Extreme Networks, Inc. Aktie

Okay. Good morning, everyone. My name is Tomer Zilberman. I cover 2 areas here at the bank. I lead coverage of vertical and back-office application software, which not so relevant for this discussion, but I also support coverage on networking and by extension, I cover Extreme Networks. Today, I'm joined by Kevin Rhodes, CFO of Extreme. Kevin, thank you for joining us.

Yes. Thanks for having us.

Of course. Kevin, maybe just a high-level question just to start here for investors that are newer to the story, can you talk a little bit about Extreme, where do you sit in the campus network infrastructure? What's your opportunity in campus switching versus Wi-Fi equipment?

Sure. So we deliver, obviously, Wi-Fi solutions, both hardware and software solutions that when kind of combined together, give a very elegant networking experience for our customers, we believe that software is the real key differentiator. And what we've been really focusing on in the last 2 years is, A, we have this fabric technology, which is different than the competitor set. Typically, competitors have an IP fabric, which is more like a 7-layer cake. And ours is -- the way that our architecture is built is more like a spider web and it doesn't have IP addresses.

And so at the end of the day, what -- you can't move laterally within our network, which gives you a lot more secure architecture for how you configure your network. The hardware itself, access points, switches. Those are pretty standard in the industry. We use Broadcom. Broadcom is an amazing partner of ours, and that's who we use. And we feel very, very confident in working with Broadcom in that regard. And we've, kind of, solidified. We talked about recently, our supply chain for like next fiscal '27. We are, kind of, really focusing on is gaining share, gaining share against Cisco, against HP, against Juniper.

Naturally, there are some forces that are happening in the markets right now that are getting us some opportunity to, kind of, win more share than the normal competitor. I do describe this as an ankle biter, but we're working our way up to the knee at the end of the day because it's a large, large market that we can go after. At the end of the day, we feel like we're really winning head-to-head on technology, but we're also doing it with software.

Right. Absolutely, I want to dive into the technology and software aspect. And you are seeing, if you look at the market share data that you are gaining share, right? I think you were, kind of, 3% market share last year, 3.5%. I think that momentum is continuing. But before we get into that, I want to talk about the Broadcom piece, right? I think the topic du jour nowadays, which is memory supply shortages and your management of that. So as I said, you guys have been executing very well.

Stock wasn't really working up until recently until, kind of, last quarter-ish when you came out and you said we have line of sight to visibility of memory supply until 2027. Can you first walk us through how you got there? What are the steps that you have in place to ensuring that you really have all the supply?

Yes. It's really 2 things that happened last quarter, right? One, we said about the supply chain, and two, we actually had pretty good margins because people are worried about margin pressure, which we've actually, kind of, solidified through a couple of price increases. And I'm sure we'll cover that. But on the supply chain side, we -- first of all, we have an excellent team on the supply chain side, and they've been with us for 10, 12 years. And they've -- COVID was, kind of, 10x the problem that we faced here. The reality is working with our partners, in particular, Broadcom and others, we were able to solidify all the components within the next fiscal year.

And that's really Q4 through fiscal year 2026 -- 2027. And we feel very confident, and that's what we said in our third quarter coming out is that our supply chain is covered. And it's not just covered from a contractual commitment perspective, but we've actually bought a lot of the components ourselves as well, and they're on consignment with our ODMs, but those ODMs is really, kind of, sitting either on our balance sheet or sitting on the ODMs balance sheet. But at the end of the day, these are components that we've now secured. And we feel very, very good about our ability to achieve and deliver on our promise that we can fulfill 2027 forecast.

So as you're just kind of referring to, right, you have a mix of inventory on hand, but also supply that's committed that maybe you don't have on the balance sheet just yet. We just hosted Arista this morning and in their last quarter, they talked about decommitments. So what's the risk that your partnership with Broadcom or I think you've also talked about having direct relationship with some of the memory vendors that they come to you and they say, "We know you committed, but we can't just supply it?"

Yes. I mean on the Broadcom side, number one, we sit at the lower level than like Arista, right? Arista is at the kind of 5-nanometer and a different type of chip that's coming through Broadcom. We're at the lower level, the Trident level. And we feel good about our ability to -- I mean, we've committed -- we've heard from them that they've got enough supply to cover us for that fiscal '27. So I don't think we're going to see just de-commitments there. And like I said, we feel very confident in our ability to continue to get that supply from them.

We wouldn't say that on records unless we actually felt it, and we heard it directly from Broadcom leadership all the way up at the top. So I feel -- and Ed has had that relationship for a long time.

It's less of a, call it, a strategic partnership level, meaning the size and scale of the companies, it's more -- the actual chip you need is not constrained versus where it is for Arista?

Correct. It's a different chip.

Right. Understood. Maybe going back to the growth aspect, right? You had your Analyst Day, I believe it was towards the end of last year?

Yes. End of November.

And you set out a 10% long-term growth framework. Last few quarters, you've been growing nicely above that. I know between ...

11% last quarter. 12% for the year.

Yes. How do you think about that, right? Where is the growth improvement versus your long-term expectation coming from? And how sustainable is that?

Yes, a few things. I'd say from a demand environment perspective, we continue to see very strong demand. And it's not necessarily a pull forward. We see -- there's a few things. One, there's a refresh happening right now. Intellectually, if you think about it, people weren't really in the office at all during COVID, '20, '21, '22, even '23. People started to come back in the office in '24 and '25. Here we sit in '26, and full on, everybody is back in the office.

Well, now people are back in the office, but the networks weren't refreshed over the last 4 or 5 or 6 years. And now you've got all this Claude usage and other LLM usage that's happening and it's running over the network. And so people are realizing very, very quickly that the network that they have today are not going to sustain them for tomorrow. That, coupled with Cisco's announcement last June, that they're going to have a massive refresh and that they're end of lifing a lot of hardware has got a lot of customers thinking about, "Hey, do I need to refresh my network?" And then above and beyond that as well, you've got a lot of customers that are just thinking about lead times, like it's now 52 weeks with the memory shortages. And so they've got to get ahead of what their refresh is going to look like, well more in advance now than they ever had to before, right?

And so that's causing everybody -- and then you get the price increases happening across the board as well, with memory shortages and other components. And so that's what's causing a lot of customers to think about, "I got to get ahead of this. I got to make sure that I'm being planful about what my network refreshes look like."

Oftentimes, we work with our customers and our customers tend to -- I think about like a higher education -- they do higher education university, they'll do their athletics first, and they'll do their dorm second, then they do administrative buildings, then the classrooms. There's this cycle that just happens kind of consistently on a 4- or 5-year period where they're always refreshing. Well, now you've got Wi-Fi 7, 50% of all of our wireless bookings last quarter were Wi-Fi 7, 37% of our shipments were Wi-Fi 7. That was actually faster than we expected it to happen. And so we see this kind of convergence move into Wi-Fi 7 as well.

So if you think about the growth opportunity, is it more about displacing or moving up the knee, like you said, versus some of the bigger incumbents? Or is it more about this kind of secular Wi-Fi 6 to Wi-Fi 7 protocol? Or is it kind of sprinkled in between for the both of them?

I think it's those 2 things. But I think the third is really we're embracing AI differently than our competitor set. And the traditional way that people run networks is they have a network that's installed and then wait for problems to happen. And people put a trouble ticket in and they say, "Hey, I'm having problems with my video." And then they go investigate and they look at a lot of the log files and they find the access points get a firmware upgrade that's due. And then they go fix it, and then they go and tell the person that is all set and then they close out the tickets. And it's very reactive and it's very like trouble ticket-centric.

