constraint, whether it's supply or pricing or combined is expected to last for a while, right? So, we are continuing to navigate that.

But our bias is customer satisfaction and delivery. So, if we were forced to make that choice, we'll figure out what to do and still deliver EPS. But so far, we have been able to manage that, but it's unknown, right? Everybody is expecting it to last for many more quarters. So, we are just staying focused on the customer delivery.

Our next question is coming from Michael Romanelli of Mizuho Securities.

Maybe to start off, obviously, the new Microsoft agreement provides some validation around demand and deployment activity. So, congrats on that.

I guess just looking beyond that relationship, can you talk a little bit about the broader pipeline today, how that compares to perhaps 90 days ago, whether that be size, quality and visibility, particularly for just the larger enterprise and any AI-related opportunities that you can comment on? Just trying to understand how demand looks for -- outside of the Microsoft agreement. And then I have a follow-up.

Sure. Yes. Good question, and I'll maybe answer it in 2 ways. So, first is when we look at our overall pipeline, it's compared to 90 days ago and let's say, enterprise SP separately, I would say, on the service provider side, we certainly see slight improvement in the North America market.

And some of it is, right, the products we sell help them run networks better, cheaper, faster, whether they replace the network or not. So, we certainly see that as a trend where that pipeline is improving. And so, we expect that to be a contributor more in the future.

On the enterprise side, obviously, we have put a lot of effort. And I think because our focus is typically on large enterprise, the sales cycles tend to be 6 to 9 months and are pretty complex. So, I would say the pipeline is good. We see kind of the trend being pretty positive as well. But I think we should start seeing the results later this year, early next year more so than before based on that, right?

So, the pipeline compared to 90 days is definitely better. And I would say the quality of deals is better. So, it's -- obviously, the last part is the most important, which is we have to execute.

And the second thing, Michael, you asked, on the AI side, right, like many companies, we are engaged with a lot of customers, proof-of-concept kind of things right now as they are themselves figuring out what to do with AI. So there, I would say our measure of success is more around how many customers are we engaged with and are we deeply involved with kind of their business problems and how we can solve them.

Got it. Okay. That's helpful. And then maybe for my follow-up, congrats on the recent acquisition of TrojAI. I guess what made this the right asset for A10? And where do you see the strongest fit within the portfolio? And I guess just more broadly, could AI security become a more meaningful growth vector for A10 over time? Or should we think of it more as an important capability that enhances the relevance of the existing portfolio?

Yes. No, great question. So, I think, first of all, I think one of the most important things for us in going with Troj was the team there had developed a very strong technical solution and which was very much in line with kind of the road map we were driving towards and somewhat complementary to some other things we were doing. So, in a way, it was adding that capability to strengthen a portfolio that we can sell stand-alone, but also as part of broader bundles in the future.

I would say the near term, of course, it adds capability to the overall solution for sure. But at the same time, the road map that we are driving has more to do with kind of native AI solutions that we can bring to market in the next 1 or 2 years that are not even predicated on people using all of our other products, right? So, it's more of the first thing today, but it could be both in the future as the market matures.

And our next question is coming from Simon Leopold with Raymond James.

Okay. I wanted to check. Historically, you've included Microsoft within your service provider vertical, I believe. I want to confirm that and just verify that, that's still how you categorize it just to make sure that essentially the sort of shift in mix isn't reflective of recategorization of a customer?

Good question and clarification. So, Simon, you are correct. Historically, we characterized it as service provider. We have not recategorized that portion of the business. But as I mentioned before, we are also doing different and new business with Microsoft as well as others. And that's where it's sometimes difficult for us to kind of split in that enterprise ASP mix because many of our customers, including in Europe, do both. And so, you are correct. There's no historical revenue that has been recategorized. And so, what is sold to them as a service provider is still counted in the service provider segment.

So then in the most recent quarter, is there Microsoft business showing up that you do categorize as enterprise?

Yes, based on a completely different product set, correct.

Okay. That totally now things make so much more sense to me. So helpful. So then stepping back, last quarter, you did disclose in the Q that you did have a 37% end customer. Can you give us a similar metric for the June quarter?

I think obviously, we will come out in the Q, but it will be a similar number. And we'll publish the Q next day or 2. So -- but it will be a similar number, and it's linked to kind of completing the rollout, right? So, it will change probably in the future. But as of now, for Q2, it will be a similar number just for those exact reasons.

Okay. And so, I guess kind of trying to just put a button on this line of questioning. It looks like service provider, excluding Microsoft, declined in 2025. And I think you're talking about it stabilizing. So, if we're trying to think about service provider, excluding Microsoft in 2026, we should be thinking about that as similar to the 2025 level. Is that what you mean by normalizing? I just want to make sure I'm interpreting that commentary correctly.

Yes. So, I think very good question. I think -- so I would say expecting it to be slightly better than 2025 level. And the puts and takes are the North America segment, we see as improving. Japan is equal or slightly worse and Europe is neutral, right? So between those factors, overall, we expect it to be slightly better versus 2025.

Well, we appear to have reached the end of our question-and-answer session. So, I'll now hand back over to the management team for any closing comments.

Thank you. And thank you to all of our employees, customers and shareholders for joining us today and for your continued support. I'm increasingly confident in our strategic orientation with security and next-generation networking spending patterns. Thank you for your time and attention.

Thank you very much, everybody. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful rest of the day. We thank you for your participation.

Greetings. Welcome to the A10 Networks First Quarter 2026 Financial Results Conference Call. [Operator Instructions] I will now turn the conference over to your host, Tom Baumann. Sir, you may begin.

Thank you, and thank you all for joining us today. This call is being recorded and webcast live and may be accessed for at least 90 days via the A10 Networks website at a10networks.com. Hosting the call today are Dhrupad Trivedi, A10's President and CEO; and CFO, Michelle Caron.

Before we begin, I would like to remind you that shortly after the market closed today, A10 Networks issued a press release announcing its first quarter 2026 financial results. Additionally, A10 published a presentation and supplemental trended financial statements. You may access the press release, presentation and trended financial statements on the Investor Relations section of the company's website. During the course of today's call, management will make forward-looking statements, including statements regarding projections for future operating results, demand, industry and customer trends, macroeconomic factors, strategy, potential new products and solutions, our capital allocation strategy, profitability, expenses and investments, positioning and our dividend program. These statements are based on current expectations and beliefs as of today, April 28, 2026.

These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control that could cause actual results to differ materially, and you should not rely on them as predictions of future events. A10 does not intend to update information contained in these forward-looking statements whether as a result of new information, future events or otherwise, unless required by law. For a more detailed description of these risks and uncertainties, please refer to our most recent 10-K and quarterly report on Form 10-Q.

Please note that with the exception of revenue, financial measures discussed today are on a non-GAAP basis, unless otherwise noted, and have been adjusted to exclude certain charges. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP and may be different from non-GAAP measures presented by other companies. A reconciliation between GAAP and non-GAAP measures can be found in the press release issued today and on the trended quarterly financial statements posted on the company's website at a10networks.com.

Now I'd like to turn the call over to Dhrupad Trivedi, President and CEO of A10 Networks.

Thank you, Tom, and thank you all for joining us today. A10 continued to deliver on our strategic plan centered around the current AI-driven demand cycle, while simultaneously focusing on disciplined execution. Our customers are seeking solutions to address 2 major challenges: accelerating traffic volume and complexity and emerging security threats in the rapidly evolving AI landscape. A10 is well positioned to address both these challenges. We delivered 13.4% revenue growth in the first quarter. This was our third quarter in the last 4 with double-digit growth. On a trailing 12-month basis, we have grown revenue by 12.1% and delivered TTM adjusted EBITDA margins of 29.7%, in line with the rule of 40 we outlined several years ago. During the same period, we have grown service provider revenue by 11% and enterprise revenue by 13%, demonstrating the importance of the strategic shift we have made.

A key contributor to our growth is the relevance of our core platform to the demands of AI infrastructure build-out, which create new challenges with greater traffic within the networks. As a result, traffic management is returning to the forefront of build-out plans, and this trend is aligned with A10's history and core expertise. Second, AI is evolving rapidly, creating new threats and expanding the footprint of security concerns. For most of the last decade, A10 has prioritized security advancement in each of our solutions. During this period, we have built a security portfolio that is now directly in the path of AI-driven threat expansion.

This quarter, we were selected as a technology partner for a new application at 1 of the most significant AI infrastructure build-outs in our industry. As a result, the customer behind this build-out represents a 5% of total revenue this quarter. The expansion of the customers' commitment to their enterprise applications reflects our focus on and relevance of next-generation networking. Deployment of this scale are time-sensitive and technically demanding, and it required prioritized allocation of product inventory and engineering resources. This was a deliberate choice to support a strategic customer and partner through a time-sensitive deployment window. We believe capturing this opportunity at the right cadence creates long-term value for the business.

I also want to highlight that dynamic, I believe, is increasingly important to our story. AI is transforming the distinction between how large enterprises and service providers build their networks. The workloads are the same, the performance demands are the same and security requirements are the same. What this means practically is that a Fortune 500 customer standing up an internal AI cluster is now evaluating the same architectural choices as a cloud provider. A service provider hosting AI workloads for their enterprise tenants is being held to the same standard as its customers' own data centers. We have built our platform for exactly this world, 1 architecture, 1 operating model, 1 security framework across both segments. That is a meaningful competitive advantage as this convergence accelerates driven by AI. Our disciplined operating model balances targeted investment with margin expansion converting growth into profitability and cash while dynamically reinvesting in strategic priorities. We continue to meet our objectives for EBITDA margin, reflecting our ability to reallocate resources based on best business opportunities. This results in consistent revenue and EPS performance.

With that, I'd like to turn the call over to Michelle Caron, our Chief Financial Officer, to review the numbers in more detail. Michelle?

Thank you, Dhrupad. As a reminder, with the exception of revenue, all of the metrics discussed on this call are a non-GAAP basis, unless otherwise stated. A full reconciliation of GAAP to non-GAAP results are provided in our press release and on our website. So let me turn to the results.

As stupid noted, Q1 results were aligned with our business model goals and delivered revenue growth of 13.4% to $75 million. Turning to mix. Product revenue was $44 million or 59% of total revenue, growing 22.3% year-over-year with service revenue comprising the remainder. Security led revenue was a strong driver of our product revenue growth and continues to meet or exceed our long-term goal of security-led revenue as a percentage of total revenue. Security remains the dominant revenue driver across our next-gen networking, legacy networking and network security solution areas.

Turning to our major verticals. Enterprise customers represented 56% of Q1 revenues, with Americas continuing to outpace overall enterprise revenue growth. While first quarter benefited from timing of large orders, this segment continues to grow above company average in terms of results as well as outlook. Enterprise momentum reflects the combination of our focus on this segment as well as continued strong demand for our next-gen networking solutions as customers prioritize modernizing their infrastructure. Our customers across both segments are aligning on the same underlying requirements for performance, security and scale.

From a financial lens, this convergence is showing up in larger opportunities with our enterprise customers. Service provider revenue was 44% of total revenue in the first quarter. Both verticals align with our strategy and reflect the alignment of our offerings with AI infrastructure build-outs. A10 has evolved its solutions to be well positioned to capture this next-gen networking demand while also addressing legacy refresh opportunities as this market transition progresses and customers resume investment while continuing to align the evolving priorities around performance, scale and security.

From a geographical perspective, our Americas region represented 67% of global revenue, driven by continued investment in AI infrastructure build-outs. In EMEA, we saw headwinds related to regional conflicts. In APJ, spending remains conservative as customers navigate an uncertain capital environment. We're not losing market share or experiencing competitive displacement, rather customers are extending asset lives and deferring discretionary spend.

Q1 operating results reflected our continued investment in our strategic initiatives as well as our financial discipline amidst temporary input cost pressures. Non-GAAP gross margin was 80.6%, in line with our stated goals. Operating expenses were $41.5 million as we prioritized investments in AI facing innovation, next-gen networking and security. Operating margin was 25.2%, resulting in net income of $17.7 million or $0.25 per basic and $0.24 per diluted share. Q1 diluted weighted share count was 72.9 million shares. Operating cash flow and therefore, free cash flow in the quarter was temporarily impacted by the timing of receivables as well as inventory investments. Neither item reflects a change in underlying business fundamentals, and we expect both to normalize over the course of the year.

Full year free cash flow expectations remain unchanged, expanding on a year-over-year basis. Adjusted EBITDA was $22.5 million, 30% of revenue, consistent with our business model goals as we balance investment and growth initiatives with our commitments to sustained and expanding profitability.

Turning to the balance sheet. Cash and marketable securities were $369.7 million (sic) [ $ 369.8 million ] as of March 31, and deferred revenue was $147.2 million. During the quarter, we paid $4.3 million in cash dividends and repurchased $2.5 million worth of shares, returning a total of $6.8 million to our shareholders. The Board has approved a quarterly cash dividend of $0.06 per share to be paid on June 1, 2026, to shareholders of record on May 15, 2026. The company has $53.4 million remaining on its $75 million share repurchase authorization. As is true for everyone in the industry, we are seeing delivery and cost challenges related to pricing of certain components. We entered this environment with strong supplier relationships, and we will keep evaluating the evolving market and adapt as needed.

I'll now turn the call back over to Dhrupad for an update on our 2026 outlook and closing comments.

Thank you, Michelle. A10 continues to strengthen its position as a partner of choice to address the evolving traffic and security needs of next-generation networks. The strong financial results, including double-digit growth and solid EBITDA margins validate the strategic investments we have made. As a result, A10 is well positioned in front of multiple durable secular catalyst. We continue to invest to enhance our position across our portfolio while preserving profitability and shareholder returns. We are reiterating our 2026 outlook with 2026 revenue growth within our guided range of 10% to 12% and adjusted EBITDA margins between 28% to 30% and EPS growth of 12% to 14%. In addition, we remain confident and committed to our long-term operating model.

Operator, you can now open the call up for questions.

[Operator Instructions] Our first question comes from Gray Powell with BTIG.

Okay. Great. And congratulations on the very strong set of results. It was really good to see the product revenue growth accelerate to 22% this quarter. So I guess my first question would just be, where do you think we're at in the investment cycle around AI. And if you start to see a further acceleration in traffic growth, would you think about prioritizing faster revenue growth over the historical 28% to 30% EBITDA margin framework that you've always talked about?

Yes. First of all, thank you, good question. So in terms of, I think, the investment cycle, as I think we have said in the past that we see this as there is a large build-out phase and where we are actually focused with customers is in that phase, but also with customers who will, over time, deploy their own solutions, whether it's around sovereign AI and things like that. So the second part of that cycle, I think, is very early stage, and we expect to see that benefit next few years. The first part of the cycle, I think, is pretty active build out. I don't know how much higher it will go or lower it will go, but it is pretty solid and stable in terms of the significant committed to the build-out and even though the build-out itself takes several quarters, right? So I think we are in the midst of that build-out phase, and we are at a very early stage of where enterprise and other entities will use AI for their own business more directly, whether it's on-prem or cloud or combined.

And I think your second question is this correct and appropriate. So we certainly continuously look at that trade-off. And I would say the focus for us is if there are opportunities to grow faster, typically, that also helps in growing EPS faster, right? So I think -- we look at it from a point of view of revenue and EPS being the ultimate top and bottom line. And the EBITDA margin is a reflection of our ability to drive kind of OpEx productivity as well as maintain sufficient margin that the fall-through is good. But absolutely, I think as we navigate the market and if we see opportunities for significantly faster growth while still delivering EPS expansion, we continue to look at those.

That's perfect. And then just my follow-up question, if that's okay. So you called out the large customer win. I'm assuming that hit in the enterprise segment because the revenue growth there really spiked. Is there any additional detail you can give? Like was that 1 of the larger frontier models? And if not, just how should we think about sort of the split between growth in enterprise and service provider going forward?

Yes. Yes. No, look, a perfect question. And I think I touched on it very briefly, but that's a great question. So I think, first of all, what we are seeing is that many of our large customers that were traditionally SP or enterprise, right? There is a complication where a lot of our SP customers when they are doing AI are sort of also doing a lot of enterprise applications. And so that's really where that becomes hard to segregate completely. And then enterprise customers are planning to build our own on-prem inference models and build out. So in that case, they look like a service provider, right? So that's the demarcation. And I think this is the case of an existing large customer expanding their deployment. And it's really around an enterprise application, so it's not the DDoS type product. And it's an enterprise application that enables their delivery of AI.