And we've now moved the entire industry towards a proactive approach to managing our network and this is an approach that is like let the technology help you solve these issues before they become issues and let the technology help you become safer so that you can look at your network overnight while everybody is sleeping and then they can come and tell you in the morning, "Hey, this is what happened in your network overnight." Those are the sort of kind of paradigm shifts that we're seeing with our technology now that customers are really embracing. And you want that because the new technology has that, but the old doesn't.

Right. I think that conversation will come just a little bit about the new Agent ONE platform that you guys debuted pretty recently. But maybe going back into the market dynamics for just a second. If I quantify the market right now, it's give or take, Cisco is about 50% of the market. HPE, Juniper is about another 10% to 15%. As I kind of mentioned earlier, you're around the 3.5% mark. So you've talked about 2 growth dynamics or 2 competitive displacement dynamics. One is Cisco through this end of refresh, but also HPE and through the kind of integration pains with Juniper.

Now if I just look at the scale of the market share of both of them, is there a difference in how much you're winning against Cisco versus HPE? Or is it still kind of broad-based or winning against both?

I think it's fairly evened. I think the dynamic of HP and Juniper will continue to play out over time. they've got to converge the road maps. They've got to figure -- they still have 2 independent sales organizations that they're starting to integrate together, but they're still going out with 2 different products. And people are not -- like they're smart and they're asking which product is going to survive. And if you can't give them a straight answer, I think that, that creates fear, uncertainty and doubt around what I'm buying for the next 5 years? And is that product going to still be there?

So I think that's going to kind of shape itself over time, they're doing really well, selling servers and whatnot, but we feel like we're starting to gain some share on the enterprise side because of that fear, uncertainty and doubt. And they've got $1 billion, I think their number to take out. And so a lot of employees are being let go as a result of that. So that's just naturally going to create challenges.

Your account manager leaves, you no longer have a tie to the company like you used to, that tends to help us win those customers. On the Cisco side, some interesting dynamics here. Obviously, they've announced this refresh that they're forcing customers through that refresh with the end of life of certain hardware. They also just change their partner program to point system.

That point system is enabling their partners to make money, but only if they sell all things Cisco. I think there's a lot of partners out there that are disenfranchised when they sell Palo Alto and they sell side-by-side with Cisco, but they're not going to make the points that they used to and the rebates that they used to if they don't sell everything.

And so we're hearing from partners as well that are interested in being authorized resellers of Extreme because they want to be able to not have all their eggs in one basket because they're not sure what the rebate structure is going to look like in the future and obviously, it's dollars and cents is what matters to resellers.

Right. Also if I look at the pricing environment, I think Cisco has now made 3 -- 4 price increases?

4, 4 is what we've heard.

Yes. And you are at 2, right? And I think each one was about mid-single digits. Correct me if I'm wrong, but...

Yes, a couple of things there. One, I think this is actually -- so a, 4x versus 2x, we tend to sit 10% to 15% below Cisco. That might even be more wider now with the 4 versus the 2. I think the one thing that we also are doing going to market right now is that we're giving more certainty around the pricing that we're giving. So our quotes right now, if a reseller deal [ reg ] is with us, we will give them almost a 6-month price guarantee through November 1.

We just announced that about 3, 4 weeks ago. And so our resellers love that because now it's price certainty, especially as we kind of cross over years with a lot of governmental agencies who are starting their fiscal '27 themselves in July.

They're looking for quotes now for the next year. And all of a sudden, if you can't rely on a quote that's only 2 weeks old with Cisco and that the price could increase, they could cancel that order before it ships and give you a new price increase, that creates a lot of fear, uncertainty and doubt around what are you going to buy.

And so we're trying to make ourselves, again, we try and make ourselves the easier partner to work with -- a technology partner. So we're giving them a little more price certainty and resellers, margin certainty on their end is one.

But how do you think about that in terms of you said you're widening the gap between your list price versus Cisco's list price, but the opportunity set that because Cisco is such a big piece of the market that you could also in tandem raise your prices.

Yes. I mean we can, and that's -- there's obviously a delicate balance. We want to be very sensitive to price and customer elasticity there. And we want our customers to be understanding that we are trying to pass on real cost to them without price gouging. At the end of the day, we want these customers to be happy with the technology that they're buying and realize that there's real value there behind it.

And again, with the technology, the software, in particular, we're trying to make them more productive than they were before, managing their network. And even one research company just came out and said that we are about 32% cheaper than Cisco over a total cost of ownership over a 5-year period.

So it's just not the upfront, and it's not just the licensing simplicity that we have and the cost of the licensing, but it's also like the things like the PoE, just the energy usage of that equipment over time, we save you costs. So that's what we're trying to differentiate.

And how do you think about it from a profitability perspective? Two quarters ago, you did see some margin pressure from the memory constraints, but you came out last quarter and said you can protect the 62% gross margin level, 15% operating margin level.

That's right.

Do you think that pricing stays even over the next 1 to 2 years as memory eventually starts easing? And does that help both growth and profitability?

It's a good question. Time will tell whether the cost of memory starts to come down. I don't think that we are going to find ourselves in a situation where memory constraints are lifted and that there's just not enough new memory suppliers coming online in the next 12 months. We just -- no one sees it. And so while we've secured that and we've got even some customers that are delivering DDR4 memory to us, and we've got other ways of being able to get that DDR4 memory into 2028.

Wi-Fi 8 is going to go in DDR5, and that's about 18 to 24 months out. So that's where I think we're all going to see as Wi-Fi 8 being at the DDR5 side. I think at the end of the day, for now, we feel good about where we are from a supply chain perspective in sourcing the memory. We've bought the memory for 2027. That is for sure and we feel good about being able to deliver that.

Right.

And then margins like -- the margins, like you said, 62% at the low end, we said at the low end. We think as we continue to drive more platform on adoption, revenue mix will continue to increase and that we get margin improvement that way as well.

Maybe to turn to the AI angle a little bit. I think AI presents an opportunity for you from 2 sides. One, Cisco talked about, as we move more towards inference, there's going to be a kind of, higher sustained traffic pattern on the network that facilitates some need for this camp infrastructure upgrade. I think you guys have a little bit of a different tune when you think of that opportunity?

Well, there's a few things. I mean, a, I do think network traffic is going to increase over time. I would agree with Cisco on that. I think two, but it's not going to all be in the hyperscaler environments. I think there's going to be a hybrid. I think that customers are going to come back to building out their own data centers. When you think about customers, they have different types of data. If you're a company in clinical trials, that clinical trial data is really, really important to you, you may not upload that into a hyperscaler environment.

If you've got HIPAA data, that may not go outside your 4 walls, either. And so the sensitivity and then, of course, in Europe, you've got data sovereignty and that's a big issue there. I mean at the end of the day, we're seeing enterprise customers starting to think about more to have a hybrid of using the hyperscale environments, but also that critical data I keep and I put in my own data center. And again, we can kind of go from the data center, which we do today, about 15%, 20% of our total revenue, it comes through data centers all the way through to the core campus, all the way to the edge.

And so kind of extension all the way through with our fabric technology, with our AI, you can get full visibility of your network all the way from end to end. That's what we think is going to really help us and be able to drive more volume.

Right. But if I think about the data center opportunity, historically, at least, you've been a little bit more tied to the service provider use case, right? I think you called out partnerships with Verizon and Ericsson, as an example, right? You had your user conference a couple of weeks ago, which I was at and you debuted or you discussed an enterprise data center switch. I think it was 800-gig.

400- and 800-gig.

So can you talk about that opportunity? Why enter the market now? Does that -- are you limited to just the enterprise network? Or do you think that you can grow into, I don't know, the hyperscaler or maybe the Tier 2 clouds, the neoclouds of the world?