The next question comes from Hamed Khorsand with BWS Financial.

Just for clarification purposes, is it -- was this -- on the accounts receivable build, was it all related to this 1 large project? And did you receive payment for it?

Good question. Michelle, you can answer that.

So this is a calendar event and not a credit event right? So our business fundamentals remain strong. There was no meaningful uptick in our aged receivables or there were no deterioration in our payment behavior. There were no concessions on standard payment terms with any customers. So we see the business fundamentals as favorable.

And I think, Hamed, you are correct, we expect it to be in Q2 in addition to the original Q2 -- we expect to action normalize over the course of the next couple of quarters and expect the full year to be on track.

And then just given the growth that you saw in Q1, why the hesitation to keep guidance unchanged if you're growing in excess of 10% to 12%...

Yes, I think it's more that we are still in Q1, and I think we want to see the progression through the year. And if we see that momentum continuing in Q2 and beyond, Obviously, we will revisit that. So it's not -- it's just that we are navigating, obviously, things that from a time perspective, right, including supply lead times and cost challenges for some components -- and obviously, our EMEA business has a little impact from some conflicts there, et cetera. So we feel really good about 10% to 12%. And if we see that progress in terms of pipeline growth and execution into Q2. Obviously, we will revisit that on it. So a fair question.

The next question comes from Michael Romanelli with Mizuho.

So yes, I mean, in the press release, you guys noted that you're seeing expanded commitments from some of your top customers. Just wanted to dive a bit deeper into that comment. So outside of this large project, like how is business activity across the installed base to kind of get a feel for I guess, the magnitude or size of this and just how business was excluding that large project? And then I have a follow-up.

Yes. So I think that the intent of that Michael was really to highlight that many of our existing customers who are service providers or large enterprise are all beginning to allocate more spending and priority to AI, whether it's building it or using it. And so in general, what we are seeing is even if they were buying certain other product categories from us, this is an area of expansion for us, and that's the basis for the government of expanded commitment, right? So it could be a service provider in Europe who is also now doing enterprise or it could be somebody like that as well as an enterprise customer who is now deploying or expanding their AI infrastructure and build out. So it could be any of those kinds of things.

Okay. Got it. That's helpful. And then just as my follow-up, you touched on this in the prepared remarks, but can you maybe just characterize demand and business activity across your primary geos. It sounds like some parts of the business are still challenged. Anything worth highlighting or calling out this quarter?

Yes. No problem. So I think the -- maybe I'll go in reverse order, right? So we talk about Japan, and that market is if you look at all the macro factors and spending pattern, there is caution with a lot of reasons, right, that they keep siding. And what we see is typically what would have been a spending profile of the large customers there is getting pushed out more to the right -- because it's both ends of it, it's not just being worried about. -- cost or international issues or something. It's also concern around deploying more when there is not that much GDP growth and expecting to recover it, right? So from an ROI as well. So I think we see that as a region where we are very focused on maintaining those customers staying close to them, helping them solve problems now and expect that to come back, but we don't see it imminent, right? It could be later, and we don't know exactly.

EMEA, I think, as you can imagine, there's section of EMEA, which is quite challenged with active activity with international news, obviously. And so I think that is part that is not kind of growing well, but we continue to see progress and improvement in our business in core Europe part of that segment, right? So -- but obviously, the Middle East part is a little bit harder right now. And then when it comes to Americas, I think there's obviously categories, right? So we see customers who are leaning more into AI are more optimistic and spending more and are more outward looking towards wanting to be participating in that.

On our traditional sort of telco customers, what we are seeing is stability, I would say. So I think it's not where -- it's declining anymore for sure. And it's not growing, but it's very stable right now, right? And it could improve in the future as those customers as well figure out their AI spending and deployment pattern. So -- but we certainly see the spending on AI as being the biggest in Americas or U.S. And I think -- and then EMEA and then Japan, we continue to make progress, including on AI solutions in Japan, but the spending is correlated, obviously, to economy and outlook and we are mostly focused on ensuring customer satisfaction.

Next question comes from Anja Soderstrom with Sidoti.

Congrats on the quarter. In the past, you said that the product revenue is indicative of the services growth, right. But -- and we've seen the product growing quite nicely over the past couple of quarters, but the services has been lagging. What's the lag do we see there? When do you expect the services to pick up?

Yes. No, good question, Anja. So I think if you think about it, typically the way the product is sold is when you have product growth in 4 quarters time that contract or support comes up for renewal. And so typically, you would see that in the fifth quarter right after that. Meaning, for 4 quarters, they already are covered. And then at the end of fourth quarter, they have to renew, which goes into the support pool again. And so product growing faster will show up in service improving in 4 quarters later, roughly, right? So that's 1 dimension of it.

The second, I think, is I think our renewal rate is fine, very stable. I think, and we continue to manage services with customers. there is sometimes timing fluctuation a little bit because of large contracts and renewal time and early or late collections and so forth. So -- but you are correct. It should be a lead indicator for service revenue growing faster in roughly 4 quarters.

Okay. And then in the past, you also said talked about you're taking shares from competitors. Have you seen any changes to the competitive dynamics recently?

Good question. So no, we really have not seen any significant changes since the last quarter or 2. And I think I feel confident in what our trajectory is and what we are doing because if you look at even our peers and even the recent kind of reports or outlook, 10% to 12% is still a little bit north of most of them. So we feel if we continue that and can continue to improve on that as well. we are in a good competitive position. And no -- I would say no real change in the dynamics in terms of the specific landscape here.

Next question comes from [indiscernible] with Craig-Hallum.

I'm on for Chris Schwab here, just a quick question on the 10% to 12% reiterated. Is that going to be kind of a step function every quarter? Or is it a stronger second half? And then with that, is that tied to just the continued growth and market share gains? Or is that concentrated on a few customers?

No, I think that's a good question. So I think it's a broad market share, obviously. And the reason, I think, Ben, we reiterated this year is because we had our Investor Day subsequent to the earnings call in Q1. So this is not indicative of a new trend where we will be doing that every quarter. This was just reiterating and recapturing in 1 place because we had announced that again at the Analyst Day, right? So -- so that's the objective. And so it's not indicative of us saying we will be guiding every quarter.

All right. And then just thinking about I believe you guys said it was 12% was a long-term target. Is there -- with legacy decreasing in the stronger CAGRs, mid-teens even was previously stated at Investor Day, is there any of -- with those mid-teens CAGR and legacy down it -- is there a path to exceed that 12%? Is there anything that you guys think that needs to happen to get there?

Yes, sure. No, I think -- so I think the factor is right. I think there's to and we touched upon 1 of the earlier questions. So certainly, if we see stability in demand and supply as we go through the year, we will continue to evaluate. I think certainly, AI spending could be 1 of those factors that helps us improve that in terms of our participation in that spending profile. So that's probably evolving, right? Obviously, -- and the second factor was we had talked about the notion of the mix shift. So as we grow next-generation network and security solutions faster than legacy, we are also automatically exposed to higher growth rate markets. right?

So I think through that evolution, I think we had said obviously, right, more than 12% next year and beyond. So I think the mix shift is helpful in being exposed to higher growth market. Second is to the degree that we can get more embedded into AI build-out, whether infrastructure or applications is the second factor, right? And third is, long term, we don't know, but when SP spending resumes more -- to more normal rates, that obviously helps us, right? So we don't need all but we need 1 or 2 of them, right, to be more confident of raising it immediately.

Next question comes from Simon Leopold with Raymond James.

This is Victor in for Simon Leopold. Can you provide some color around the supply chain and kind of memory shortages. You mentioned you observed some impacts around that this quarter. Have you adjusted pricing around this? And if so, how is that impacting kind of the demand dynamics that you're observing?

Yes. It's a good question, right? So I think, obviously, as well known, right, the memory is the biggest. There's other component shortages. But and certainly sort of the DDR categories, the most specifically the biggest one. And we have seen the same price increases. And I think it's more than just price increase. It's also lead time and allocation right from the suppliers. So we absolutely see that phenomenon as well, and we are continuously ensuring that on 1 hand, obviously, driving demand, but on the other hand, also trying to do as much as we can to line up enough supply. In the next few quarters, like where it's not expected to get better in like, let's say, 4 quarters, maybe at least, maybe more. So absolutely, we see the same phenomenon.

All of us use almost the same 3 or 4 major memory suppliers, right? And we are navigating it the same in terms of securing supply managing costs but also managing our ability to fulfill kind of customer needs. And we'll continue to do that, and I think it's obviously something we have to navigate and there's no -- as of now, when we say 10% to 12%, that is not an area we are worried about, we can achieve that. and we'll continue to work towards improving that and making it not for us. But it is certainly a cost issue. I think as we said in the past, we try to split that with customers as much as we can. And it doesn't always work, and sometimes it does, and we'll continue to navigate that.

Okay. Great. And I think you also mentioned the benefit of timing. You have some large orders. Was that related to that large enterprise order specifically? Or was there maybe some kind of pull-ins that maybe you observed from customers kind of pulling in orders ahead of these shortages?

No, no, I don't think it's bad. I think it's not yes, good question. So it's not a question of people kind of overbooking it to book capacity, right? I don't think that's the issue. I think in our case, it's more -- our customers are looking at building out things fast, and we are trying to keep up with them to make sure we get them everything they need. So it's more of that phenomenon versus -- I don't think at least we don't have a concern around double bookings and things like that at all.

We have reached the end of the question-and-answer session, and I will now turn the call over to Dhrupad Trivedi for closing remarks.

Thank you, and thank you to all of our employees, customers and shareholders for joining us today and for your continued support. I am increasingly confident in our strategic orientation with security and AI infrastructure spending patterns. Thank you for your time and attention.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Good afternoon, everyone. For those in the room, if we can go ahead and get seated, we're going to get started here.

Thank you all for attending and joining us for the A10 Networks Investor Day. My name is David Schroeder. I'm the Vice President of Corporate Development here at A10. This call is being recorded and webcast live and may be accessed for at least 30 days via the A10 Networks website.

Before we begin, please refer to the safe harbor statement on Slide 2. Today's discussion includes forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially. Additional information can be found in our most recent Form 10-K and Form 10-Q. And unless otherwise noted, financial measures discussed today other than revenue are non-GAAP. Reconciliations to GAAP are available on our website, A10networks.com.

We last conducted an Investor Day 3 years ago. Our goal today is to provide not just an update and new goals, but to establish a clear map of the next phase of our evolution. We'll discuss how today's A10 is strategically aligned with durable and secular catalysts, how we continue to measure our business, where we compete and why we win and how disciplined execution continues to drive consistent performance.

Let me quickly walk you through the agenda so you know what to expect. We will begin with a strategic and operational overview led by our President and CEO, Dhrupad Trivedi, where he'll walk you through how A10 has evolved over time, how our strategy has translated into measurable execution and how we are operating today at scale to best serve our customers. Following that, we're excited to host a fireside chat that focuses on one of the most important structural shifts impacting infrastructure today, AI and the future of the data center.

Joining us for this discussion are Madhav Aggarwal, A10's Staff Machine Learning Engineer; Dr. Rene Meyer, CTO at AMAX Engineering; and Sean Pike, our Head of Information Security here at A10. Together, they'll discuss how AI workloads are changing traffic patterns, infrastructure requirements and security considerations in and around the data centers and what that means for the ecosystem as a whole.

Next, Michelle Caron, our Chief Financial Officer, will walk through how our strategy and execution translate into sustained financial performance, including our operating model, financial discipline and long-term framework we use to guide capital allocation and value creation.

And we'll conclude the day with an open Q&A session where we welcome your questions and discussions until 3:00 p.m. Pacific. You can use for those of you joining the webcast, the webcast portal to submit your questions ahead of time.

With that, let's go ahead and get started. It's my pleasure to welcome to the stage our President and CEO, Dhrupad Trivedi.

[Presentation]

Thank you, David. Good afternoon to all that are attending here in-person and online. I'm pleased to be here today to go through the next section of our Investor Day. For those that may not be so familiar with A10, let me start with a snapshot of who we are as a company.

So A10 as a company, we are listed on New York Stock Exchange, and we deliver secure, high-performance networking for critical infrastructure needs. We recently reported our full year results. And for full year 2025, we delivered revenue of $290.6 million, adjusted EBITDA of 29.6% and $0.90 adjusted GAAP -- non-GAAP EPS.

We are based in the Bay Area. Company was founded in 2004 by leading engineers in the segment, went public in 2014. And today, we have about 7,000 customers with a very strong global footprint and more than 200 patents that are at the core of creating the innovation engine and a technology-driven business.

Before we jump to what is ahead, I want to go back to what we said 3 years ago at our Investor Day because one of the important parts of our culture is holding ourselves accountable and demonstrating results. So 3 years ago at our Investor Day, we laid out these outline or this framework to create a consistent strategy and a business operational engine that would deliver against them. At that time, the company was quite removed from these goals.

First, we set forth the idea of having a Rule of 40 framework. The reason for that was simple. Our business is technology-driven and we need growth, but we need to have sustained profitability to actually invest in innovation at a level that our customers expect and the market requires. So we set forth a goal that said, on a combined basis, our growth plus EBITDA percent would reach 40%, and you will see the progress we have made.

Second, we set forth a target of 10% to 12% revenue growth. To put it in context, this was just post-COVID. And so this was an ambitious number, if you will, and quite a bit ahead of most of our peers at the time. And more importantly, we set a goal that our product revenue would grow faster than our total revenue. And the reason that is important is our product revenue is a lead indicator of future support and service revenue. But secondly, product revenue is a great indicator if we are developing the right technology that create customer value for us.

Third, we saw that many customers had a kind of issue of time was security and the volume and scale of cyber attacks. And even though we had started on this path, we set forth an ambitious goal to have security-led revenue reach 65% of our revenue from where we were at that point.

And lastly, to get the right balance and a sustainable business, a goal of non-GAAP adjusted EBITDA margin of 26% to 28%. Goals are interesting. Results are more interesting. So let's see how we did.

For fiscal year 2025, we were able to achieve 40.6% on adding our 29.6% and 11% something on revenue. Second, in that period, we also achieved 11% revenue growth overall and 20% product growth, which we see as a lead indicator, which is what continued to help us improve our belief in the business for 2026 when we discussed it on our call. Third, we reached security-led revenue to be about 72% of the total. Our goal is to maintain it at least 65% because ultimately, we are selling a portfolio of solutions that includes multiple products. So we believe this creates a strong relevance with our customers and actually helps us be relevant to their future road map as they think about things to do in the future such as AI.

And last, we were able to achieve non-GAAP adjusted EBITDA margin of 29.6% for the year. The progress that we made obviously didn't happen in a vacuum. It needed us to continuously work on disciplined execution, agility of our strategy, selecting the right markets and then just daily disciplined execution on what we chose to do.

So we want to talk about what we are going to do next. But before we talk about what we do next, I wanted to zoom out to give everyone a perspective of what we did in the last 3 to 5 years that has allowed us to continue to progress on our business. And to that, first, we are going to play a short video, and then I'll continue with...

[Presentation]

What you just saw captures the evolution of the data center across multiple eras from centralized infrastructure to distributed architecture and now to intelligent AI-driven environment. To understand where we are going, it is important to start where we began. For much of the first 2 decades of this evolution, scale was physical, performance was engineered and availability was existential. That was the environment in which A10 built its foundation and earned the trust of thousands of customers.

From our founding in 2004, our focus was simple, help customers run infrastructure that could not fail. In service provider network, that meant enabling the Internet itself. We address the IP address exhaustion and traffic growth to millions of users through products such as carrier-grade NAT.

In the enterprise environment, it meant delivering highly reliable application delivery, ensuring performance, uptime and efficiency for mission-critical networks. Across our customer base, the value proposition was consistent, scale without disruption, optimize infrastructure investment and protect availability under any load conditions. That focus on trust. By executing in some of the most demanding environments, A10 grew to more than 3,000 customers globally and became embedded in network expansion plan for many of the largest operators and enterprises.

As traffic volumes increase and architectures mature, risk evolved. Availability alone was no longer enough. So towards the latter part of that era, we expanded into DDoS protection, extending our role from performance and scale to protection and resilience. That combination of infrastructure depth, operational scale and customer trust positioned A10 for the next phase of the data center.

As the data centers moved to more -- moved away from centralized environments, architectures became more distributed, more software-defined and increasingly hybrid. That evolution changed what customers expected from infrastructure providers. Success was no longer defined by a single deployment model. It was defined by the ability to meet customers wherever their applications live and for us to be where they were going. For this period, A10 continued to drive a deliberate transformation.

Through COVID, supply chain shock and macro uncertainty, we rebuilt the company financially to the disciplined scalable model you see today while expanding our insertion points beyond the traditional data center and into edge interconnection and application layer environments. We virtualized our portfolio to support hybrid and cloud environments, giving enterprises flexibility without forcing them to make architectural trade-offs.

We moved from selling individual products to delivering integrated solutions where performance became inseparable between scale, reliability and security. And as this continued to develop, security became more inseparable and our acquisition of ThreatX strengthened our ability to protect modern applications even at a time when that exposure was growing. Through this evolution, our customer base expanded to more than 7,000 customers globally and they adopted more and more distributed or hybrid architectures. This was A10's transition from a best-in-class hardware-centric infrastructure company to a sustainable technology platform.

We were able to deliver our solutions in a consumption model that worked best for our customers in any mix of on-prem virtual or container-based solution. And that transformation matters because it positioned us for what comes next. We are now in the intelligent era, an era defined by AI-driven workloads, machine-to-machine communication, real-time inference and exponentially increasing east-west traffic. The concept of a core will continue to blur with the edge over the next several years as AI redefines network architecture and protection points.

Sovereign AI is, in fact, emerging as a meaningful and structural driver of infrastructure investment. Governments and regulated industries are building AI capabilities within national borders outside of hyperscale public cloud. These environments require secure, high-performance networking and favor purpose-built architecture. That dynamic aligns well with A10's global footprint and experience for 20 years.

Infrastructure is no longer just transporting applications. It is supporting autonomous systems, decision engine and AI models that operate at machine speed. Looking at A10's evolution across every era we have walked through today, the core challenges have remained remarkably consistent. What has changed is the intensity and velocity. Performance requirements are tighter. Security risks are bigger and more dynamic. Architectures are more distributed. The demands are higher but the fundamentals remain the same.

While architectures now span on-prem, cloud and hybrid and edge environments, customer continue to demand the same fundamental outcomes, low latency at scale, high throughput with always-on reliability and uptime, security embedded in the traffic path and world-class customer support and close technical partnership. These have, in fact, defined A10 from our founding. What has changed is not the nature of the challenges, but the scale and intensity at which they must be solved.

Our relevance today is actually greater than ever before. We built our reputation at the core of the network, where performance and availability are mission-critical. As that becomes more distributed, our participation has also expanded beyond the traditional core into much broader portions of the network. That increases both our strategic importance as well as growth opportunity.

Let me walk you through what A10 delivers today, how our portfolio aligns to these requirements and how the rise of AI is further accelerating our strategy. A good way to visualize what we do today is to see that A10 serves customers across 3 core solution areas. Each one reflects a different stage of infrastructure maturity, but all are unified by the same performance, scale and security foundation.

Our legacy networking solutions support some of the largest and most demanding networks in the world. This is where A10 made its name by consistently delivering best-in-class solutions that directly drove customer success. This includes foundational infrastructure that powers service providers where scale throughput and reliability are not negotiable. They also support significant large enterprises. They generate significant traffic and require continuous innovation to actually operate efficiently. In fact, most of you are probably using these networks today.

Looking ahead, we are extending upon this legacy with AI predictive performance and analytics solution. A10 has deep expertise and long history of operating at scale and understanding network traffic in tremendous depth globally. This solution leverages this know-how by examining and looking at traffic patterns, system behavior and network signals to help customers anticipate performance issues before they can affect availability, SLA performance or downtime and at the same time, be able to design their network capacity more efficiently, all of which have direct benefits on uptime CapEx and OpEx for them.

Next-generation networking reflects how customers are evolving, hybrid architectures, virtualized deployments and cloud-enabled environments. Here, customers want flexibility, hardware where performance demands it and software or virtual appliances where agility matters. This is where solution selling becomes essential, delivering consistent outcomes across very different architectures. Importantly, this segment increasingly supports AI infrastructure today.

As AI workloads generate higher volumes of east-west traffic, API-driven communications and real-time inference, next-generation networking becomes essential to preserve low latency, scalability and consistent performance. As AI environments scale, load balancing regains strategic importance. This is no longer simply about distributing web sessions. It is about optimizing high-value compute resources. In AI deployments, precision traffic management directly affects latency, GPU utilization and ultimately, power efficiency. These are areas where A10 brings decades of expertise with an architecture that is purpose-built to deliver deterministic performance and scale in demanding environments.

Looking ahead, we are extending these capabilities with our AI prompt and traffic routing solution designed to support the next phase of AI-driven infrastructure. This solution is intended to help customers manage performance, enforce policy and maintain reliability as AI workloads scale across multi-tenant hybrid and cloud-enabled environment. It builds on the next-generation networking strengths and across increasingly complex architecture.

Finally, while security now runs across everything we do, we also offer dedicated security solutions designed to operate natively in the data path. These capabilities extend beyond point protection, enabling always-on defense. As applications become more distributed and API-driven, protecting availability and application integrity becomes inseparable from traffic delivery itself.

Security is embedded directly into the data path to provide always-on protection and intelligent threat mitigation without introducing additional latency or friction. This is increasingly critical in an AI-driven world where machine-to-machine traffic, API and real-time inference dramatically expand the attack surface. We are extending our security portfolio driven by AI applications. This capability reinforces our approach of embedding security directly in the data path, supporting safe and scalable deployment of AI workloads across modern infrastructure.

All 3 solution areas are built on a unified architecture with shared operating system that has been organically developed and perfected over a long period of time and a natively integrated security platform, all managed through a unified control plane. That consistency allows customers to operate at scale while managing performance, availability and security as a single system. Together, these solution areas reflect how customers actually operate today in production.

As we look ahead, our next-generation networking and network security portfolios represent a primary growth markets already participating in the global AI infrastructure build-out.

So take a step back, why do customers choose A10? First, we help customers provide fast response and low latency that simply cannot tolerate delays, whether they are running on-prem or in the cloud. We meet them where they are and solve their problems. Second, we protect infrastructure investments. Our solutions are designed for them to continue to run their assets without having to constantly rip and replace them while providing next-generation road map and technologies that give them continuous breakthroughs in their economics of delivering that performance.

Third, we support seamless migration to cloud and between non-cloud environments, making it neutral so that our customers are more focused on their business outcomes versus trying to continuously change their IT infrastructure. Fourth, we help customers secure and deploy new AI applications. In terms of cyber attacks, we continue to help defend from new complex and highly voluminous attacks now enabled by AI.

And last, we continue to simplify IT ops with more automation with our new platforms that we have released recently and continue to work with customers' workflow optimization to further improve how they can manage these networks better.

And finally, what is important as these are not theoretical use cases. These are customers using these products at hyperscale today across multiple environments in the ways I described. The trust from these customers is what has allowed us to continue innovating in the right areas that create direct value for them.

If you look at the next page, you can see that trust reflected in the breadth of organizations we work with, from global enterprises to service providers to some of the most recognizable brands in the world. These are customers with 0 tolerance for downtime. They choose A10 because we help them meet performance and security requirements that grow more demanding every year. And that experience becomes especially important as AI workloads are layered into their existing environments already.

We talked a little bit about what we do. In the next 2 slides, I'm going to talk a little bit about how we fit in the bigger picture and what happens with AI. When customers build new infrastructure, whether in a centralized data center, distributed cloud or the edge, a few foundational layers come together. At the bottom, it starts with compute storage and power. On top of that, switching and routing provide connectivity and above that sit applications and workloads. What ties all this together and where complexity really begins is traffic delivery and security. This is where performance, availability and protection have to work together in line and at scale. This is where A10 operates.

We sit directly in the data path across core and edge environments, enabling traffic and application delivery while embedding security capabilities without adding latency or friction. Importantly, this also explains when A10 becomes relevant. We are often specified early during design when customers are modeling capacity, traffic flows and resiliency. But our solutions become critical during activation and scale stage when applications go live, traffic ramps up and availability and security move from design assumptions to operational requirements. That relevance only increases to support AI workloads.

Now let's expand on what actually changes when that happens. In an AI infrastructure, compute becomes GPU dense. Switching and routing carry dramatically more east-west traffic. Applications become API-driven and machine-to-machine and security shifts from perimeter to continuous inspection. And in the middle of that, traffic requirements multiply, higher concurrency, low latency tolerance and real-time inference sensitivity. But AI also introduces something new. Above application and workload sits what some are calling Layer 8 or the inference layer. This is where prompts are routed, models are accessed and responses are governed. It introduces new requirements around prompt security, usage control and intelligent routing.

So what are we doing? First, we are deepening our role in the traffic layer with our AI prompt and traffic routing solution. This will extend upwards impacting all of the layers above. Second, we will expand into the application layer with our AI predictive performance and analytics solution, applying our traffic intelligence to proactively optimize AI workload before performance degrades. And third, we will help to extend security upward with an AI inference security offering.

As requirements multiply, A10's role expands, and we believe our decades of traffic intelligence and machine learning expertise positions us to best serve our customers in their AI infrastructure journey.

Now let's step back and take a very quick look at what's driving that change at a market level. When AI infrastructure is discussed, most of the attention goes to compute, GPUs and training clusters. From our vantage point, what we are seeing in real production environments is that AI becomes a traffic problem first. AI workloads drive nonlinear traffic growth. As the use of AI moves from current infrastructure build-out towards enterprises using it for business gain, the needs evolve based on the needs for data management, privacy regulation and network security.

In fact, as I mentioned earlier, Sovereign AI will likely be a major secular driver of growth in the next few years, and we are squarely positioned to support it with solutions across public cloud, private cloud and on-prem solutions. A single user interaction with an AI-enabled application doesn't result in just one request. It can trigger dozens, sometimes hundreds of internal calls. Those requests are persistent, primarily east-west, and they live inside the data center.

At the same time, API has become the dominant interaction model. This results in a fundamental shift in traffic pattern. Industry research suggested that by end of last year, AI workloads represented roughly 30% of all data center traffic, significantly higher than what it was a few years before. And it means infrastructure is being stressed in new ways because before you ever hit a compute constraint, you hit a traffic constraint, which brings us to the second reality that AI introduces, the economics of latency.

Once traffic volumes increase, the way we just described, the next constraint shows up very quickly, and that constraint is latency. AI inference is fundamentally real time. Whether it's a chatbot, a recommendation engine, fraud detection or an AI-enabled workflow, users expect immediate response. That changes the economics. In inference-driven application, milliseconds matter. Latency doesn't exist in isolation. It compounds across service chains and an AI request might touch an application, call multiple APIs, invoke one or more models and return results back to the stack. Every hop adds to the latency.

And when you get even small delays across them, performance degrades quickly. That's why throughput has to scale without introducing bottlenecks. You cannot solve this problem by pushing traffic off to site systems or for out-of-band inspection. Performance has to be delivered in line directly in the traffic path. And what this means in practice is that infrastructure decisions now directly impact application responsiveness, user experience and ultimately, business outcomes.

Our own customer research shows that vast majority of organizations view low latency as critical to delivering real-time AI experiences, and they are actively investing to reduce it. So as those workloads scale, latency stops being a technical metric and starts becoming an economic one. And when that happens and traffic increases, something else changes as well. AI expands the attack surface. As AI becomes more embedded into application, the attack surface expands dramatically. These new intersection points create new types of threats and new ways that you can be breached. And they are targeting application flows, APIs and business logic directly.

Industry data reflects this shift. If you see the numbers here, Gartner estimates 90% of web-enabled applications now expose more attack surface through APIs. And the impact is real. More than half the companies experienced such attacks last year or last 2 years. We are also seeing that play out in terms of DDoS attacks, which have surged about 350% and exceeding 30 terabits, which was unimaginable even 3 years ago.

Which brings us to the broader point. AI is changing the fundamental requirements for infrastructure. And those changes are what we want to explore next from an industry-wide perspective. To explore what this means beyond A10, I would like to turn it over back to David, who will lead us into a fireside conversation with industry experts. Thank you. David?

Thank you, Dhrupad. What we've just outlined are structural changes driven by AI, not point solutions or short-term trends. To dig deeper into how these shifts are playing out across the data center ecosystem, we wanted perspectives from people who study, design and operate AI infrastructure every day.

So for the next segment, we'll move into a fireside conversation focused on how AI workloads are changing traffic patterns, performance requirements and security considerations in and around the data center.

So I'm pleased today to introduce the panelists. First, we're joined by one of our own, Madhav Aggarwal, who leads AI-focused technical strategy here at A10 Networks. Madhav works closely with customers and partners on how AI workloads are changing traffic patterns, performance requirements and security architectures across the data center and is key in the development of our AI portfolio.

Joining him is Dr. Rene Meyer, CTO at AMAX Engineering, a leader in AI-optimized data center and infrastructure solutions. Rene works closely with customers deploying AI at scale, offering a firsthand view into how power, performance and traffic requirements are shaping modern data centers.

And finally, Sean Pike, A10's Chief Information Security Officer. Sean works closely with customers to protect high-volume, mission-critical environments, and he applies the same rigor internally at A10. He brings a practitioner's perspective to today's conversation on how performance and security come together in AI-driven architectures. Together, this group brings perspectives from product development, real-world deployment, security operations and AI-driven infrastructure.

So with that, let's get started. Thank you, guys, for joining us. The goal of this conversation is to zoom out. We want to talk about what's actually changing in real environments, what trade-offs are being made today and what capabilities will matter most as AI moves from experimentation into production at scale.

So I'd like to begin with the macro view. I'll start with you, Madhav. When you zoom out, what do you think the market is most misunderstanding about AI infrastructure today?

So I guess there are a couple of misconceptions, but the top priority for me is that we're still associating AI growth with the growth in compute. It's no longer a linear function of the number of GPUs that a company is buying. There's been so much talk about H100 buying, NVIDIA's Blackwell schedule. But honestly, with the amount of growth that we've seen in model inference with models becoming more sparser with the launch of the DeepSeek-R1 model, the MiniMax 2.5 models, it's essentially that inference on these large models is actually now like insanely sparse, which means it's no longer a GPU bottleneck, but an inference bottleneck from an infrastructure standpoint. You need to optimize the entire infrastructure around your model.

So the inference layer needs to come up holistically. And this sort of correlates with -- I've seen some market sentiments that the compute is going to grow 10x every year. I don't think that's true. It's like my best estimates are that it's going to grow 50% to 60% in peak quarters, which is in peak periods. But it's definitely -- we're going to see a lot of growth in compute but not at a 10x multiple every year.

And Rene, I think you've got a unique perspective. I think one of the challenges that we highlighted earlier and that's emerging is this power problem, right? So any metrics you can reference that help us kind of illustrate that infrastructure challenge from a power perspective?

Yes. Power is an interesting one. So everybody thinks, well, we need to save power because power translates into cost. I think the reality is that data centers typically are not so cost concerned about power. But what we see is a challenge is the power scarcity of the grid itself, right? So what happens is you want to deploy AI servers. AI servers typically consume a factor 10 more power than general servers. And now you cannot afford additional cooling costs anymore, right?

So the drive of power scarcity translates into change in the data center and how you operate a data center, right? These servers consume more power. You want to save power. You cannot waste power on the cooling infrastructure. So that leads to a transition from an air-cooled infrastructure to a liquid cooled infrastructure.

So power from a deployment perspective is a definite challenge in the data center because simply in the data center, power is not available to the rack. But the bigger problem is that the power in the grid becomes a more and more constraint and people transform into liquid cooled data centers to save cooling power to deploy more IT workload.