I would say that our focus is on enterprise. I think it's always been. I think that's the first and foremost because our reseller network has got relationships with these customers, and we're a trusted adviser to those customers. So it's much, much more natural for me to have -- from my resellers and my salespeople or my sales engineers to have a conversation with an existing customer that knows my technology, and they're going to go from the core all the way out to their data center. That's very, very natural.

Could a 400-gig or 800-gig switch go into a different data center? Maybe. But that's just not our DNA right now as a company. And so I wouldn't want to overarch just say, yes, we could easily. The reality is we just don't have those relationships at this point. Can we create some of those relationships? Sure. It'd probably be through a reseller relationship, not necessarily direct.

Got it. You started talking about it earlier, but I want to go into the Agent ONE platform that you announced. If you could first go over what it does, I know you have 2 different forms with 2 different pricing models. So if you can just discuss the differences between the two.

Okay. Okay. And maybe we'll back up a little bit to Platform ONE like what it was when we first went out, right? So we introduced Platform ONE and the Agentic model was really, what I would say, a query model. So our first generation of Platform ONE that we announced last July was you asked a question just like if you would ChatGPT or Claude, you ask it a question and it will give you an answer and you can query and you could constantly query and you're trying to get those answers back and you're trying to basically pull information out of the system that way.

The new generation of Agent ONE, which we're calling basically more agent actions, there was a coworker mode and then there's an operator mode. The coworker mode, think about it as a virtual desktop IT agent that's working for you. And so you're able to work with this agent and basically have it do tasks on your behalf. Now you're not just doing queries, now you're actually doing actions, agent actions that are helping you protect your network.

So that is a light year ahead of where everybody else is from a networking perspective right now. And even Cisco has kind of announced what they are doing from a AI perspective like a day or 2 ago. But the reality is that's akin to our first generation, and we're already leapfrogging what they have with our second generation, which is coming live. We just showed it on stage live demo. We have not seen any live demos whatsoever what Cisco has.

What we showed it live on stage as a demo at our user conference, and we're going GA with that. It's in limited availability with certain customers today and we'll go live with that in July. That's exciting.

So then there's an operator mode, which we talked about as well, which is our agents working with other agents, like an agent exchange and so creating like a ServiceNow agent, working with our agents and being able to manage tickets simultaneously with our networking agents to be able to solve issues.

Right. And the pricing mechanism growth?

Yes. So right now, Platform ONE tends to be about 15% higher than if you bought our old, what we call Extreme CloudIQ, ironically IQ is what Cisco is calling theirs now and then we also had support contracts separately. We've bundled those together and then we added our AI on top of that, and that's what Platform ONE was.

Then you've got Agent ONE, which is going to be slightly higher than that because what we're going to do is we're going to monetize the agent actions. So within your Platform ONE subscription, you're going to have, what I'd call, a reasonable amount of agent actions that you can use that's embedded within and then you can buy more blocks of the agent actions should you choose to go and do more right? And that's the monetization there.

Is this an area that needs customer education, meaning, is this more about future-proofing the portfolio now for this world of Agentic network operations? Or do customers kind of understand the problem, understand the benefit from adopting agents for their networks?

Yes. Well, it will take some time, naturally, like anything. But I think this is not a use case where a company is going to spend their time trying to use Claude or Claude code and try and solve this issue on their own. I'm going to market to solve the issue for them as a product feature and not necessarily force them to go do it themselves.

And the benefits they're going to get out of it is they get a better view of their network. They get a better proactive view of what's happening within their network and naturally there are natural security ramifications of that if you've got over-the-top security today on top of your network, well, maybe you don't need as much of that security in the future.

And so there is -- at least for the smaller businesses, they can actually manage very well with what we're doing from an agentic AI perspective versus buying some software on top. It's not going to get rid of checkpoint, but it's going to be just better visibility of what's happening in your network.

Yes. And are you competing in the space more against the vertical players or the horizontal players. Meaning are you going to see more companies like Cisco and HP come out with their own agent platforms? Or will you see AI native companies in the space?

No, I think that we'll see the, I think, slower than us because we seem to be more innovative, more nimble. I think that Cisco and HP, Juniper will come out with their own Agentic AI. It's just going to be 18, 24 months behind us. We were already doing this if we -- when we launched last July, we had backed up from that 18 months prior to that to build that agentic layer that we had.

Yes. So we only have a few minutes left here. If there's any questions in the room? Tal?

Technology is one aspect. What about go-to-market. AI change your go-to-market at all for the same [indiscernible]?

We're using AI actually to help our go-to-market. So a few examples, RFPs. We have put all of the historical RFP responses into a container into a RAG model. And then we are -- naturally any new RFP that comes through, we are basically putting Claude code against that to be able to kind of have 90% of their RFP response ready and going and then we're filling in the rest. That's one thing that we're doing.

We are using it also for empowering our resellers differences between Cisco and Extreme, enabling them from an AI perspective to be able to fill in those queries, ask those queries and be able to be very responsive to our customers, obviously, sell sheets and things like that, being able to generate those as well.

So I think we're embracing it from a sales ops perspective and being able to -- not only our own sellers but also our partner resellers to be able to make them more efficient and more productive for sure.

Have you changed -- so you're running very fast on the technology side. Talk about your go-to-market in general, talk about AI, what have you done in the last few years to broaden the market reach, customer reach. What are the efforts -- what are the part of the efforts that you have done on go-to-market?

One of the things we did, Tal, is that we looked at our reseller universe and realize that we have a great, very sticky, very loyal reseller base. But from a growth perspective, many of those resellers, owner-owned, they're very happy with us, but growth was not necessarily top of mind. They have $30 million a year or $50 million a year, and they're very happy with the size of where they were operating.

What we realize is that we need to move up market and we needed to move upmarket with larger resellers, more reach, more ability to kind of generate more demand for us.

And so that's -- we've been on a crusade, if you will, for the last 18, 24 months, we actually hired the head of partnerships from Juniper. We actually hired the Head of European sales from Juniper. These were 2 wonderful adds to our management team. They have obviously very good relationships with their resellers and also with sellers within Juniper as well who are maybe out of job.

And so we're getting just more and more, I'll call it, halo effect from a go-to-market perspective based on some of those things that we've done. And so things like NTT East, things -- like companies like Softcat or Computacenter or WWT or CDW, we're building much stronger relationships with these larger resellers that have a lot more volumes.

Last question is about the portfolio. So we've seen -- if I take a 5-year on a quarterly. I've seen switching companies expanding the portfolio into adjacent areas. So if you're selling into SD-WAN, anything to Wi-Fi before, the view is to provide a much wider portfolio, where are you in terms of your vision, your own vision of complete, are you where you want to be? Or do you think you need to grow horizontally into adjacent markets in order to provide a wider portfolio over?

Yes. It's a good question. I would say from a product perspective, we've got a niche and that niche is just enterprise and enterprise networking. We're focusing on the Wi-Fi 7 portfolio expansion. We've now created a ruggedized switch. So that's kind of an interesting one that people were asking for a while. So now we have that. Now we've got 400-gig to 800-gig coming online. I do feel like we are expanding the portfolio more than we've done in the past. The reality is, could we do -- you could always do more, but it's really doing it all, doing it well is an important element for us. And we believe that we have very sticky customers.

And the reason why we have such loyal sticky customers because we deliver for them, and we do it with high quality. And we don't want to basically take away from that by expanding too much adjacently and then basically not doing the things that we need to do right.

I think Tal might have looked over my question list because he addressed some of the things that I was going to get to you. But unfortunately, we're out of time. So Kevin, we'll bring you back next year to round it out. Thank you so much.