Yes, I'd agree with that. So that actually informs part of A10's infrastructure strategy today. We run into the exact same problems. I think -- when you're thinking about on-premise data centers of old, folks are moving away from that and obviously moving quickly into data center for a large degree to that exact reason. We just can't get the power at the street that we need. So we need that fed in from -- in a different way. So we need to be able to power at scale in a way that we haven't before.

Makes sense. And another one of those infrastructure challenges that Dhrupad highlighted is really around the security challenges. So wondering, Sean, from your perspective, what are the biggest security challenges emerging for customers that are hosting their own data centers?

So I'd like to think about this in three different ways. One of them is people. One of them is complexity and the other is scale. And if you give me just a moment, I'll go through each of those. But thinking about complexity, I know Dhrupad highlighted some of the AI-related attacks that we see. So things like polymorphic malware, for instance, is sort of AI-driven and it changes itself so often. Not even thinking about those things as it relates to complexity. What we're seeing more and more of is just scaling complexity because of the way that we're using AI internally, whether that's some sort of an agent like a ClawdBot, for instance, or OpenClaw or things like just building out additional infrastructure to support our AI initiatives.

So you take that and take sort of all of the scale that comes along with that, and you're now 10x-ing the efficiency of all of the folks that work in your organization. So instead of developing 5 new products a year, maybe we're working on 8 or 12 or maybe it's 40 in some organizations. And now we take the people that are responsible for monitoring and controlling all of that infrastructure and security. And you think about at A10, what we demand from our infrastructure and security folks is they have to understand the organization better than anyone else.

So you've got a certain scale of that type of a person, and now you're asking them to understand and control an infrastructure that's 10x or 100x what it used to be, becomes a massive network for us.

And adding to Sean's point, I guess it's moving from static rules to now more like static pattern matching to now semantically interpreting the traffic that also like is coming through your network, right? Semantic AI understanding of the traffic that is going through your network.

Yes, absolutely. seeing a move away from kind of that traditional SIEM solution of looking at those patterns and moving into more AI-driven tool sets.

So as these enterprises are developing their own AI applications or AI as a services deployed, Madhav, how should these enterprises think about latency in the data center? Maybe you can touch on it from a consumer standpoint and then maybe from the AI vendor standpoint, both of those. And Rene, feel free to add to your perspective as well.

Right.

From a consumer standpoint, latency is more about like it directly correlates with quality of service. So there are a couple of metrics that we measure for AI latency. And one of the most crucial ones is the time to first token. That essentially means how long you're waiting before you actually see the first piece of text from an AI model. And that really governs your attention span. It governs whether you engage with the model and in what form you engage with the model.

So for this, we are roughly looking at less than 500 milliseconds. The other one is sort of the time between tokens. So it's intertoken latency. And then finally, it's about how many tokens you can consume in a batch so that you can serve millions of users concurrently. So these 3 metrics sort of govern latency in the data center from a consumer standpoint and from an inference standpoint.

Okay. Maybe I'll chime in here. So we see latency in 2 directions. Like if you look at the GPU cluster and our GPU cluster is built, the intercommunication between GPUs, it's ultra, ultrafast, right? Like so if you compare that with an HPC cluster, each node per HPC cluster has a high-speed network link. Now each card has a high-speed link. So the density and the performance of that network inside a cluster, especially if you do training or fine-tuning of foundational models is extremely, extremely high.

The other thing is like how you consume the service, right, like if you have an AI application. There, I think what is most important is the quality of service, right? We know this all you use ChatGPT and yes, we cannot really wait. We want to have like an instant response. And there, what we see is, well, the more requests you have for an instance, like the slower is the performance. I think like then bringing up performance and quality of service, quality of response time leads into smart load balancing of those applications.

And I think there's an interesting challenge with AI agents as well, right? Latency is becoming even more critical because an agent is probably making -- let's suppose it's making 50 requests, right? Each request is probably querying 12 other data lakes like databases. So there's additional latency of about like in seconds of all these additional requests. So it becomes even more critical. And I think that networking, routing, load balancing piece becomes even more fundamental with agents.

Yes. And we touched on this a little bit earlier along those similar lines, but how -- compared to the traditional cloud applications, how do these AI workloads change the traffic patterns inside the data center? I know we talk about east to west and we talk about north to south. Maybe you can dumb this down a little bit for those not as familiar with those flows and talk about what's changed there.

So it's primarily going to be east-to-west traffic, especially with agents. I think this traffic is blowing up exponentially. Further, with larger models that are being orchestrated across nodes, across GPUs, there's a lot of GPU communication and synchronization. So you're almost seeing traffic in terabits. And I guess, load balancing becomes even more fundamental with all these challenges.

Yes, makes sense.

Yes. I think what we also see, like we have like the first version of ChatGPT, like we ask on something and it comes back with an answer. Now we have a thinking model, right? Like so under the hood, thinking models are essentially distributed agents who run in parallel, but also run sequentially. And like each segment of latency that you introduce by calling an agent sequentially adds up. So you want to bring essentially the response time down to have good performance with this more advanced AI models.

We're impatient and we're very critical of the facts. We want to accurate in a very timely fashion. Sean, along those lines, security inspection when you're wanting this kind of accurate picture, but you're also wanting to make sure that security protocols are being followed, that introduces overhead. And so how do these teams and your team specifically keep security always on, but without making performance unpredictable?

Yes. So this goes right back to what I was saying before. When you think about the amount of volume that is increasing, and then you're also looking at different types of traffic. So I think we talked a little bit about changes in traffic patterns, right? So more east-west traffic, maybe more, I would say, distributed traffic. But it's not just that, it's also the type of traffic, right? So we did talk a little bit about how the modern or the sort of the old-fashioned SIEM is changing a bit. So we're moving away from kind of simple pattern matching. That's all part of this.

We're now digesting much, much more data than we did before. And we're also looking at types of behaviors that we haven't seen before. And some of that behavior isn't consistent. So it's a little bit difficult to get a good read on some of that.

So at the end of the day, you've got a couple of choices here. One of those is to massively scale your team to try to do their best. But the real answer here is going to be we're going to end up fighting more fire with fire, right? So you're seeing more development in this area, specifically in AI, and I think we'll just continue to see that grow over the next few years.

Security has always been a bit of a laggard in the technology space, but it's always kind of bolted on after, right, in general. We actually talked about this earlier. We said, "Oh, when cars first came out, they didn't have seatbelts, right? And then somebody said, well, maybe it's a good idea to add a seatbelt. Kind of the same thing here, right? We're saying we're now developing stuff at scale, and it's time to secure at scale as well.

I think you have to understand it before you start securing it. So there's certainly a learning curve there.

Maybe one thing like -- and I think you cannot underemphasize that enough. So AI essentially changes how company information becomes available. Like so typically, you have information silos, access is tightly controlled. Now if you have custom AI systems, so essentially custom systems, large language models acquire key information of the company, like processes, trade secrets, everything. And at the same time, the AI system makes that available to everyone if you let people query this, right?

So security is coming into a completely new rhyme as a company, core information is at stake. If you cannot protect it, everybody, employees can access this information. And I think it's -- at least from what I see, it's overlooked, but it's such an opportunity, but also such a challenge to control the information flow and guarantee information, integrity and containment.

So I'll say one other quick thing here because I want to tie back. I mentioned OpenClaw a moment ago. That's exactly the issue with those kinds of systems. Security researchers talk about it as sort of having the trifecta, right, which is it's scalable. It's almost always over-provisioned, meaning it has too much access, and it's automated. So it's the perfect tool for attackers to sort of go after.

And with agents, like if you have hundreds of agents that are working in parallel, then security becomes even more fundamental because the blast radius is very, very large. Let's suppose you have 50 steps, you failed in step 37, you're pretty much compromising a chunk of what you previously computed and also probably like a bunch of the infrastructure.

So stepping back from security. There's this perception that AI infrastructure is largely being driven by a few small group of companies, these large U.S. hyperscalers. From your vantage point, is that an accurate picture of where the market is heading? Are we going to see a more distributed global build-out across these enterprises, sovereign environments with all of the regulatory concerns, service providers, co-location? I guess, generally using a baseball term, what inning are we in?

So definitely not at the late innings of the build-out as some people are attributing to. I would say we are somewhere late in spring training. So that's for a baseball analogy. And the reason I say that is because people are buying GPUs. They're building their data center off of all these compute components. But slowly, they're realizing that there's a security component in the posture. There are a bunch of other components. It's evolving towards more efficient inference, which means you're optimizing for compute per dollar. You're also optimizing for like the cost per million tokens. So it's slowly evolving in this -- towards this trend.

I think most of the AI workloads are actually hosted in the cloud because it's so easy to consume. And essentially, you have access APIs and you have very robust generative AI systems underneath, right? If you -- and there is -- there are several drivers, as you mentioned, like token cost driver, but then also like data security concerns, regulatory requirements. So there is definitely a trend to move these AI workloads to on-prem. Now the challenge is on-prem, you have access to not the same type of models, [indiscernible] build your own, you look into the NVIDIA like infrastructure stack or you have open source models. And those models, they need to build up to the same capability to what you have in the cloud.

So I think the industry is in the process of figuring this out, how you can essentially deploy models with equivalent performance on-prem. And I think once that problem is resolved, I think is a stable transition.

Are we in a different inning in the U.S. than we are internationally globally? Talk about outside of the U.S., where are we on that journey, the infrastructure build-out?

So inside the U.S., like it makes sense, right? The U.S. has sort of a power advantage. We are seeing this massive amounts of spending. But it will be wrong to attribute all this growth to just the U.S. because there's significant amounts of investment being pumped in other countries as well. Specifically, if you look at Japan, they have a $10 billion AI spending program. You're having a bunch of growth in the Middle East. UAE has their G42 AI Alliance program. And Saudi Arabia also has a lot of like spending and like investment in AI. So I guess this will slowly -- like you'll see these trends emerge elsewhere in the world as well. And I think it's only going to exacerbate with time.

Yes. And Sean, I think Dhrupad touched on Sovereign AI and the sort of -- maybe you can touch on the security concerns, how does that differ globally to impact inning we're in there as well?

Yes, yes, sure. So one thing I did want to say, so Madhav mentioned a number of countries that are sort of ahead in AI. But I think it's sort of the list, right, that you mentioned. So I think globally, a massive part of the spend, obviously, is in the U.S. and the other sort of territories that Madhav mentioned. So still the rest of the world has a pretty good long way to go. I think what we're seeing in terms of -- I think what you're driving at is sort of regulation around all of this.

We're definitely seeing an uptick just in questions we were being asked from customers, things that we're sort of hearing coming out of U.S. federal and other governments as well in terms of just how are we using AI? What is it going to look like in the future for us? Where is our AI going to live? Who's going to train it, et cetera, et cetera. All of those are, I think, taking shape today.

Certainly, some countries are a little bit further ahead than others. And it's not just about where the data is moving to, right? I mean, obviously, there's maturity around data residency and data privacy, but we're just starting to see maturity around what does the model actually look like and how is the model actually using the data. So more to come on that. But I'd say today, we're in nascent stages there as well.

Yes. And adding to that, I guess when I'm speaking to customers, at least, what I'm hearing from them is that they're running GPUs at about 30% utilization, which means from someone who's running it more efficiently, you're about 1/3 as efficient as them, right? About 90% to 100% is where you want to be. So that is why like the components around just the inference layer would slowly start developing a lot more. And with that, like once that 30%, at least hit 70% is when I would say now we are like we are at a sustained production workload.

Yes. And maybe last but not least, like current geopolitical shift, right, highly like essentially accelerate Sovereign AI.

There's a component to this as well, right? I mean there's a lot of -- to get an AI workload up and running, you need the components in time, too. So the companies that are getting those -- getting access to those are able to move a little further along.

Last question, and I imagine each of you has a slightly different perspective on this, but this is an Investor Day. So I had to ask, if investors have to watch just one market indicator, a trend to track real meaningful AI adoption, not the -- this model can build draw a cat more realistic than this other one. What should that market indicator be?

For me, personally, I think investors should be looking at whether AI companies are actually mentioning at what utilization they're running their GPUs at. So if it's closer to the 70% mark, that's when you know you're in the late innings now, as I said before. The other one is probably attribute -- like how much revenue can you attribute to AI actually. I would say right now, it's about 8% to 15%. You want it to be closer to 30%. And that's when you can say it's actually taken off both in terms of productivity and in terms of revenue gain for companies.

Rene?

Well, it's sort of the $100 million question, right? It's -- so I think it's really difficult to answer. And I think it's also like what is meaningful AI, right? Like I came up with maybe the installed or increasing power consumption for on-prem solutions. So if enterprises really decide they're betting on AI and their turn is on, I think then we really see an adoption.

And for me, it's just productivity. I think it's a direct tie to adoption because if we can look at -- I think we -- again, we were kicking this around earlier. And I think I was asked how do you measure the productivity. I think you measure productivity the exact same way that you did before. But now the question is, were you sort of green before in your productivity, but now you're 2x or 3x in that so that you're very green with what you're trying to do as a company. That to me sort of marks real adoption.

Sure.No major controversy up here. So really appreciate the conversation. I think we're out of time there. So thank you very much. It's been a great discussion. Can we get a round of applause for our panel?

What's clear is that AI is amplifying the core demands of infrastructure. Traffic is growing faster, latency tolerance is shrinking and security is becoming inseparable from performance.

So the next question is how these shifts translate into business outcomes. To walk us through that, I'll hand it over to our Chief Financial Officer, Michelle Caron. Michelle?

Thank you, David. What you've heard so far today is how A10 has evolved strategically and how our portfolio aligns with how customers operate today, including where the infrastructure market is headed with AI.

My role this afternoon is to translate that strategy into financial results and more importantly, into a role that's -- into a model that's durable, disciplined and designed to deliver long-term shareholder value.

Let me start with taking a brief look at our most recent performance, which underscores how our strategy is translating into financial results. We finished the year at just under $291 million in revenues, up 11% year-over-year, delivering adjusted EBITDA margin of 29.6%, translating into EPS of $0.90 per share, reflecting both growth and continued operating discipline.

Importantly, when you combine our profitability with our full year revenue growth, we've achieved the Rule of 40, which reinforces the strength and sustainability in our financial model. I'm proud to have joined a company that's both growing and profitable and doing so in such a disciplined way. And we'll continue to take that focus and discipline into 2026 and beyond.

So this slide puts in our recent performance into a longer-term context. So our revenues have grown steadily over time. In 2019, we were just $213 million. And today, we're just below $291 million. So we've grown steadily over that time despite periods of macro and market volatility. In fact, over the last 2 years, we've seen our growth accelerate, reinforcing the strength that we've seen in our -- both our portfolio and our execution.

At the same time, we've expanded adjusted EBITDA margins from mid-single digits to nearly 30%. This margin expansion reflects operating leverage, disciplined cost management and improved mix, particularly as next-gen networking and security become a larger part of our business. You can also see this directly translate into earnings. Non-GAAP EPS has increased meaningfully over this period to $0.90 in 2025, demonstrating growth and profitability are scaling together.

We left the year with a very strong balance sheet. We have $378 million in cash and marketable securities. This level of liquidity provides resilience and flexibility. It allows us to continue investing in our business with innovation and go-to-market initiatives while maintaining discipline and financial strength. At the same time, it positions us to act strategically when opportunities arise without compromising our long-term margin profile. With that foundation in place, our focus turns to how we allocate capital thoughtfully and to drive sustainable growth and shareholder value.

As the company continues to evolve, we are sharpening our financial priorities around 3 core areas: driving sustainable revenue growth, operating a disciplined business model and allocating capital to maximize long-term shareholder value. At A10, our approach is to create value grounded in these three areas.

First is our revenue growth. Our focus is on driving sustainable profitable growth as our portfolio continues to shift towards next-generation networking and security. Yes, sorry about that, where we see stronger long-term demand and relevance, including participation in AI infrastructure environments.

Second is our business model. We operate with a disciplined operating framework that emphasizes margin expansion, operating leverage and strong cash generation, even as we continue to invest in innovation and go-to-market execution. Third is our capital allocation. We are deliberate in how we deploy capital, balancing reinvestment in the business with returning capital to our shareholders and maintaining strategic flexibility over time. Together, these 3 priorities guide our decision-making and ensure that growth, profitability and capital discipline reinforce one another.

I'll now walk through each of these areas, starting with our growth profile. This slide highlights how our portfolio mix has evolved over the past several years and more importantly, how that evolution positions the company financially going forward. As you can see, we've been deliberately shifting our revenue mix towards higher growth solutions, specifically next-gen networking and network security. In 2022, these categories represented just about half of our revenue. Today, they account for more than 70%.

As Dhrupad mentioned earlier, legacy networking continues to play an important role in our business. It supports large mission-critical environments that generate meaningful cash flow. However, we expect the growth in this solution area to be flat or declining to mid-single digits over time, reflecting broader market maturity. At the same time, next-gen networking is growing faster, and we expect the growth to be approximately 16% to 18%. This area benefits from hybrid architectures, software and virtual deployments and increasing complexity inside our modern data centers.

Network security represents another growth opportunity for us, and we see the growth in this area between 14% to 16%. This reflects continued demand for our embedded security, API protection and always-on availability, particularly as customers scale AI-driven and highly distributed applications. The result is a portfolio increasingly weighted towards higher-growth markets with stronger durable characteristics and attractive profit margins. This mix shift supports more stable revenue growth, continued operating leverage and strong free cash flow generation over time.

Across legacy networking, next-gen networking and network security, revenue is increasingly anchored in a security-first value proposition, reflecting how we've embedded protection directly into our core platforms. We expect security-led revenue across all 3 solution areas to continue to represent over 65% of our revenue on a go-forward basis.

As we look ahead, this portfolio evolution underpins our financial priorities. It supports disciplined growth, reinforces the strength of our business model and enables continued capital returns while investing in the next phase of our company. This slide highlights how disciplined allocation has translated into meaningful operating leverage over time.

On the left, you can see adjusted EBITDA absolute dollars growing steadily as revenue has scaled. At the same time, operating expenses as a percentage of revenue has declined meaningfully, reflecting increased productivity and a more efficient cost structure.

On the right, that operating leverage shows up clearly in our margin profile. Adjusted EBITDA margins have expanded from low single digits in 2018 to just under 30% in 2025. Importantly, this margin expansion has come from continuous improvements in the business and ongoing productivity, while we dynamically allocate resources to the right opportunities. We've continued to invest in innovation, go-to-market initiatives and capital support while maintaining cost discipline and focus.

With that operating leverage as a context, I'll now turn to how we think about allocating capital to support growth while continuing to deliver strong returns. The next question is how we deploy the cash that the model generates. Over the last 3 years, our business has produced consistent free cash flow, and we've returned much of that to our shareholders through a combination of dividends and share repurchases. And as the chart shows, those returns have increased over time, primarily by share repurchases while maintaining a steady and predictable dividend. Importantly, this has been achieved without compromising investment in the business.

We have continued to protect product development, go-to-market initiatives and innovation aligned with higher-growth solution areas such as next-gen networking, security and AI-related capabilities. This reflects a balanced approach to capital deployment. We prioritize returning excess cash to our shareholders while preserving flexibility to invest organically and pursue disciplined strategic opportunities.

Let's turn now to allocating capital going forward. Capital allocation is a critical component of how we create long-term shareholder value and we approach it with a clear set of priorities. First, organic growth. Our top priority is investing in the business such as innovation and go-to-market initiatives that drive durable, high-return growth, particularly across next-gen networking and security. This is where we see the strongest strategic and financial returns over time.

Second, returning capital to our shareholders. When we generate excess capital beyond what we need to fund the business, we're committed to returning it through share buybacks and dividends while maintaining a healthy balance sheet that's strong with financial flexibility.

Third is strategic M&A. We'll pursue potential acquisitions with discipline, focusing on those opportunities that enhance our portfolio and align with our strategic direction and meet clear financial return thresholds. Across all three priorities, our framework is consistent. We focus on assets that align with our next-gen networking and security profiles, support a recurring revenue profile and deliver a payback period of 3 to 4 years.

Our disciplined approach to capital allocation reinforces growth, profitability and long-term value creation. With our operating model and capital allocation framework in mind, I'll now turn to our financial outlook and how we see these priorities shaping our performance going forward.

Let me close with our financial goals. Our objective is to execute a disciplined growth model in the AI era, balancing top line expansion with profitability and capital efficiency. For 2026, we're targeting 10% to 12% revenue growth, 28% to 30% adjusted EBITDA margins and non-GAAP EPS growth exceeding revenue growth.

Looking ahead to 2027 and 2028, we expect to sustain 12% plus revenue CAGR, expanded adjusted EBITDA margins of 28% to 30% plus and continue to deliver non-GAAP EPS growth above revenue growth. This reflects a model built on operating leverage, mix improvement and disciplined capital allocation, allowing us to participate in AI-driven infrastructure demand while maintaining strong profitability and cash generation. That combination of growth and discipline defines how we intend to create long-term shareholder value.

With that, I'll now turn it back to Dhrupad to close out today's session and to share his final thoughts on the path ahead. Dhrupad?

[Presentation]

Thank you. Thank you, Michelle. The last section, I'm just going to bring back to a summary of what we have heard through the day. I think what we wanted to highlight was our business and strategy have evolved in customer needs and architecture. We talked about the centralized infrastructure era, the distributed and the intelligent era. You heard a lot of discussion around how a lot of those factors are directly being affected with people using AI today already and how they could continue to be changed.

What is important to take away from this is through all these periods, we have maintained focus on what is our differentiator, what we know how to do better and actually increased our investment in areas that were aligned to our differentiation and continue to create customer value through that to continue to develop a sustained business around that capability.

If you look at the things we know how to do well around low latency, reliability, uptime and security, as the progression of the network continues, these are more relevant than ever before. What is also important to note is when we talk a little bit about giving maybe an alternate perspective on how to think of our business segments, remember, in all of those segments, all these differentiators are exactly equally valid. It just happens to align with transitions from one type of network to another, and we are mindful and conscious of where we choose to align with our customers' growth areas.

So this continues to be a foundation, and we continue to focus on what we can differentiate and how we can apply that to new problems that customers are facing.

We talked a little bit about driving future growth. Michelle gave a little bit of perspective of that. We certainly have talked about 2026. We think we certainly see a path that is sustainable, disciplined and aligned with strategy and customers to deliver consistent CAGR of 12% or more in outer years.

Second, because of the nature of our business model and how we have executed that, and I've been there about 6 years now, is it is not something we do different every year, right? It is an operating system. This is how we run the business. This is how we make decisions. And so we are also comfortable saying, yes, we will invest in AI, but that doesn't mean our business model is suspended for 2 years. Just like for the last 3 years, we invested heavily in cybersecurity and actually, our EBITDA margin expanded, not contracted, right?

So our model is inherently run in a way where I look at OpEx productivity in addition to margin fall-through, which therefore, means EPS grows faster, right? That's as simple as that. And an interesting data point for you might be that even last year, full year '25 compared to '24, we actually increased R&D significantly while expanding EBITDA percentage, right? So that's an important thing.

We certainly heard a little bit of the conversations around AI and security trends and so forth. And like everyone else, we are very optimistic. We are highly engaged with customers who have ambitious plans to use AI for business gains and other factors. But the timing is not exactly clear. And there's a lot of things that drive it, including regulation, power, GPU shortage, all kinds of things. But we certainly believe that as that market matures and as more and more enterprises use AI actually versus just building out large training models, this is the interception point for us, and this is where we are engaged with our customers on how do they best get business results when they use AI.

And so we certainly see security and AI infrastructure in outer years as potentially tailwinds to our growth trajectory. And similarly, I think part of our business is exposed to cyclic CapEx spending with service providers. And that obviously, by definition, is cyclic. And we have seen kind of a depressed period for some time now -- we can't project exactly when it's up or down. But that is, again, an area where we are deeply designed into these networks. We are very close to these customers and fully expect that when that pattern resumes, we should be in a good position to help them to continue their build-outs as well.

And lastly, I think as a snapshot, right, what we talked about that I want to leave with you. I think first is, as a company, our objective or mission is around enabling a secure and available digital world. And you heard a lot of things that probably resonate and tie into that theme as well. We offer a differentiated platform at the intersection of infrastructure, security and AI. And what I would say, again, is unique is these are not disparate products that we have accumulated over time. This is built on a common software foundation, a unified control plane and therefore, it provides the level of performance that it does, trusted by the largest companies in the world.

Second, positioned for secular infrastructure expansion as that unfolds in the next few years. Third, I would say what is important is if you go back and see our performance as it relates to a variety of metrics on income statement, cash flow or balance sheet, you will see a sustained steady progression of improvement versus 1 year being completely great, 1 year being completely off, right?

Yes, things can happen that are beyond our ability to adjust to that. But to the best of our abilities, that is an extremely important goal for us to achieve. And durable cash generation, obviously, is important as it ties into our ability to drive the business, invest in things and continue to balance investor needs, customer needs and employee needs as well.

And last, I think you've seen disciplined cash allocation methodology, first priority, organic growth; second priority, making sure we balance with investors. Third priority, be opportunistic, but very strategic because doing bad M&A is much worse than doing no M&A. So continue to be disciplined, thoughtful around the business structure and environment we have put in place and using that as a platform to grow versus doing something totally different.

So hopefully, that gives you a good snapshot of the company, where we are. Some of you obviously have known the company for a long time. So this is hopefully a good refresher on where we have been in the last few years. And I think before I conclude, obviously, I want to thank all the A10 employees around the world because a lot of the results you've seen are direct result of their hard work, dedication, focus and, I would say, commitment to buying into a new business system and believing in it and doing it, right? So I think that's critical for what we have achieved.

Second, obviously, I want to thank customers who continue to trust us with very critical application all over the world. And lastly, obviously, I want to thank our investors for your continued interest in A10. And hopefully, we can continue to do our work to provide you with a good option that you can count upon, right, delivering a balanced model of growth and profitability with consistency. So thanks. And now I'll hand it over to David. Thank you.

[Presentation]

Thank you, everyone. We've got a Q&A session here scheduled, and we've got some submitted webcast questions. If you do have a question and you're logged into the webcast, obviously, we'd love you to use that portal to submit a question, and we'll try to address it while we're up here. We have Michelle and Dhrupad available to answer those questions. And then for those in the room, we do have Jeff in the back who will be walking around with a microphone.

I'll start with a couple -- a question here while if you can raise your hand, Jeff will come by to bring the microphone to you. But we've got a couple of questions online.

The first one is from a couple of questions from Michael Romanelli from Mizuho.

We've, of course, seen a number of AI-related product announcements and initiatives across networking and cybersecurity, Michael is wondering if we can elaborate on what is differentiated or unique around our AI-powered predictive analytics, our AI prompt and traffic routing and then our AI inference security solutions. Anything you can talk about there? And then we have a couple of other follow-up questions there.

Sure. Yes. So I think what I would tie back to is continuing to focus on what is differentiating and what do we know how to do. So as a company that works with about 7,000 customers around the world for 20 years, understanding in extreme detail the network traffic and patterns and packets.

Our ability to now take contemporary AI tools to be able to look at that data, know what is important, what is less important and create a view to predict performance or capacity planning is something that would be very, very difficult for an AI company that doesn't know anything about network traffic, right? So there is a domain knowledge upon which we are building. And what we are building is using AI as a tool to actually use that domain knowledge to make business decisions, not doing AI because we can do AI, right? So that's one dimension.

Similarly, I would say, not go too long, but one more example, our platform, hardware and software that allows us to deliver the low latency, high throughput and ability to process packets in line is the platform we are using to now do reviewing of things like AI prompts, leak of PII information, et cetera. So we are not saying we are making a new AI product. What we are saying is we can take a platform that has been developed over 20 years is proven to work at scale, at line speed and using that to solve a new AI problem, which maybe people want to know if there is a risk of their employees using ChatGPT and leaking data.

So once again, it is building on our differentiation, taking what we know how to do and using AI as a capability versus saying we need to make an AI product, right? That's not at all what we are doing.

And Michael follows up with -- when we talk about Phase 3, that intelligent era, we have talked about this investing in our AI portfolio and our AI capabilities organically. He's wondering, does this require any incremental investments from A10, any significant changes to the go-to-market strategy? And along those lines -- so that's part one. Along those lines, how is A10 leveraging AI internally to help improve our platform?

Okay. So let me go in reverse order, maybe not reverse order. I'll go in the same way. So first question is we have been doing AI last 2 years and our gross margin and EBITDA margins have expanded. So at the same time, we have increased R&D in AI, right? So our business model is designed to manage our investments to high-growth areas and more important areas while we still continue to deliver financial performance.

If you go back to the numbers we showed, we are showing the same exact EBITDA percentage for 2026. So there's no dilution of business model. We are not ever going to tell investors, hey, we are doing AI, so don't worry about results for a while, right? That's not what we are doing. If anything, we are improving them. So that's the first one.

The first one. And then how are we using it internally at A10?

So I think we are using it like many companies, right, across a variety of areas. So obviously, in our software engineering team, they use AI for code inspection, doing quality assurance, doing testing. There's a lot of ways they have been using it for about 2 years now. We are using it in our support organization to use AI to better service our customers faster on diagnosing problems and solving them. So there's a lot of ways we are using that internally as well.

Sure. Thanks Dhrupad. Both Michael and Anja Soderstrom from Sidoti are commenting on our outlook, '27 through '28 is encouraging. Wondering if we can elaborate on the underlying assumptions provided in our framework, particularly how are we getting to 12% plus revenue growth, kind of the components of that? How does the macro play into that? How does share capture play into that? And then as one quick follow-up, is this dependent on service providers returning our AI portfolio, kind of expand upon that.

Yes. So it is not dependent on service providers returning or not. I mean I think, obviously, every single year in every business, there are things that go better than you thought and things that go worse than you thought. So there's no way to conclusively say in '28, what will happen. But our 2026, we are expecting growth of 10% to 12%. So '27 and '28, it's 12% plus, which could be slightly more than 12% as well. The drivers are very simple, right?

We think AI infrastructure build-out is going to slowly go from initial phase of huge build-out to more even growth as enterprises adopt it around the world. And it's hard to say the exact timing or quarter where it happens, but that's the time frame we would see that. And second is as we see growth in new security threats and problems, and we are engaged with customers on those solutions, that is also a tailwind going into that, right? There's no implicit assumption on service provider spending in that.

And maybe there's a couple of questions around segmentation and the solution areas. Michelle, maybe you can comment just briefly. What is the '26 and '27, '28 kind of longer-term projections for enterprise versus SP in our traditional segmentation? And then maybe, Dhrupad, you can expand around if we're planning to report on these new solution areas, which is one of the questions that came.

Yes. And maybe I'll start with that. She can answer that. I think our objective is to give investors more insight into what is driving our business, where we see upside, where we see opportunities and how we prioritize investing in the business. We do not plan to change our financial reporting segments. We plan to also show a view by this look for a period of time so that investors get both perspectives without suspending something we do today, right? So that's not the objective. It's to provide what we think is a better indicator to understand our business because the traditional notion of service provider and enterprise is more and more blurred because most of them also sell to enterprise.

So we will continue to do that. We're not going to stop that. But this is probably an incremental view, not a financial reporting segment that will help investors understand the business.

And I think it creates greater transparency. So to get to the other part of the question, I think right now, we see enterprise, the Enterprise segment outpacing the growth in service providers. We expect enterprise to be between 15% to 20% of our growth. And we see the Service Provider segment growing between 5% to 10% unless we see a return of the first segment telcos.

And I guess along the lines around growth, Hamed asks, what is the customer assumption for your revenue outlook, specifically not enterprise versus SP, but new versus existing customer base?

Yes. So I think that's a good question. I think -- so once again, that is -- you should think of that as the solutions we provide to all our customers. So there is no change in assumptions. We have customers today who buy legacy and NextGen. We have customers today who buy NextGen and security, and we have customers who buy all 3. So there's not a new customer. This is simply creating a point of view that shows investors a better view of where we are investing and what is growing and why. And we don't expect a change in go-to-market because there's no change in customer.

Obviously, as we develop our capabilities around AI, we will continue to assess and supplement our teams with incremental expertise, whether it's technical or selling or whatever function to be successful, right? But it is not -- we don't expect the customer list you saw before to be different because of that reason.