Thank you very much, Tomer.

Welcome, everyone. Thank you for your patience. For the next fireside chat, we have Extreme Networks, and we have the pleasure of hosting Ed Meyercord, who's the CEO of Extreme. Ed, thank you for being here, and thank you to the audience as well.

Ed, a Lot has changed since we spoke last time at this conference. You've had 5 straight quarters of double-digit growth. Platform ONE has fully launched. Agent ONE has been unveiled as well. I mean just maybe outline for investors where you are in terms of the transformation or the evolution of the company and how much more to go in terms of transforming the platform that you're trying to build?

Yes. And Samik, thank you for having us. Full schedule here. We appreciate that. We -- just 2 weeks ago, we had a user conference in Orlando. We have customers. We also have our partners. We had some industry analysts there. And we announced our second-generation AI platform. Keep in mind, we came out with the first platform in July. So I guess I say that because it's moving fast.

And what we announced is the evolution of our platform to include Agent ONE which is -- highlights the Agentic platform and the capabilities that it has as a coworker to an IT team in networking. And then we also announced this operator mode, which was an agent Exchange, which got a lot of attention and a lot of attention for enterprise customers because effectively, what it does is it creates a platform and it allows our customers to innovate with us.

So for example, I had Jim Clendenen on stage with me. He's the CIO of Kroger. This is a pretty big IT organization, 6,000 people and 2,800 stores, 36% of what they sell, they manufacture. So people don't realize a big manufacturing operation and a big supply chain of distribution. Well, they chose Extreme. Part of what we'll talk about is Extreme moving upmarket with these kinds of customers. It's one of the most complex networks on the planet and in the United States. But they do a lot of their own development.

So when we build our networking platforms, they have a lot of workflows that they want to build on their own that integrate with our network. And the excitement with Kroger and the excitement with Korean Airlines and the excitement with a lot of customers who are there is the fact that we're building a platform that allows them to build their tools with us.

And so I would say that's really the big part of the evolution for Extreme is not only building the capabilities to have a coworker that can do things like troubleshooting and firmware upgrades and I would say, mundane tasks as well as complicated tasks that networking teams can offload. And then they can do this always under their control in a very safe environment so that they have complete visibility to what's going on with agents and they have a complete audit trail and they can move at their own pace.

But then the idea on top of that, that our partner community and the channel as well as our customers that are a little more advanced in terms of their IT teams can codevelop with us with this agent Exchange was a big deal. And I think that's the evolution.

This is something that we'll GA in the October time frame. Our coworker with Agent ONE will be released in July, so we're not too far away. And we're rapidly moving customers on to Platform ONE. A year ago, at our user conference, there was a lot of skepticism about AI. There was a lot of doubt about AI and a lot of questions. And it was almost like people were questioning whether AI would come in and have an impact in networking.

And one year later, there was no questions about whether, there was no questions about if. It was a question about how quickly we're moving, how quickly can we deploy use cases. All of our customers are at a different point in their journey. But I think that's why people like to choose Extreme right now because we'll meet you wherever you are in the journey.

We have the best tools, and we can make it easy for you to take this to go on the AI journey and to explore new use cases that have real ROI. So that's kind of -- that's in terms of our evolution, we've made a lot of progress. It's moving very quickly. And where it's going is into a place where we're sort of co-developing with our customers and with our partners as opposed to just a license tethered to a networking device as part of network management.

So maybe just taking a step back, like in the past, networking was talked about more as a -- you go to a customer, they want to refresh the network, you go...

Samik, you're trying to be polite...

And clearly, the conversation looks like it's shifted. When -- what are you seeing in terms of the refresh activities attached to the AI conversation? Like you're obviously developing platforms, letting your customer co-innovate with you. But what's the underlying refresh activity associated with that move to the next-generation platform?

Yes. So I'll hit on a couple of points as it relates to the activity and networking overall in the industry. First of all, we have a fairly large competitor that acts as a good proxy and industry bellwether for us in Cisco. And they've announced a multiyear $43 billion network refresh is their catalyst platform goes end of life and customers have to upgrade their networks.

A lot of customers are just going to go with what they've had or where they have relationships and a lot of customers are going to take the opportunity to look and see what's in the industry and potentially evaluate other competitors as they consider this kind of investment. And so at a high level, that's very helpful to us. So that creates opportunities we might not have had otherwise and will give us more at bats.

The other competitors consolidated and became one and have created a lot of risk in terms of the industry. There's a lot of uncertainty and risk in terms of customers and partners wanting to invest. I just -- there's a lot of unknowns, I'll put it that way. And so this is creating a lot of opportunities for us.

As it relates to new workloads happening on the enterprise campus in terms of agent traffic, I mean people are talking about this. The reasoning models and the frontier models all exist in hyperscale cloud. That's going to continue. But all the agent traffic is going to happen on the enterprise. And so we do think it's hard to quantify what that's going to be. I don't think we're there yet in terms of watching or seeing enterprise customers pull the trigger and making that investment today, but we all know it's coming.

I would say the enterprise customers today are actively and aggressively exploring use cases for AI -- Agentic AI. And I don't think that they have an understanding today exactly what that means for the enterprise network and enterprise traffic. But we know the traffic is going one way. We just don't know how much in one direction.

Yes. Got it. No, that's helpful and that's exactly where it's going is...

Actually, yes -- it should -- the pendulum is fully on the hyperscale cloud environment for -- in our industry and networking, but it will swing back to investment in the enterprise.

Do you see that, particularly as you look through your lens into enterprise customers who have both campus networks and enterprise data centers as well, do you see that changing the refresh pace on both campus and data centers? Or do you think one follows the other?

I think it will happen coincidentally. I don't think it's one versus the other. I mean it would be logical that it would happen in the data center first, and then you would have pressure on the campus network. Yes.

You've outlined growth, I think, targets of 10% revenue CAGR through fiscal '29. When you look at the pipeline today, the market opportunities that you're targeting, investors seem to be under appreciating the durability of this growth. They agree that their growth is the near term. They don't really think it's as long a cycle probably in some cases. Like what gives you that visibility that you can forecast demand to fiscal '29 and there's enough pipeline to support it or visibility to support it until fiscal '29?

Yes. It's a great question. And it really has to do with the evolution of Extreme as we move upmarket and the kinds of customers that we're winning. An example is the Government of Japan, massive project, the biggest project that we've ever had in Asia Pacific. So starting off with $40 million and then by the time it's all said and done, probably closer to $80 million in network investment. And this is just a couple of the government agencies. So it will continue to grow in terms of bookings.

But the point there is that we came in as a fourth entrant into the conversation and then became a finalist with a large company that we've been talking about. And then we won. We won on a variety of fronts, but it has to do with our technology, a unique fabric technology that we have for the campus and the campus enterprise and then a unique use of that fabric technology across the wide area network.

And then our flexible cloud capabilities in terms of providing a private cloud instance where data sovereignty was very important to the Japanese government. And the security benefits of our fabric and being able to segment networks, again, a capability that our larger competitors don't have. So when we actually got in and we -- where the rubber meets the road is when you put your technology to work and we put our technology to work, we win, we win and heads up competition.

And so we're moving upmarket in a meaningful way. Initially, our first bid in Japan, we lost. We got outflanked because it was Cisco worked the channel in a way that sort of boxed us out. We were a lot smarter than next go around and for the bigger opportunity. And it's one thing to win a customer like that, which success begets success with that kind of reference customer. It's another thing to get the channel. So NTT EAST now has become a partner of Extreme, okay? That's a really important partner to have in Japan as well as KDDI as well as Net One Systems.