Sure. A couple more. So Hendi is interested in sort of our pre-AI and post-AI data center infrastructure solutions and specifically around the average deal size. Does the deal size expand once we introduce our new AI portfolio? We've noted, obviously, that the our AI, the AI upside is not captured in our base case of 12% plus, but maybe you can comment quickly on a deal size difference between the two.

Yes. I would differentiate that though, right. I would be clear that our products fundamentally are already being incorporated into AI infrastructure build-out, right? So it's not related to -- we have no play in AI until we release something in 2 years, right? So that's not the case. I think if you think of the strategy is, you have to pivot around either a market or a customer or a product. When we look at our customers who want to deploy AI and they were going to spend, say, $100, with the AI firewall, the same customer may spend $120. But it's not that we have to find a new customer for $20, right? So it's a share of wallet expansion. It's not a wholesale replacement of portfolio.

Got it. I think we had a couple more online. Again, if you have a question in the room, just raise your hand and Jeff will bring you over the microphone. Yes, we've got one in the room. So one second.

You talked a little bit earlier as it relates to sort of the AI revenue opportunity about how you work -- you're designed in pretty early into the cycle. And so it's really just a matter of, I guess, the network traffic volumes continuing to scale with AI adoption. I guess when it comes into that design-in opportunity, are we in the midst of that today? Do you already have these design wins in the bag and it's just a matter of the volume scaling? Or is there, I guess, opportunity for incremental design wins?

Yes. Great question. So I would say we are very early in that process today. So we are in trials with customers. They are evaluating technology road map. They're running it in their network, giving us information. So it's pretty early in that phase. And certainly, I think we would expect to get more design wins as well.

But even the ones that we are engaged in will take time to mature in the next 1 or 2 years, right? But today, they are in the phase of testing it in the lab, in the new network configuration, giving us feedback and then we get -- like as you remember correctly, then we are in that early phase where we can say we are in these many sockets already, and that will just scale from there. So it's pretty early in that cycle.

I think 2 more questions online that we should answer. Hendi is asking about the competitive landscape across those 3 areas, the 3 solution areas who we primarily see maybe as a reorientation since we're not talking about enterprise versus SP specifically, but we're talking about legacy networking, next-generation networking and our network security.

So there's -- I mean, as I said before, it's more to give investors a better view of how we sell and how we go to market and our solution set. There's no significant change. We still continue to compete with NETSCOUT and F5 and Juniper and companies like that. But where we are doing new unique AI solutions, there's no one to compare to, right? So that is open space. So because we are innovating and doing new things that's not even a category yet. So -- but other than that, there's no change in that landscape. I think we are focused on finding the best ways to grow, and we'll compete with different competitors in different places.

Got it. Gray asks alongside Trevor at BTIG, when we talk about those different solution sets, legacy networking, next-generation networking, security, is there an uplift if the customer takes all 3 solutions? Is there a typical uplift from legacy networking to next-generation networking? Maybe you can just talk a little bit about that.

Yes. No, I think that's a good question. And obviously, that's our goal, right? So our goal is we want the current or existing or new customer to buy as many categories as they can. So typically, obviously, we see a good attach between next-generation networking and security. We would also probably see a good attach between legacy and next-gen because what it means is the same customer could be in both, right? In one case, they are spending less on this product and spending more on this product.

And in many cases, one of the things we highlighted is my approach is really that we don't go to customers and say, you got to replace everything you got if you want all this new stuff, right? So in many cases, we are actually enabling our customers to interoperate legacy and next-gen networks and equipment because that is in their best economic interest, and we want to be aligned with them to support them what is driving that. So yes, absolutely right, our goal would be there's a natural connection of security to everything, but there's not a strong decoupling. Many of our large customers buy legacy as well as next-gen.

The last question is the easiest of all. Can you post a slide deck to the IR page, please? Yes, we will do that. Our slide deck will be available on our website, and the webcast will be available for the next 4 weeks as well.

I think we're wrapping up our Q&A session. Again, thank you, everyone, who has come here to San Francisco to enjoy this event with us. We really appreciate your attendance. Thank you, our special guests from Amex Engineering and the A10 employees who contributed to this great event. We'll be around here for a little bit to answer any other questions in the room. But thanks, everyone, online for joining us for this webcast, and we'll speak to you soon. Thank you.

Thanks,everybody.

Greetings. Welcome to A10 Networks Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions]

I will now turn the conference over to your host, Tom Baumann. Sir, you may begin.

Thank you. And thank you all for joining us today. This call is being recorded and webcast live and may be accessed for at least 90 days via the A10 Networks' website at a10networks.com.

Hosting the call today are Dhrupad Trivedi, A10's President and CEO; and CFO, Michelle Caron.

Before we begin, I would like to remind you that shortly after the market closed today, A10 Networks issued a press release announcing its fourth quarter 2025 financial results. Additionally, A10 published a presentation and supplemental trended financial statements. You may access the press release, presentation and trended financial statements on the Investor Relations section of the company's website.

During the course of today's call, management will make forward-looking statements, including statements regarding projections for future operating results, demand, industry and customer trends, macroeconomic factors, strategy, potential new products and solutions, our capital allocation strategy, profitability, expenses and investments, positioning and our dividend program. These statements are based on current expectations and beliefs as of today, February 4, 2026. These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control that could cause actual results to differ materially, and you should not rely on them as predictions of future events. A10 does not intend to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. For a more detailed description of these risks and uncertainties, please refer to our most recent 10-K and quarterly report on Form 10-Q.

Please note that with the exception of revenue, financial measures discussed today are on a non-GAAP basis, unless otherwise noted, and have been adjusted to exclude certain charges. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for prepared remarks in accordance with GAAP and may be different from non-GAAP financial measures presented by other companies. A reconciliation between GAAP and non-GAAP measures can be found in the press release issued today and on the trended quarterly financial statements posted on the company's website at www.a10networks.com.

Now I would like to turn the call over to Dhrupad Trivedi, President and CEO of A10 Networks.

Thank you, Tom, and thank you all for joining us. Today, A10 reported record quarterly and full year revenue results. These results reinforce A10's strategic position. A key contributor continues to be the sustained investment in environment supporting AI-driven workloads. As customers scale high-performance computing, inference platforms and data-intensive applications, they are increasingly focused on traffic management, availability and security at massive scale. These requirements play directly to A10's strength.

For the full year, revenue grew 11% year-over-year, outpacing growth rates across much of our competitive landscape and underscoring the increasing relevance of our portfolio with customers.

We enter 2026 with momentum supported by macro trends as a result of our agile strategy, strong execution and excellent industry reputation. Increasingly, we are considered a foundational piece in the development of AI and other infrastructure in addition to being a critical component for customers operating their current environments. As our customers grow, we grow.

In the fourth quarter, we delivered $80.4 million in revenue, our largest single quarter ever. Revenue expanded 8.3% year-over-year in spite of an unusually strong seasonal fourth quarter last year. Our investments in targeting North America customers has resulted in this portion of our business growing faster than overall [Technical Difficulty]

It seems we've lost Dhrupad's line. Just one moment while we get him reconnected. Okay. Dhrupad your line is live.

Great. Great. In the fourth quarter, we delivered $80.4 million in revenue, our largest single quarter ever. Revenue expanded 8.3% year-over-year in spite of an unusually strong seasonal fourth quarter last year. Our investments in targeting North America customers has resulted in this portion of our business growing faster than our overall revenue, and we continue to be well positioned with these customers while maintaining our geographic and customer diversity. Our global diversification continues to enable consistent performance despite macro variability.

For full year 2025, we delivered revenue of $290.6 million, up 11% year-over-year and adjusted EBITDA of $86 million, which represents 29.6% of revenue. These are all company records and continue to demonstrate the inherent strength of our strategy, operating model and disciplined execution.

Security-led solutions are now sustainably at our long-term goal of 65% of total revenue. This shift reflects not only the breadth of our portfolio, but the increasingly central role security and encrypted traffic play in legacy networks as well as next-generation networks.

During the quarter, we closed a win with a large global data and analytics software provider serving customers across highly regulated industries. The customer was experiencing rapidly rising encrypted traffic volumes driven by platform expansion and recent acquisitions, creating both performance and cost challenges. A10 was selected for its ability to deliver high-performance solutions supporting the next-generation network with hardware acceleration and improved security, enabling the customer to consolidate infrastructure, support future growth and materially improve cost efficiency.

We also closed a significant new win with a large global airline operating highly distributed mission-critical digital platforms. The customer was focused on improving automation, performance and centralized management across a complex hybrid environment while reducing operational cost at scale. A10 was selected for its ability to deliver state-of-the-art cybersecurity, resilient next-generation networking solutions with deep automation while supporting consistent performance and availability across an always-on customer-facing operating model.

Importantly, these wins are representative of the type of demand that aligns well with our operating model and our strategic growth drivers. They reflect customers prioritizing performance, security and efficiency at scale use cases where A10 can deliver strong value without incremental complexity or disproportionate cost. We continue to drive a disciplined operating model that balances targeted investment with margin expansion, converting growth into profitability and cash while dynamically reinvesting in strategic priorities.

As previously noted, investing in organic growth is one of our strategic priorities in addition to returning capital to shareholders. We have reallocated our research and development budgets, focusing on accelerating some of our future AI-related solutions and integrating AI across all our offerings, supporting current and future growth. We remain committed to our long-term operating model, driving revenue growth more than 10%, adjusted EBITDA margins of 26% to 28% and EPS growth faster than revenue growth.

A10 is well positioned to serve our customers, and our solutions are well aligned with the dynamic needs of today's customers. Today, A10 works with 9 of top 10 telecom operators, 8 of the top 10 cloud providers and more than 7,000 customers globally. The investment cycle to support AI specifically and network capacity generally continues to drive sustained demand. A10 is positioned to grow with our customers and our proven capabilities and industry-leading total cost of ownership are helping us win new business as well.

With that, I'd like to turn the call over to Michelle Caron, our Chief Financial Officer, to review the numbers in more detail. After that, I will discuss our 2026 outlook. Michelle?

Thanks, Dhrupad. 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. A full reconciliation of GAAP to non-GAAP results are provided in our press release and on our website.

So now let me turn to the results. As Dhrupad noted, we delivered a strong Q4 and entered 2026 with encouraging momentum. Fourth quarter revenue grew 8.3% to $80.4 million. This was a record revenue level for A10. From a mix perspective, product revenue accounted for 61% of total revenue and service revenue represented 39%. Product revenue of $48.8 million grew 13% year-over-year and typically is representative of future revenue trends.

Within our product revenue category, the fourth quarter achieved our long-term target of generating more than 65% of our total revenue from security-led solutions. This demonstrates our ability to deliver differentiated solutions, leveraging our strengths in performance, scale and reliability.

Looking at our major verticals, enterprise customers represented 42% of Q4 revenues. The Americas continued to outpace overall enterprise revenue growth for the company, in line with our stated strategy. Service provider revenue, which was 58% of total revenue, was weighted towards cloud providers, further indication of our success in strategically aligning our offerings with AI infrastructure build-out. In fact, non-cloud service provider revenue was flat year-over-year, reflecting an ongoing mix shift as customers prioritize security and next-generation networking initiatives over legacy infrastructure. A10 has evolved its solutions to be well positioned to capture legacy refresh demand as this market transition progresses and customers resume investment while continuing to align with their evolving priorities around performance, scale and security.

From a geographical perspective, our Americas region represented 64% of global revenue, reflecting the benefits of A10's investments in our Enterprise segment and strength of AI infrastructure build-out. Macro-related headwinds such as persistent inflation and threat of tariffs in rest of the world were more than offset by strength in Americas.

Q4 operating results reflected our continued investment in our strategic initiatives as well as our financial discipline. Non-GAAP gross margin was 80.8%, in line with our stated goals of 80% to 82%. Operating expenses were $43.6 million with an operating margin of 26.6%, reflecting increased investments mainly in R&D, focusing on next-generation networking and security. Our non-GAAP effective tax rate was 15.7%, resulting in net income of $19.1 million or $0.26 a share. Q4 diluted weighted share count was 72.7 million shares. Adjusted EBITDA was $24.9 million, 31% of revenue. We generated $22.7 million in cash flow from operations in Q4 with CapEx coming in at $6.7 million, bringing free cash flow for quarter 4 in at $16 million. We've continued to invest in the business while also returning capital to our shareholders.

Now I'll turn to the full year results. Revenue grew 11% to $290.6 million with non-GAAP gross margin coming in at 80.6%. At the same time, we delivered record adjusted EBITDA of $86 million or 29.6%, reflecting disciplined execution and a highly productive operating model. Net income was $66.3 million or $0.90 a share and was up from $64.8 million or $0.86 a share in the prior year, while we invested significantly throughout the year in strategic investments such as AI and security. As a result of this, we were still able to increase EPS on a year-over-year basis. Our growth was driven by increased demand for security-led revenue, which represented 72% of total revenue for the year. Revenue from the Americas increased 30% for the year, while revenue from EMEA increased 12%, offsetting a decline in revenue from APJ, where the region has been experiencing macroeconomic headwinds such as low GDP growth, persistent inflation and concerns with tariffs. We continue to have deep customer relationships in these regions to preserve our geographic diversity.

Turning to the balance sheet. Cash and marketable securities were $378 million as of December 31, and our deferred revenue was $142.8 million. During the year, we paid $17.4 million in cash dividends and repurchased $68.9 million worth of shares, returning a total of $86.3 million to shareholders. The Board has approved a quarterly cash dividend of $0.06 per share to be paid on March 2, 2026, to shareholders of record on February 16, 2026. The company has $53.4 million remaining on its $75 million share repurchase authorization.

Now we're closely monitoring the broader supply environment, including the memory segment, which has been widely discussed across the industry by customers, partners and competitors alike. Based on our supply management processes, we don't expect this to impact the delivery to our customers, and we continue to navigate cost pressures alongside our suppliers and our customers. As a result, we've taken proactive steps around supply planning, supplier engagement and component flexibility to mitigate potential impacts. We deployed similar measures in previously supply-constrained environments such as 2020, so we feel well positioned to navigate this dynamic. I look forward to speaking with many of you in the coming weeks, gathering your feedback on our strategy and operations.

I'll now turn the call back to Dhrupad for a discussion of our 2026 outlook and closing comments.

Thank you, Michelle. The results for the fourth quarter and full year validate the strategic investments we have made over the past half decade to reposition A10 as a valuable partner for addressing the new and emerging challenges related to the evolving technology environment. The demands AI brings to a data center or a CSP are challenges that A10 has a proven track record of addressing. We facilitate east-west traffic, efficiently managing workloads and dynamically prioritize traffic, emphasizing high throughput and low latency, all with integrated security. As a result, A10 is positioned squarely in front of multiple durable secular catalysts. We are investing to enhance our position across our portfolio. Our business model dynamically allocates resources to address changing market conditions while preserving profitability and shareholder returns.

In the press release we issued today, we laid out our initial 2026 outlook. On a full year basis for 2026, we expect to deliver both top and bottom line growth, including revenue growth of 10% to 12% over 2025 levels. We also expect non-GAAP gross margin in line with historical trends and within our stated business model goals of 80% to 82% while navigating input cost pressures. We expect to expand our net and EBITDA margins from current levels, and we expect EPS growth to exceed our revenue growth rate.

We will provide additional strategic and solution context around our growth drivers and market positioning at an upcoming Investor Day, including a deeper discussion of the factors that drive these expectations.

Operator, you can now open the call up for questions.

[Operator Instructions] The first question comes from Gray Powell with BTIG.

Congratulations on the good results. absolutely. So maybe a couple of questions on my side. Just to start off, it was really good to see the improvement in service provider growth in 2025. Just as we think about 2026, how sustainable is the trend there? And then I know you hit on this in the prepared remarks. Just like how should we think about the different growth drivers within service provider, like a recovery in traditional communication companies versus continued growth from the cloud providers deploying AI infrastructure.

Great. Thank you. Good question. So yes, so I think as we went through the period this year, right, I think you can see in the results we saw certainly relative to 2024, an improvement in the Service Provider segment overall.

I would say the two things to note. First is majority of that growth did come from cloud-oriented companies, whether it's in U.S. or elsewhere, building out infrastructure towards AI or towards more cloud services. However, I would say, as we went through the year into Q3, Q4 period, we saw not return to original levels, but certainly improvement in spending patterns with also the traditional telcos.