Historically, we struggled to break into some of these larger ecosystem partners that are really important because they deploy the technology and they work with the customers. So I'd say the bigger win was not necessarily the government itself, although that is -- the end user is very important. But I would say it's the partners who are now bringing other opportunities to Extreme of that size and scale. And they know Extreme can execute on these very large important projects.

I mentioned Kroger, the same thing happened. I mentioned Korean Airlines that was also up on stage. The same thing has happened there. We've had some really large wins in the U.K. where we've attracted much larger partners. The same is true here in the U.S. We're very far down the road on potentially one of our largest customers ever, a very large government contractor, same situation where with that kind of win, it could open up a massive channel opportunity for us.

So these are long-term projects. These are not -- a networking project is something that's going to take several years. In the case of Korean Airlines, their network transformation project is a 9-year transformation. So I think with the success we're having with these customers, how it spills into the channel and the multiplier effect of the channel, that this is what is giving us confidence.

In terms of the competitive wins you have, clearly, your platform is resonating. So that's one part of it. But let me -- maybe help me think about what are the -- how are the other drivers helping, one being your customers -- your competitors clearly are making changes -- are in somewhat sort of change mode, right, like Cisco is tweaking their Meraki portfolio, HP Juniper undergoing the integration. And then the other thing you've talked about is the memory supply advantage that you have. You've talked about having visibility into supply. How are those 2 drivers playing out with customers? And how do you sort of delineate between how much the platform is resonating versus the other two?

Yes. Well, I mean, hats off to the team at Extreme, we take an existential threat to our business and flipped it into a positive, and now it's going to generate demand for the company. So really proud of the team for everything that has been done there. We're -- we can be very nimble. I'd say we have 20 different initiatives. I'd shout out to Broadcom and the executive leadership of Broadcom, they consider Extreme to be a strategic partner.

So when the memory shortage cropped up, they were very helpful to our teams and then to me personally in establishing relationships. We bought exclusively from Micron. And I got introduced to the CEO of Micron and then his executive leadership team. And we've got a very good relationship. Micron did not know Extreme was a customer.

So we buy through our design manufacturers in Taiwan. They buy from distribution. Distribution, there's no allocation for Extreme, they're just buying from the ODMs. Micron is just selling into the distribution channel with no knowledge of where the product ends.

So when I was talking to senior leadership at Micron, they're like, can you prove to me that you're a customer and you're not just trading chips, which is kind of interesting. We've reorganized that relationship. We have an agreement with Avnet, a large distribution in the U.S. We're buying direct. We have an allocation from Micron through Avnet in the United States, and then we'll supply. That's the same way that we buy Broadcom.

We've done a lot of other things. We found other vendors, again, through Broadcom. Thank you. And they're a very strategic partner for Broadcom and Broadcom said, put these guys in front of the list and take care of them. So they're going to come online at the end of '27. That will be another important source of supply.

Samsung runs on Extreme. Their global headquarters runs on Extreme, and we have excellent relationships with them. Our country manager, this is a unique one. It worked the executive leadership there, and Broadcom came in and qualified Samsung chips. And so we were able to get very low price Samsung chips that are approved for our platforms. So that was a big move.

The other one is just kind of people being crafty. I think this is what we can do at Extreme that our competitors aren't doing because of their size or whatever. But again, we worked and we found that there were chips destined for other industrial segments like automotive, where their memory chips actually would work with our systems, and we got Broadcom to qualify the chips.

And a lot of these chips were sort of sitting in inventory because demand was not what they expected, so they had a lot of extra chips. So we were able to move very nimbly and buy up a bunch of chips that were destined for another industry. So these are just -- there's about 10 other things that we're doing, but we solve for supply through calendar '27. And we have new sources of supply coming in the market, and we have new allocations coming from Micron. So we don't have an issue. So we're confident in meeting demand.

And as I said before, this could shift into an opportunity for us as competitors stretch out lead times. That's where we'll see it. We'll see lead times get stretched. And if people have important projects that they need to move on, then it could create an opportunity. We haven't predicted this. We haven't put this in our numbers, but it could create an opportunity for us.

Wi-Fi 7, that's ramping fast, nearly half of your wireless booking dollars coming from Wi-Fi 7 now. Can you just talk about what's driving enterprises to adopt Wi-Fi 7 this quickly? And when you think about overall the portfolio that you have today, is Wi-Fi 7 a trigger for customers to, again, go through their network refreshes a lot sooner than you expected?

I don't know that it's Wi-Fi 7 that will cause people to upgrade their networks sooner than expected. But just to reiterate, networking is mission-critical. Every enterprise on the planet needs to have a high-quality, high-performance, secure network that's up to date. And then to support all the devices that are on networks, the bandwidth continues to grow. Applications continue to flourish in terms of the numbers. So there is a continuous pressure to upgrade.

Extreme was the first company with -- to come out with Wi-Fi 7. So we were actually in '23, at the very end of -- in December '23, we came out with Wi-Fi 7. And there are meaningful benefits. With Wi-Fi 7, the industry realized that you could actually run mission-critical applications across Wi-Fi 7. I think it's the first time that people felt confident with Wi-Fi and its ability to run mission-critical. And that was well documented, well supported. I don't know if you remember, there was a time where people were looking at private cellular as being kind of more reliable and we can count on that for industrial applications. Wi-Fi 7 obviated that discussion.

And so now I think people have come to accept that with this generation of Wi-Fi, you can run mission-critical. So I think that's -- that will be part of this. And then -- we just signed up University of Florida, The Swamp, that stadium. It will be the first college stadium with Wi-Fi 7. It's a function of just sort of the quality of connectivity and what you're running inside your environment. But it's -- Wi-Fi 7 is here is 50%, and I think this will definitely be the year of Wi-Fi 7. And when Cisco comes out and says it, it has an impact.

Noted. Maybe let's move to the recurring side of the business. Recurring revenue, I think, is now 36% of the total revenue in the latest quarter. How does the business look in terms of recurring revenue mix a few years from now, let's take like 3 years from now, how are you envisioning the mix looks for the company?

Yes. Well, yes, our subscription revenue driven by adoption of Platform ONE was up 29% year-over-year. There's an offset on the services side of the business. We're combining service and subscription and Platform ONE. But you'll see that kick into gear in our fiscal '27, especially in '28, the dynamics. We are combining service and subscription together from a financial modeling benefit. There's a lot of benefits to the attach rate change on the services side as well as the renewal rate and the fact that service plus subscription plus 10% is how we're -- people are adopting Platform ONE. So there's a benefit.

So 36% is going to go over 40% over the next few years just naturally because of the high growth rate of Platform ONE subscriptions. And everyone is going to be moving on to Platform ONE. We -- our product revenue growth has been double digit for 8 consecutive quarters, and we expect that to continue. What could provide upside to that subscription recurring number is that agent Exchange that I mentioned before. We haven't modeled that yet, and we haven't included that into our outlook.

So Platform ONE, where does adoption stand today? What are the attach rates? And how should we think about how much of the installed base is migrating already versus how much is left to migrate?

Yes. So we came out with Platform ONE early in July. And as I mentioned, we just came out with the second generation. We have several thousand customers who have moved on to Platform ONE. Platform ONE is -- will be fully featured so that I'd say 80% of our customers can live in Platform ONE within a few months. So there's still -- we combine 9 systems into 1. And so there's still features and capabilities that are important to customers that are being built in. So as we add them, literally in real time with the May release and the June release, there's going to be a significant -- we're going to cover a significant number of customers who can move and live in Platform ONE.

The way we went about this is to create a license that allowed customers to live in the old world and then to move into the new world at their own speed. And so that's been very popular with our customers. And we expect the move to accelerate. By the end of next year, I think it's fair to say 70% of our customers, we would expect to be fully in Platform ONE.

And then when you think about customers adopting this sort of next-generation Platform ONE or Platform ONE 2.0 that you've launched, when you look on a like-for-like basis, are those customers -- are you able to derive an ASP uplift from those customers? Or is it more about focusing on expanding the deal sizes with those customers, like you mentioned, like you're moving upscale. Is it more focused on just the overall deployments increasing? Or are you able to get an ASP uplift as well on a like-for-like basis?

I'd say it's a combination of both. But it's -- if you take the service revenue and you combine it with the subscription revenue, it's about a 10% to 15% uplift on both.

And maybe last one for you. I mean we've talked about all the tailwinds that you have. But if you sort of now start to think about the next 3 to 5 years, where are the sort of areas that you feel like you have to focus a lot more on? What are the execution risks you would highlight that you need to monitor? Or you want to be more focused about making sure that if the demand is strong, you execute to those opportunities?

Yes. I mean the challenge for us is moving upmarket in the channel and getting the attention. Cisco is a very strong competitor with their channel relationships is what they're known for, excellent marketing. If you look on paper -- if you look at what we have with Platform ONE, a key differentiator is that we're actually demonstrating the technology, and we're on our second generation.

People ask how we compare with the larger player. And we haven't seen a live version yet. So there's nothing that's GA that's out there, but they have terrific marketing. And so they tell a great story. They have a lot of capital. They buy a lot of technology, and they tell a great story. So I think we -- for Extreme, it's getting the brand recognition, getting the app bats and moving upmarket, particularly with larger channel partners. That's a challenge.

Great. I'll wrap it up there. Thank you. Thanks for coming to the conference. Thank you to the audience as well.

Yes. Thank you.

Hello, everyone. Thank you for joining us, and welcome to the Extreme Networks Q3 Fiscal Year ' 26 Financial Results. I will now hand the call over to Stan Kovler, Senior Vice President, Finance and Corporate Development. Please go ahead.

Thank you. Good morning, everyone, and welcome to Extreme Networks' Third Quarter Fiscal Year 2026 Earnings Conference Call. I'm Stan Kovler, Senior Vice President of Finance and Corporate Development. And with me today are Extreme Networks' President and CEO, Ed Meyercord; and Executive Vice President and CFO, Kevin Rhodes.

We just distributed a press release and filed an 8-K detailing Extreme Networks' financial results for the third quarter of 2026 and a copy of our press release, which includes our GAAP to non-GAAP reconciliations and our earnings presentation is available in the IR section at extremenetworks.com. Today's call and Q&A may include certain forward-looking statements based on current expectations about Extreme's future financial and operational results, growth expectations, new product introductions, supply chain dynamics and management strategies.

All financial disclosures made on this call will be on a non-GAAP basis, unless stated otherwise. We caution you not to put undue reliance on these forward-looking statements as they involve risks and uncertainties that can cause actual results to differ from those anticipated by these statements. These risks are described in our risk factors in our 10-K and 10-Q filings. Any forward-looking statements made on this call reflect our analysis as of today, and we have no plans to update them, except as required by law. Following our prepared remarks, we will take questions.

And now I will turn the call over to Extreme's President and CEO, Ed Meyercord.

Ed, you may be on mute.

[Operator Instructions]

Okay. Sorry about that. Thank you all for joining us this morning, and thank you, Stan. The third quarter marks our fifth consecutive quarter of double-digit revenue growth. Our results reinforce our momentum as the fastest-growing enterprise networking player outpacing market leaders.

Our performance reflects strong sales execution and differentiated technology, including our enterprise fabric and AI-powered platform, which are driving share gains across key markets. We've also resolved memory supply needs for both the near and long term, which will allow us to meet customer demand and stabilize gross margins. And in the quarter, we returned $50 million to shareholders through share repurchases. Revenue in the quarter beat the high end of our guidance at $317 million, an improvement of 11% year-over-year.

Product revenue increased 12% year-over-year, representing 8 quarters of growth. Cloud subscription momentum lifted SaaS ARR to $236 million, an increase of 29% year-over-year. This performance underscores the strength of our Platform ONE strategy and the durability of our recurring revenue model. Extreme has secured our forward-looking supply to support demand through fiscal '27 and beyond through a combination of multi-sourcing, alternative component qualification, engineering redesign, component inventory investments and strategic supplier partnerships.

Moving forward, this gives us greater fulfillment certainty and margin visibility. Enterprise networking demand remains strong as high-quality secure networks are mission-critical to scaling operations and achieving business objectives. This demand supports targeted price increases to offset supply costs while maintaining a price advantage relative to Cisco.

The combination of disciplined pricing actions and cost management allowed us to improve gross margins to 62.3%, up quarter-over-quarter, exceeding guidance. A recent independent study found that enterprise customers can experience more than 30% total cost of ownership savings with Extreme compared to leading competitors. Additionally, our new partner program delivers 20% higher profitability versus our largest competitor.

This, combined with Cisco's end-of-life refresh cycle and the HP Juniper integration complexity is creating a significant opportunity for Extreme to take share. This is reflected in double-digit growth where 44 customers spent over $1 million with Extreme this quarter. Our products and solutions stand out in the market. Our fabric continues to be a significant differentiator. Customers highlight its simplicity and automation, which translate into reduced deployment time, improved reliability and lower operational complexity. It also strengthens security by shrinking the attack surface and containing threats with built-in segmentation that limits lateral movement.

The feedback we hear most often is, "It's so easy." and our favorite customer quote is, "What took us 6 hours with Cisco took only 6 minutes with Extreme". We're the only vendor that offers this fabric. We're gaining traction and adoption across verticals with Extreme Platform ONE. Its agentic core and ability to provide customers with full network visibility is a significant competitive advantage. Customers are using Platform ONE to streamline operations, accelerate root cause analysis and automate routine tasks, resulting in faster issue resolution, reduced downtime and more efficient use of IT resources across increasingly complex environments.

WiFi 7 continues to be a key driver of wireless network refresh opportunities. This is driven by the advanced design of our access points, which maximizes throughput, minimizes latency and efficiently utilizes spectrum in dense environments. Our APs are built to handle the increasing demands of complex enterprise applications, AI-driven workloads and real-time traffic, delivering consistent high-performance connectivity even in the most challenging conditions.

And finally, no one matches Extreme's cloud choice, public, private or on-prem with no trade-offs in performance or control. Our platform's built-in compliance and flexibility let customers meet strict data security and regulatory requirements without compromise, driving strong public sector interest. The strength of our portfolio is showing up clearly in our results and customer wins. For example, Extreme played a role in 2 marquee events this quarter. During the recent Artemis 2 Lunar spaceflight launch from Kennedy Space Center, our networking solutions supported mission-critical systems at the launch control operations. We're very proud to be a part of this historic and critical mission.

We also supported Lucas Oil Stadium during the NCAA Men's Final 4, where our team rapidly modernized connectivity, removing legacy access points and deploying temporary infrastructure to make the stadium game ready. Now we're upgrading and modernizing the stadium to WiFi 7 for the upcoming Indianapolis cold season. In addition, we had several new Extreme platform on wins in the quarter with customers, including Asiana Airlines, which is merging with Korean Air, Atlantic Food Distributors, Bridgeport Public Schools, City of Prescott, Arizona, Johnstone Supply, Nissan Medical Technologies, and the University of Buckingham.

These customers are turning our AI-powered automation to reduce manual tasks, streamline operations and minimize network complexity, ultimately enabling faster execution and lower costs. We're seeing strong momentum with our MSP program with more than 70 active partners. MSP billings grew 26% quarter-over-quarter and continued a solid upward trajectory. MSPs value Platform ONE for its ability to manage multiple customer networks, licenses and incidents. And our unique consumption billing and portable licensing model make it easy for them to scale their businesses.