And the nature of their investment, I would say, is twofold. One was relative to improving their security position and posture for the networks or the enterprise services that they provide. And second, I would say that because of the nature of our portfolio, the other part of that growth was them simply needing to add capacity to manage more data and more users and more traffic on the network, right? So without them needing to build like a kind of a greenfield new network, both those drivers were relevant to us. One was making their networks more secure. And second is continuing to modernize the network as well as adding capacity while they do that.

Got it. Okay. And then just a quick follow-up, if it's okay. I know it's probably really hard to quantify, and maybe it's like too early. But are you seeing -- is part of this like are you seeing AI drive higher traffic volumes like higher levels of DDoS attacks or something else, and that's driving part of the refresh cycle? Or am I getting ahead of myself there?

Yes. No, that's a good question, Gray. I think we certainly monitor that. And I think your question, it may be a little early. I don't think we are past that point where we could quantify or talk about it. But absolutely, there is a two sides of the coin, right, is where AI also facilitates kind of ease of deploying more complex, more sophisticated attacks and therefore, also drives volume. And some of it is related to also the nature of traffic that did not exist on the network before AI, right? So that certainly is a factor.

A little early to quantify. I don't think that service providers are investing yet on that, but they are certainly viewing that as something to worry about. But they do expect and anticipate increasing volume just from the nature of the volume increase when people constantly feed prompts and get feedback as opposed to not having that traffic before. right? So that certainly also feeds the growth. And the security is something that is on, I would say, everybody's radar, but hard to quantify that yet.

Our next question comes from Anja Soderstrom with Sidoti.

Congrats on the quarter and the outlook for 2026. You had quite an outperformance in the fourth quarter. What was the main surprise here? What changed during the quarter? And sort of how did the quarter trend for you?

Yes. So, I think, for us, as we had talked about, right, Anja, is that our focus is obviously, we have a strong position with the service provider segment globally. And as that improves, maybe not fully recover, we'll continue to see some benefit from those deep relationships that we continue to build upon. So that, obviously, you can see in the numbers helped a little bit.

Second is, right, we continue to focus on growing our footprint around larger customers, including in the enterprise segment. And we highlighted a couple of new customers. So our ability to land new large customers, obviously, is also helpful to that growth while we benefit overall, right?

And third, as we said in our comments that to the degree where some may be a lot, some may be not so much, people are investing in AI infrastructure. Our portfolio is well positioned. So we see that. So I would say SP becoming slightly better was, I would say, better than we expected, not all the way back, but certainly something that helped us in the quarter. Our growth on enterprise side as well as on AI-led infrastructure was what we were expecting.

Okay. And you mentioned some new customers. Were they -- did you displace someone with them or?

Yes. I think -- so typically, in most of those cases, we would be displacing them. I think the only exception to that is when we work with customers on some of our security solutions, they may not be using anything today, right? And they are implementing new security protocols or standards. So that -- in that case, it's not replacing somebody. But outside of that, it would be certainly in a competitive situation.

Okay. And is it like one specific competitor you're replacing? Or is it more broadly? And has it changed at all recently, the competitive landscape?

No. So, I would say no real change in the landscape, right? As we have talked about in the past, right, on enterprise side and security side, it's the same competitive landscape. I think we just continue to work at improving our solutions and be more in tune with customer needs. So I think as that is better aligned, we are seeing better opportunities as well.

Okay. And just one more from me. If I heard you right, there was an uptick in the CapEx spend. What's driving that? And how should we think about that for 2026?

Sure, yes. So I think if you kind of look at our trend, there was a little bit uptick in CapEx in Q4. There's two real drivers to it. I think one of it is related to our need to invest in some of the back-end infrastructure. So when we acquire a company like ThreatX and we are offering some more services, what that translates to is not necessarily cost from a traditional sense, but on hosting services, data centers, SoC and doing our security right to strengthen our own security operations and so forth. So some of that investment is really around enabling the solutions that are helping our solutions be more relevant to customers in terms of either hosted solutions or back-end infrastructure. So a lot of that is in IT.

And then some part of it is as we are in the early stage with customers doing demos and POCs on AI infrastructure, Obviously, we are investing a little bit of that CapEx in new kinds of processors and chips and GPUs and things like that.

The next question comes from Hamed Khorsand with BWS Financial.

Could you just walk through your guidance a bit here? This is the first time you've been willing to provide any kind of guidance, this specific in like two, three years. How are you seeing that visibility? Is it enterprise, the service provider? And how certain are you that this is going to actually be there compared to two, three years ago when you stopped giving guidance?

Yes. No, I think that's a good question. I think if you look at how kind of the environment has evolved and our products and business has evolved over the last two, three years, certainly, right, we were much more exposed to just the SP or the traditional SP spending cycle, which is CapEx cyclic and CapEx intensive and so harder to predict over long periods of time. What we did guide even in the last three years, as you know, Hamed, was delivering on the gross margin and EBITDA percent, but not as much on top line because that -- because of the level of variability with everything going on, right, with macro as well as micro.

So as we see the last few quarters, I think we have continued to make the base of our revenue more durable. And as we are getting more of that from enterprise or large enterprise as well as SP as well as AI spending, I think in an aggregate, we think we can sustain kind of the momentum where we are, where we just finished the year at 11% year-over-year growth. So we feel that based on the visibility we have with a 6- to 9-month cycle and more diversified exposure across these markets, that's all it is, right? But our fundamental outlook of saying EBITDA 26% to 28%, gross margin, 80% to 82% and EPS growing year-over-year has not changed. I've given that guidance every year, right?

Okay. Great. And my other question was related to your APJ performance. Was that country specific? Or was that multiple countries?

Yes. No, I would say that the majority of it was related to Japan. And I think it's heavily related to the environment there with the low GDP concern over what tariff environment could mean and therefore, large SPs as well as enterprise holding off on investment. So I think we certainly are not seeing us losing share, but we are certainly seeing depressed spending in line with all the macro news you would see out of Japan. Outside of Japan, I think we are fine. It was not that negative, probably close to company average.

[Operator Instructions] The next question comes from Michael Romanelli with Mizuho.

So enterprise revenue growth was 8% this quarter, obviously, much improved from the 10% decline reported last quarter. I guess did you close any notable deals that perhaps pushed from the 3Q? And I guess going forward in relation to the 10% to 12% growth outlook for 2026, how should we be thinking about enterprise business growth for the full year?

Yes. So, I think good question, Michael. And I think if you remember last call, right, I talked about the fact that because we are early in expanding our footprint into that marketplace, it's going to be a little bit choppy. And therefore, even the last quarter, we were highlighting focusing on the TTM growth versus every quarter, right? So every quarter could be up or down. But on a trailing 12-month basis, we are confident that, that segment will grow at least at the fleet average of 10% to 12%.

Okay. Got it. That's helpful. And then as part of your prepared remarks, Dhrupad, you highlighted a few encouraging wins in Q4, which was great to hear. I guess, like overall, how would you characterize net new enterprise logo activity this quarter? And as part of the 2026 guide, like obviously, you have a very large installed base, but how should we be thinking about your ability to sign up many more new enterprise customers?

Yes. No, it's a good question. And I think what I would highlight again, right, is as a company, based on our technology and value proposition, we are not really focused on an SMB market orientation. So, really, we are not looking at how many hundred customers we acquire every quarter and how many churn and everything else, right? So our goal is really to continue to get new customers typically in large enterprise who operate complex network with thousands of users, mission-critical environments, right?

So, in that context, obviously, acquiring new customers is very, very important, but it's very different than a typical SMB model, and we don't need to acquire hundreds of customers to get that growth, right? So we absolutely have a good pipeline of adding new customers. But even once we have those customers, typically, we continue to expand and sell them more product categories as well over time. So that's an important metric for us. But I would say it's different than maybe an SMB-oriented business.

The next question comes from Hendi Susanto with Gabelli Funds.

Dhrupad, you highlighted how AI can drive growth in three categories like modernization, network capacity and security. How do you rank among those three?

Yes. So, I think, obviously, core of our growth comes from capacity, whether it's existing or new build-outs or growing as the network. Security is not decoupled from capacity, right? So obviously, our goal was to get security-led revenue to be 65% of total, and we are there and we'll stay there. And we are confident we can continue doing that.

Modernization, I think there's two aspects to it. One is when people are modernizing applications and use cases, then obviously, we are relevant. The second part of it is where modernization means somebody has to build a brand-new 5G network. Obviously, that's not a growth we bet upon, and we will benefit when that happens more when somebody builds kind of a greenfield network. But in the current economic environment, we don't count upon that as a major driver, and our goal is to find growth independent of that. And if that happens, then that's good, right? So it's really around working with our customers on their current networks and capacity and security while enabling them with more and more capabilities and then obviously benefiting more than that if they build new networks.

And then one more question. There's a growing conversation about Agentic AI as a growth opportunity in 2026 like an early stage of growth of Agentic AI. I would like to check in, in case you have seen some use cases emerging for Agentic AI application and how we should be thinking about A10 Networks in that context?

Sure. Yes. So I think like all of -- we hear from a lot of the people in the industry and others as well, right, that it's early in the cycle, where we are engaged with customers really is while we do have AI products per se, where we are much more engaged with customers is how do they plan to use AI for their business goals and what they do with it.

So some of the examples we have talked about is for our kind of service provider type customers in the next two to three years, having an ability to do predictive analytics and getting predictive insights into their network and performance and capacity planning is important to them. It's still early because companies are themselves figuring out how to take advantage of AI. Second is, of course, right, as we talked about, as companies use more AI, whether it's an on-site model or a global model, they will have new kinds of traffic, new kinds of threat and new capabilities needed to manage those and particularly with low latency and more distributed network.

So, in that environment, obviously, we are working with customers also on how to continue to improve their security posture with new types of traffic and also enabling the architecture where they can manage that kind of traffic better on their networks.

We have reached the end of the question-and-answer session, and I will now turn the call over to Dhrupad Trivedi for closing remarks.

Thank you. And thank you to all of our employees, customers and shareholders for joining us today and for your continued support. I'm increasingly confident in our strategic orientation with security and AI infrastructure spending patterns. Thank you for your time and attention.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Good day, everyone, and welcome to the A10 Networks Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Tom Baumann. Sir, the floor is yours.

Thank you all for joining us today. This call is being recorded and webcast live and may be accessed for at least 90 days via the A10 Networks website at a10networks.com.

Hosting the call today are Dhrupad Trivedi, A10's President and CEO; and CFO, Michelle Caron. Before we begin, I would like to remind you that shortly after the market closed today, A10 Networks issued a press release announcing its third quarter 2025 financial results.

Additionally, A10 published a presentation and supplemental trended financial statements. You may access the press release, presentation and trended financial statements on the Investor Relations section of the company's website.

During the course of today's call, management will make forward-looking statements, including statements regarding projections for future operating results, demand, industry and customer trends, macroeconomic factors, strategy, potential new products and solutions, our capital allocation strategy, profitability, expenses and investments, positioning and our dividend program. These statements are based on current expectations and beliefs as of today, November 4, 2025.

These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control, that could cause actual results to differ materially, and you should not rely on them as predictions of future events. A10 does not intend to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.

For a more detailed description of these risks and uncertainties, please refer to our most recent 10-K and quarterly report on Form 10-Q. Please note that with the exception of revenue, financial measures discussed today are on a non-GAAP basis, unless otherwise noted and have been adjusted to exclude certain charges.

The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP, and may be different from non-GAAP financial measures presented by other companies.

A reconciliation between GAAP and non-GAAP measures can be found in the press release issued today and on the trended quarterly financial statements posted on the company's website at a10networks.com.

Now I would like to turn the call over to Dhrupad Trivedi, President and CEO of A10 Networks.

Thank you, Tom and thank you all for joining us today. A10's strategic position, aligning our solutions and technology road map with the persistent needs of our customers around trusted infrastructure, cybersecurity and AI capabilities continues to enable growth that outpaces our market peers.

Our solutions emphasize high throughput, low latency, and integrated security, which our customers and the broader market increasingly view as Essential. A10 is well positioned alongside the durable catalyst that are driving spending across our markets. In the third quarter, revenue grew nearly 12% year-over-year.

On a trailing 12-month basis, growth from enterprise customers in North America continues to outpace our overall company-wide growth. Revenue from the Americas has increased 25% on a trailing 12-month basis, driven primarily by investment in AI infrastructure. This performance helped offset macro-related headwinds in other regions.

Our global diversification continues to enable consistent performance despite macro variability. AI-related deployments were a key driver for growth, where security and performance at scale are critical. These applications are power hungry and our solutions deliver efficient throughput and low latency with integrated best-in-class security capabilities.

This allows customers to achieve target performance with fewer devices, improving total cost of ownership, while maintaining the highest levels of network performance. We continue to leverage this advantage in large data center opportunities globally. Our operating model continues to focus on discipline and leverage, converting growth into profitability and cash, while reinvesting in strategic priorities.

EBITDA margins expanded year-over-year from 26.7% to 29.3%, while non-GAAP operating margin expanded from 22.6% to 24.7%. This demonstrates the inherent leverage in our model even as we continue to invest more in R&D. A10 is well positioned to serve both enterprise and service customers alike, while we navigate macro uncertainty.

In the world of AI, these will be harder to demarket as customers redefine their architectures. Our increasingly strong alignment with AI infrastructure build-out and adoption gives us confidence in our strategic positioning as we align investment with structural tailwinds of AI and cybersecurity.

As our investments in innovation and product enhancements have taken shape, we have established ourselves as a stronger, more differentiated technology solution provider. On a trailing 12-month basis, growth stands at just over 10%. Based on momentum in key strategic initiatives, we expect full year growth rate of 10%.

With that, I'd like to formally welcome Michelle Caron, our new Chief Financial Officer to the call. I also want to take a moment to thank Brian Becker. Brian had been an important part of the leadership team during A10's progress and had instituted strong processes that will continue to serve us well into the future.

Michelle brings deep operational and financial expertise from complex global organizations and a proven ability to align financial strategy with growth opportunities. Her background complements A10's disciplined culture and long-term transformation agenda. We expect continued disciplined execution and an increased focus on capital deployment to play a role in our overall growth. Michelle's experience positions us well to help drive that next phase of the company. Michelle?

Thank you, Dhrupad. I'm excited to join A10 at this important inflection point. What drew me here is the combination of a strong foundation, coupled with an even stronger opportunity ahead. With a proven business model, solutions that are ideally aligned with global spending trends and a Tier 1 customer base, A10 is positioned for consistent success.

I shared Dhrupad's belief that we can continue to grow both organically and inorganically, and I look forward to contributing to both sides of that growth equation. My near-term focus involves building on our solid base and driving greater consistency, predictability and profitability as we grow.

I'll be concentrating on a few key areas. First, maintaining financial discipline and transparency, better aligning our performance and market expectations. Second, driving profitable growth. balancing top-line expansion with healthy margins and cash flow; and third, maintaining disciplined capital allocation. Investing where we can create the most value, while continuing to return capital to our shareholders. Supporting our pipeline of M&A activities and effectively putting our cash to work will be part of this initiative.

Now let me turn to the results. As Dhrupad noted, we delivered a strong Q3, growing revenue almost 12% to $74.7 million, reflecting a mix of 58% product revenue and 42% service revenue. Global service revenue of $31.6 million grew 6% while product revenue of $43.1 million grew 17% year-over-year. Product revenue, which has been strong for the last 2 quarters represents a leading indicator of future revenue.

Our third quarter performance gives us confidence we're on the right track to deliver on our strategic priorities, while continuing to drive rigor building on our culture of excellence. Within our product revenue category, the third quarter reflected a greater contribution of security-led revenue exceeding our long-term target of generating 65% of our total revenue from security-led solutions. This performance reflects customer demand and our alignment with customer needs, particularly within North America for both service providers and enterprises.

Now looking at our major verticals, enterprise customers represented 36% of Q3 revenues. As previously stated, America is our priority region, and we continue to see growth in excess of overall revenue on a trailing 12-month basis. Service provider revenue, which was 64% of total revenue, was weighted towards cloud providers, further indication of our success in strategically aligning our offerings with AI infrastructure build-out.