We exited the quarter with over $200 million in annualized EBITDA, healthy net cash and a full year guidance that reflects continued growth. And we have resolved supply chain concerns, which could translate into increased market opportunity. The setup for Q4 means we're set to grow double digits for fiscal '26, and we're confident in our ability to outpace the market and continue to gain share in fiscal '27.

Now let me turn the call over to Kevin to discuss financial results and guidance.

Thanks, Ed. We're really pleased with the third quarter performance. It was another strong quarter across several key areas: revenue growth, SaaS ARR growth, deal volume, gross margin improvement, earnings per share and solidifying our supply chain for at least the next fiscal year.

Let me walk you through what drove the strong results this quarter. Total revenue of $317 million grew 11% year-over-year and exceeded the high end of our guidance range. We achieved 5 sequential quarters of growth, a double-digit growth year-over-year and 8 quarters of sequential product revenue growth. The growth in revenue is being driven by larger deals over $1 million, higher overall volumes of deals and improved average selling prices due in part to selective price increases.

We achieved strong bookings across all regions, which reflects strong execution as well. On the bottom line, we continue to achieve strong operating leverage. Earnings per share of $0.26 exceeded the high end of our guidance range and grew 24% year-over-year, up from $0.21 in the prior year quarter.

A few highlights to consider. We saw a meaningful acceleration in our SaaS ARR to $236 million, which was up 29% year-over-year due to strong Platform ONE attach to new product sales and upsells within our existing customer base. We have several new AI and product features that are being announced at our upcoming Connect conference next week, which we expect to continue to drive Platform ONE adoption.

Subscription and support recurring revenue of $114 million in the quarter grew 13% year-over-year and remained consistent at 36% of revenue. SaaS deferred revenue climbed to $342 million, a 19% year-over-year increase. This strong and growing base of deferred revenue signifies the shift to a more favorable mix of predictable high-margin recurring revenue. WiFi 7 grew meaningfully in its contribution to wireless product revenue, representing 37% of total wireless unit shipments in the quarter, up from 27% last quarter.

In terms of bookings dollars, nearly half of wireless bookings came from WiFi 7 this quarter. This favorable mix shift continues to drive higher selling prices and gross margin. Geographically, we had very strong performance in EMEA and APAC, and we're confident in building on our success in those regions due to our favorable competitive positioning and differentiated solutions.

Performance in Americas was also solid, especially considering the elevated revenue benchmark set in the prior year, and our bookings growth during the third quarter provides confidence in our outlook. Across verticals, we saw particular strength, booking strength that is in education, health care, manufacturing and sports and entertainment during the quarter.

Several other factors drove revenue growth during the third quarter. The first factor was our momentum in winning larger and more strategic customer engagements, demonstrated by 44 customers spending over $1 million with Extreme, higher than any point in the last 2 years. Second, we had recent competitive wins and strong funnel conversion. We're seeing improved win rates with our differentiated campus fabric, Platform ONE's ability to offer full network visibility and AI-powered automation and network refresh opportunities with WiFi 7.

And finally, we successfully implemented another round of price increases in March, following our mid-single-digit November price increases. The rising cost of memory and other components caused us to selectively raise price. This as well as disciplined discounting helped improve gross margins during the quarter.

Overall, gross margins of 62.3% was up 30 basis points from the last quarter. Product gross margin grew 70 basis points from the second quarter as well. We've secured our supply chain, including our memory supply through fiscal 2027 and beyond, putting us in a strong position to meet our longer-term demand due to a combination of multi-sourcing, alternative component qualification, engineering redesign, component inventory investments and strategic supplier partnerships.

Turning to operating profit. Our operating margin in the third quarter was 15.2%, up from 14.1% in the prior quarter and 15% last year. This was driven by improved gross margins and disciplined cost management. In fact, we achieved our highest EBITDA on a dollar and margin basis in the last 10 quarters at $53.4 million of EBITDA and a 16.9% EBITDA margin.

Our strong operating results reaffirm our confidence in driving operating leverage to reach our long-term profit target of 22% to 24%. On the capital allocation side, we executed a $50 million accelerated share repurchase during the quarter, retiring over 3 million shares post settlement at an average price of $14.58 per share. We plan to return cash to shareholders through continued buybacks with $137.5 million of our current $200 million authorization still remaining.

Now let me turn to our fourth quarter guidance. We expect our revenue to be in the range of $330 million to $335 million. We expect gross margins to be in a range of 61.8% to 62.2%. Operating margin is expected to be in a range of 15.2% to 16.1% and earnings per share is expected to be in a range of $0.28 to $0.30.

Our fully diluted share count is expected to be around 132 million shares. For the full fiscal year 2026, we expect guidance as follows: revenue to be in the range of $1.275 billion to $1.280 billion. The midpoint of this range suggests 12% year-over-year growth. Given our results and visibility we have for gross margins, we now expect gross margins for the full fiscal year to be in the range of 61.8% to 61.9% and operating margin to be in the range of 14.7% to 14.9%. Earnings per share for fiscal 2026 is expected to be in a range of $1.02 to $1.04 per share.

And with that, I'll now turn the call over to the operator to begin the question-and-answer session.

[Operator Instructions] Your first question comes from the line of Ryan Koontz with Needham & Co.

Terrific results to see this morning. If I could start with SaaS there. Nice to see that inflect higher and start to accelerate. What's your visibility look like for that continuing that momentum? And do we expect some solid seasonality in your Q4. Maybe you can unpack that for us a bit.

Kevin, do you want to take that one?

Sure. I'm happy to, Ryan. So I mean, we actually were pretty pleased with what we saw both from a bookings perspective on Platform ONE. We do have a little bit of a tougher comp in Q4, like you mentioned. We still believe that we can range, I'd say, our growth in SaaS ARR to be in that kind of 20% to 30% range. Naturally, this quarter, it's higher on that range, but that's roughly the range that we're expecting on the long term.

And I'll just add to that. Yes, I'll add to that, Kevin, that we have. In terms of growth, we've been exceeding our internal expectations for Platform 1. We have a very steep ramp in our plan. And so doubling from Q2 to Q3 and then further into doubling again in Q4, and we're on track. And so I would say it's really that momentum of Platform ONE adoption that has been the driver.

That's terrific. It sounds right in line with your plan. So maybe on the competitive front, you mentioned some wins and some strong bookings internationally. Who are you seeing the most success with against in these competitive bids? And what gives you confidence here going forward on continued share gains here because you guys are clearly taking share.

Yes, it's interesting, Ryan. And all of the examples that we put in our press releases, it really reflects wins against virtually all of our competitors. And when we say that, obviously, #1 is Cisco, #2, and it really just goes by market share, #2 being HP Juniper and then we actually included a win from Huawei, which is interesting because we don't see them in the U.S. in many markets.

So I would say that it's -- our competition is primarily versus Cisco and HPE. And we're winning with our fabric. We're winning with Platform ONE. We're winning with our success and making it very easy for customers to deliver a high-quality experience in complicated networking environments.

We talk about complex wireless. And we also talk about cloud choice and flexibility. And then there's also commercial terms. There's -- today, the competitive environment is such that Cisco continues to grow and expand outside the networking market. And I would say, simply focus on other things. That opens the door for us. The new comp plan for partners require them to jump through hoops and sell things that they normally don't sell. That opens the door for us. And then HP Juniper, the complexity of that deal and the challenges that they'll have with integration filters out into the field and into the channel. And so here, again, with Extreme -- with a very clean vision, a clean portfolio and hardware and solutions that are very easy for customers to use and simplify operations in something that's inherently complex is getting us more at bats and our conversion rates are going up and our win rates are going up.