From a geo perspective, our Americas region represented 65% of global revenue, reflecting the benefits of A10's investments in our enterprise segment and strength of AI infrastructure build-out. As Dhrupad mentioned, macro-related headwinds in Rest of World were made up for in the Americas region. Now with the exception of revenue, all of the metrics discussed on this call are on a non-GAAP basis, unless otherwise stated.

A full reconciliation of GAAP to non-GAAP results is provided in our press release and on our website. Our continued operating discipline contributed to our strong Q3 results. Non-GAAP gross margin was 80.7%, in line with our stated goals of 80% to 82%. Operating expenses were $41.8 million, reflecting an operating margin of 24.7%, an improvement of about 215 basis points year-over-year.

GAAP net income for the quarter was $12.2 million or $0.17 per diluted share. Non-GAAP net income for the quarter was $16.7 million or $0.23 per diluted share, reflecting a 7.4% EPS growth from the year ago period. Diluted weighted shares used for computing non-GAAP EPS for the third quarter were approximately 73 million shares, down 1.7 million shares year-over-year, driven by our continued share buyback. Adjusted EBITDA was $21.9 million, 29.3% of revenue, which is aligned with our long-term strategic goals.

Turning to the year-to-date results. Revenue for the first 9 months of 2025 was $210.2 million compared to $187.5 million, an increase of 12.1%. Non-GAAP gross margin was 80.5% year-to-date. Adjusted EBITDA was $61.1 million year-to-date, reflecting 29% of revenue.

Non-GAAP net income on a year-to-date basis was $47.2 million or $0.64 per diluted share compared to $41.9 million or $0.56 per diluted share last year. On a GAAP basis, net income for the first 9 months was $32.3 million or $0.44 per diluted share compared to net income of $31.8 million or $0.42 per diluted share in the first 9 months last year.

I'll now turn to the cash flow and balance sheet, both of which are very strong. We generated $22.8 million in cash flow from operations in Q3. CapEx was $4.7 million with cash and investments totaling $371 million at the end of the quarter. Deferred revenue was $143.5 million. During the quarter, we paid $4.3 million in cash dividends and repurchased $11 million worth of shares.

The Board has approved a quarterly cash dividend of $0.06 per share to be paid on December 1, 2025, to shareholders of record on November 17, 2025. The company still has over $60 million remaining of its $75 million share repurchase authorization. I look forward to speaking with many of you in the coming weeks, gathering your feedback on our strategy and operations.

I'll now turn the call back to Dhrupad for closing comments.

Thank you, Michelle. We are encouraged by continued business execution and remain confident that A10 is strategically well positioned in the market, especially as we see acceleration in AI infrastructure build-out. A10 is positioned squarely in front of multiple durable secular catalyst.

In fact, our strength in high-performance hardware and software is more relevant than ever before. We are investing to enhance our position in the enterprise space and remain aligned with key leaders in the service provider sector around the world. We believe our business model enables us to dynamically allocate resources to address changing market conditions, while preserving profitability and shareholder returns.

Operator, you can now open the call up for questions.

[Operator Instructions] Your first question is coming from Gary Powell (sic) [ Gray Powell ] from BTIG.

It's actually Gray up again for Gary. Gary is traveling today. But just want to say congratulations on the good results. I just had a couple of questions. Yes, absolutely. I think last year, security-led revenue was around 63% of the business, growing 9%. You called out 65% in the prepared remarks in the slide deck. Just how is it tracking this year? And where do you think it can go longer term?

Yes. Good question. I think -- so we had said long term, our goal was 65% because -- we see the connection between security and infrastructure as something that actually is a strength for us in the sense, we want those things to work together and make it even better.

So if you look at where we actually ended up in Q3, the number was higher than 65%. And so we feel pretty good continuing to maintain that goal of about 65%. And if we do better, that's great. But at the same time, we are not looking to lose infrastructure revenue in its place, right?

So, I feel pretty good that we have been able to improve that mix to -- from somewhere less than 30% to 65%. And obviously, our goal is to lead with that because that tends to expose us to higher growth markets and applications.

Understood. Okay. That's really helpful. And then just a separate topic and this 1 might be a little bit early. But F5 had a pretty bad data breach a few weeks ago. Again, like, I'm sure it's a little bit early from your side, but is that something that can potentially help your customer discussions on the enterprise side of the business? Is that something that's come up at all in conversations yet? Or is there any -- I don't know, is there any directional commentary you could make about that?

Sure. Yes. No, I think good question. And I think, first of all, I would say that all of us in the cybersecurity industry, right, face the same kinds of attacks and challenges that we are all resolving, right? So obviously, we cannot specifically comment on anything, but I would say as we navigate that market environment and you look at some of the key players in that space, right, including F5, of course.

I think we have seen certainly an increased level of interest from customers, not necessarily wanting to change, but wanting to understand what else is in the market and what alternatives there might be towards making sure that their own infrastructure is more resilient in the future, right? So of course, I think we'll continue to work with our customers just as we'll continue to work with the industry overall to find better ways to manage and handle cybersecurity challenges.

Your next question is coming from Simon Leopold from Raymond James.

This is Victor Chiu for Simon. You noted strength in North American AI infrastructure investments in your prepared remarks. But can you elaborate on some of the specific factors contributing to the upside this quarter, were there a handful of specific customers or deals? Or was it more -- was the strength more broad-based?

Sure, Victor. I think -- so as, of course, you know well too, the market today in AI is pretty concentrated with several large players. And then in the longer term, we are also engaged with multitude of players who, in 2 to 3 years' time will be doing a lot more things on their own, right?

So right now, it's in the phase of initial big build-out and then it becomes more realistic in terms of business goals, local models and so forth. So in this phase of the evolution, certainly right, the benefit to us was from a few large customers, who are investing aggressively into building the AI infrastructure.

But we are equally engaged with customers around the world on the enterprise side as well, who will be the beneficiaries long term as they build out their own solutions and decide how to take advantage of AI.

Great. That's very helpful. And just a quick follow-up, just to elaborate on the previous question. Have you observed any -- on the flip side, have you observed any negative collateral impact from the high profile security breach from 1 of your key competitors that customers express specific concerns or hesitations moving forward with planned deployments?

No, we are certainly not seeing any negative impact from that. I think people are used to kind of having to deal with public as well as private incidents in that space for many, many years to come. So, it is certainly not a negative thing for us at all. And it's -- I would say, it has certainly increased conversations we are having with customers. But at the same time, it's hard to say it's positive.

But certainly, there's no hesitation on customer side in terms of spending on A10's products, right, and holding off on that in any way.

Your next question is coming from Julio Romero from Sidoti & Company.

This is Julio on for Anja. So my first question would be just it seems like the efforts you've done on the enterprise sales push have been working. Are there any more initiatives you can do there? And then secondly, where are you in the innings of expanding within this market?

Yes. Good question. And I think we have been talking about that for a few periods now, right? So I think our initial thesis was around building up our capability on the product solution side as well as on the commercial execution side to get more stability with enterprise customers than growing our share.

I think in the last 2 to 3 years, we have continued to see that kind of maturation process, if you will. And we believe, certainly with our sales leadership currently in place, there is a lot of focus around that while we continue to support our service provider customers as well.

So I would say, if I had to characterize it in that sense, I would say probably we are in the third or fourth innings as we continue to build kind of our own maturation of the team, but also engagement with customers.

Excellent. Very helpful. And then just any preliminary thoughts you could share on how you would view 2026 shaping up for you from a top line and bottom line perspective just at a high level at this point?

Yes. No, good question. And I think I would say you can see, obviously, last year was a little bit unusual year in terms of seasonality. And this year, as we talked about, we expect on a full year basis to get back to 10% growth and obviously, the EBITDA results as well. As we look into the future, I would say the challenge like everybody else is we are dealing with uncertainties that we cannot control, such as interest rates and tariffs and everything else.

But given the momentum in the business, particularly around secular tailwinds that we are aligning more and more to. We feel that going into next year, we should be able to sustain the growth level that we are seeing now.

And we obviously will continue to provide more clarity as we see it as well. But our goal is obviously to be in that high single-digit range. And if the market aligns do better than that, but at the same time, focused on -- our business model goals on 26% to 28% EBITDA as well as EPS growth faster than top line.

Your next question is coming from Hamed Khorsand from EWS Financial.

I was just wanted to see what kind of progress you've been making as far as expanding your service provider customer base?

Yes. No, good question. So I think, Hamed, I would probably differentiate it in 2 ways. So 1 is we -- during this year, with our existing large Tier 1 service provider, I think that has been, like most companies have seen a lot of pressure on CapEx. And so our efforts there have been more around improving share of wallet and cross-selling, whether it's in U.S. or Europe or Asia, right? Where we are seeing a little bit more traction is on the Tier 2 service provider side, where it's not necessarily related to things like BEAD funding, but we are certainly seeing a little more activity and rollout.

So our progress there is, I would say, gaining new customers that are in that category of independent or Tier 2 type service providers. With Tier 1 in addition to waiting for CapEx, really trying to expand our footprint to sell into different business units or selling them multiple products.

Okay. And then just looking out to the clarity you're seeing as far as your service prices are concerned, do you have that clarity at all? Is it better?

Yes. So good question, Hamed. So I would say on the service provider customer side, it probably varies, so on the ones that are exposed to more building out things like cloud infrastructure, the clarity is decent, I would say. And we have a 6- to 9-month kind of cycle. So we generally have a reasonably good idea.

On the Tier 1 telcos in Europe, I think we have reasonably good clarity, a little slower than normal, but moving along. Japan is pretty slow, but their economy is still in a difficult spot, right? So that we -- it's in line with what we expect. In the U.S. Tier 1 service provider, I would say, where they are exposed to cloud and infrastructure like that is good. But on the pure classic telco side, it's still a little bit choppy in the sense -- they may still spend the same amount for the full year, but projecting it by quarter is still harder than it normally used to be.

Okay. And could you just talk about what drove that big outperformance this quarter in the EMEA region for you?

Sorry, Hamed. I think you broke up for 1 second. Can you please repeat that?

In the EMEA region, it seems like on your presentation slides, that was a big revenue portion. What drove that?

I think so the -- in Q3, the EMEA portion, the step-up that you saw was 1 big project that culminated in the period. So it's probably fair to look at that 3 quarter and average it to be more indicative of it. And it's not like a new step level that you should expect to continue seeing there.

Your next question is coming from Christian Schwab from Craig-Hallum.

Great quarter. Can you give us an idea yet of the percentage of product revenue that's tied to AI-related security products?

Yes. No, good question, Christian. And I think you have mentioned that last time as well. So we are working internally on how to create a view that does that. And the complication for us is -- for many of our customers, they were, let's say, going to build 10 data centers. Now they are still building 10, but 6 are designed for AI and 4 were what they used to do before.

And I think we are trying to get a better handle on that through our customers so that we are more specific and clear in how we represent that. So that's the tougher part of it. Now when you look at our service provider growth improvement, I would say majority of it is related to because they are doing AI build-out.

But it's hard for me to say from the 10 data centers they build 4 were AI and 6 were not AI, right? Because they don't market that way either. So -- but that's something that's on our docket Christian and that we are working towards in our Q1 comments to start figuring out a way to show some kind of a proxy for that.

Great. And then when you talked about the momentum in the business sustaining itself in '26, we kind of did 10%, then you went back to high single digits. So should we just kind of assume sustaining the momentum in the business, next year's top-line growth objective would be 8% to 10%. Is that -- did I hear that right?

Yes, I think that's a fair way to look at it. So I think that's sort of the line of sight we have, right, is in that range for next year as well? And as we navigate things up and down, right, it's hard to kind of nail it down by quarter at this point. But on a full year basis, certainly, we feel good with that ZIP code, yes.

Great. And then my last question. Seeing the increased customer interest as an alternative given F5's recent issues when would be a logical time for those indications of interest to potentially turn to orders? Is that 3 months, 9 months, how should we be thinking about that opportunity?

Good question. So I think, yes, as I said before, certainly, we are having customer conversations and certainly, right, we wish all those customers and F5 to resolve those problems swiftly for themselves because a good thing for the industry. Typical sales cycle for us in that kind of an enterprise market is 6 to 9 months. And we are engaged or talking to customers, but roughly speaking, that's the window in which you would see it translate into incremental bookings if that were going to be the case.

Your next question is coming from Michael Romanelli from Mizuho Securities.

Yes. Maybe to start off, I was wondering -- I was wondering if you can comment on linearity in the quarter and how activity has been through the month of October?

Yes. No. Good question. And I think, Michael, that it varies a little bit by regions as well. So I would say that linearity for us outside of Americas has been not atypical or in line with what we expect to get to. Within Americas, I think there is a little bit of jitter around kind of political things and tariff and interest rate. But overall, we don't see a dramatic change in linearity relative to what we were expecting.

Got it. Okay. That's helpful. And then as my follow-up, it's nice to see the services revenue return to growth following consecutive quarters of decline. As part of revenue algo. How should we be thinking about your services revenue growth going forward?

Yes. Good question. So you are right. I think there's a little bit of timing element to the service revenue because it's related to 1-year, 2-year, 3-year kind of support contracts and so forth. The way you should think about it is if our product is growing at a certain rate, typically, that is sold with 1-year service or support contract.

So 1 year from that date, we would have a larger eligible pool of renewals and support contract and revenue. So in that sense, product revenue growing faster means that a year from now, it should naturally lead itself to service revenue growing faster as well.

Your next question is coming from Hendi Susanto from Gabelli Funds.

Dhrupad and Michelle. Dhrupad, would you talk about opportunity in AI, like we are somewhat familiar with A10 like core application, but perhaps you can go deeper into use cases for AI for service providers, data centers, Tier 1 service providers, like where you foresee A10 in influencing.

For example, whether it is -- like what are the growth drivers in AI, whether it is traffic or security and whether there are things that are somewhat presenting new use cases for A10?

Sure. Yes, Hendi. Good question. So I think I'll do that briefly here. But for us, really, the like we have done in the last several years, right? We connect everything back to our differentiation. So on the foundation level, we have hardware platforms and software that now also support higher throughput, lower latency and GPU-based architecture.

So those feed into people building out data centers, whether it's enterprise or service provider or telco or cloud, right? So that's the first foundation level. Second level is in our cybersecurity product, we have expanded coverage to where our products are able to detect and remediate threats that occur now because of AI traffic, and that will be things like prompt injection and loss of PII data and so forth, right?

So that's an expansion of our networking know-how to now handle new kinds of threats that happen because of AI. Third is, obviously, we are working with our customers on a longer-term basis to understand how we can look at traffic data from a long period of time in complex networks and use AI tools to drive predictive analytics, which ultimately, for them, helps do better things around network planning, resource management and which is ultimately their cost of running -- like building and running a network, right?

So that's the range of things we do. So we don't come into it thinking we are a new AI startup. What we do is we know 20 years of networking, we know cybersecurity, we have a large team of people, a lot of young graduates as well who are AI engineers. And what we are doing is we are taking our know-how in networking and security. And using that as a foundation to create AI solutions that are value creating for our customers.

Got it. And then Dhrupad, I think when you talk about U.S. service providers, you refer like Tier 1. What does the opportunity in Tier 2 service provider look like at A10 now?

So I think broadly. So this is not AI, right? But broadly speaking, I think in the Tier 2 service provider side, a few years ago, right there was a lot of discussion of government spending, rural broadband, things like that. Obviously, that has changed quite a bit, particularly with the government actually in shutdown now. So it's not that, but it's more that for those kind of carriers, our solution does not require them to fully rip and replace everything they do and then figure out how to monetize it or pay for it, right?

Our solutions are more aligned on getting more out of those networks, doing more virtualization, things like CGNAT, which allows them to reuse addresses cheaper and so progress there is more on an economic value proposition based on our technology. It is not a substitute for a Tier 1 who might spend 5x as much, right? But it is something where we continue to see good resonance with our technology and solutions.

Thank you. That concludes our Q&A session. I will now hand the conference back to Dhrupad Trivedi for closing remarks. Please go ahead.

Thank you and thank you to all of our employees, customers and shareholders for joining us today and for your continued support. I am increasingly confident in our strategy and about our future. Thank you for your time and attention.

Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.