Our next question comes from the line of Dave Kang with B. Riley.

Question on gross margin came in better than expected. Were there several large professional installation projects in fiscal third quarter? And what should we expect for fiscal fourth quarter as far as the installation projects are concerned? Because I think that was the reason that kind of pressured gross margin last quarter, right?

Yes. Dave, we...

Yes. I'll take it, Kevin, then you can jump in. We had a couple of professional projects pushed to Q4 and Q1. And so the level of professional services in the quarter was a little higher than normal, but not as significant as we had expected. But obviously, there's a lot of variables impacting gross margin, and we saw some benefit from the pricing moves we took earlier in Q2. And then we're very aggressively managing the cost on the cost of goods side. I think our teams are doing a great job there of being very disciplined and aggressive and attacking the cost structure.

Kevin, do you want to add anything?

I think that's right, Ed. I think across the board, we just saw a little bit more improvement than we had expected. But overall, part of it is execution, part of it is the price increases. And part of it is just a slight delay in some of the professional services, mix of all 3.

And then more importantly, on product margins, are they still trending up and going forward?

Product margins, I mean, yes, I would say from -- first of all, we had 70 basis points increase quarter-over-quarter from a product margin perspective, Dave. I would say from a product margin perspective going forward, we're still absorbing some of the costs that we had, higher memory costs, and we're trying to balance that with the price increases that we had, including those in March. We're still trying to see if we can get those price increases in March through. But I would say, generally speaking, we feel confident in our ability to stabilize product margins around that 57% plus range.

Got it. And then on the memory situation, I think the last time we talked, I thought you were targeting close to 3 years. Are we there yet? Or where are we in that regard?

Go ahead, Ed.

Yes, I was going to say I don't -- we would not target to have on hand 3 years of supply of memory. But at this stage, what we're messaging is that we no longer believe we have an issue with supply of memory. And that's near term with committed supply through fiscal '27 and into '28. And then there are new sources of supply coming into the market when -- we believe in the first quarter of calendar '28.

So from our perspective, we mentioned the fact that we have -- we've established direct connections with suppliers of memory and take it a multi-sourcing approach. We've been able to qualify alternative components that were designed for other industrial sectors, which has given us another source of supply. We've been able to redesign our products to reduce the number of chips required, which is another factor. And then we've been able to make investments with our strategic partners and our ecosystem of partners, they have helped us find and locate supply, which has been very important. And so it's through a combination of a variety of initiatives that we've been able to solve for this. And we're confident saying that we have no near term nor do we believe a long-term issue with memory and currently any of our components going forward.

Our next question comes from the line of David Vogt with UBS.

So maybe, Kevin, I might have missed it and maybe if you can touch on this again. Regarding kind of the supply chain dynamics and all the initiatives that you undertook in the quarter, can you remind us again sort of how we should think about the implementation of price increases in the supply chain and how it flows through?

Historically, you've had, what, like 90-day quoting windows. Like what do those quoting windows look like today for customers? And when do you start to think you're going to start to see the benefits of -- obviously, I'm sure you saw some of the price increase benefits from December, but now you mentioned March as well. So how do we think about that flowing through into the upcoming quarters from a gross margin perspective?

Sure, Dave. And first of all, I would describe the price increases even if you do like a 10% price increase, the industry standard is discounting at 75%. So really, you're looking at somewhere between 2% to 3% net price increase, right, as you can imagine. And so with these price increases kind of coming through on a net basis at 2% to 3%, both between November and March, some of that is to obviously offset the cost themselves and some of it is to maintain the margins that we've had in the past going forward.

It's a little early to tell what's going to happen with the March increases. And quite frankly, a lot of competitors also put price increases in March. So the fact that typical quotes are open for 30, 60 days makes it a little difficult to know what's going to happen with March over the time frame. We feel good about stabilizing our gross margins and being able to start to grow gross margins I would say, into the '27 period. And so I think from our perspective, we are feeling confident about the 62% number and then growing from there throughout the next year.

Perfect. And maybe one follow-up to you. I know, obviously, you talked about big wins in EMEA and other markets. Can you maybe just touch on the U.S. market? I would have imagined -- I know there was a little bit of a tough comp in the Americas, but I would have imagined given the share gains that you probably are taking from some of the integration challenged companies that we would have seen stronger growth in the Americas. Anything to call out there in the Americas vis-a-vis what's going on in APAC and EMEA?

Yes, David, I think it's a little misleading because the -- what we're showing is revenue is based on shipments and the timing of shipments doesn't always line up with -- I think what you're getting at is the demand and our success in the marketplace. If we were to flip the page and actually look at bookings, and I know we don't report bookings data, but bookings growth in the Americas was up significantly, and I would say significantly higher than total revenue growth for the company. So I think the revenue stats here are going to be a little misleading because we had an excellent quarter in the Americas as far as bookings. But in terms of the shipments and the timing of shipments channel that's what's going on.

So I would say that geographically, the strongest geo was the Americas this quarter, even though it wouldn't appear so if you're looking at that revenue number.

Our next question comes from the line of Tomer Zilberman with Bank of America.

Maybe following along the gross margin question line here. Outside of the price increases, you also mentioned some other things like requalifying alternative parts. I think previously, historically, you mentioned qualifying in automotive-grade DDR4, if I recall, and I think also qualifying in some Chinese vendors. One, is this more about just securing supply versus improving the gross margin level? And two, these other alternative things you're doing, I think you also talked about redesigning some of your products. When is that flowing through? Did that already impact results this quarter? Or is that something that we should expect to benefit in 2027?

Thanks for the question, Tom. I think it's a combination of both. It's both demand as well as gross margin. I would say we're securing memory at prices that are below market with the initiatives that we have underway. As I mentioned on the last call, our size is an advantage in terms of what we're chasing. I want to shout out to our teams because we have very creative teams that have excellent relationships with our vendors. I also want to shout out Broadcom. We have a strategic relationship with Broadcom. They have gone out of their way to support us in making important introductions out into the industry for us to solve this problem. And so they have been a key partner for us in solving for this. And it is a combination of a variety of things.

Historically, we would Extreme would not buy memory direct. We would -- our ODM, our manufacturers would acquire memory from distribution in Asia, and then they would in turn buy from suppliers. And what's changed is we've established direct connections now with multiple vendors of memory. And as you mentioned, we've been very creative working with Broadcom to qualify memory chips that were designed for other industrial sectors that we could use, and Broadcom has qualified those.

So now those are going into production, and we've been able to pick them up for a very good price. And so I would say that the efforts that have been undertaken at the company, and it's been multifaceted has opened the door for us for new supply from different vendors, from different markets. And we've been able to secure not only the supply for the long term, near term and long term, but we've also been able to get them at very attractive prices. And I would say that we were -- I'm pleasantly surprised with the success that we've had given where we were 2 quarters ago and kind of what the outlook was at that time. At this point in time, as I said, we put this behind us, and we believe it could turn into a competitive advantage. What we hear from manufacturers is that we are in a very strong position relative to competitors.

So maybe a follow-up question just to the end of what you were saying there. Are you hearing from your customers that any of your wins are coming specifically from that? One, from you have a level of supply that maybe some of your peers don't and customers are going to you because you can ship faster? And could it also be that you just have less cost pass-throughs versus your peers, and that's also a differentiator for your customers?

Tom, I think that as far as the demand side of the ledger, we haven't really seen a competitive win based on supply yet. But given what's going on in the market and given the persistent shortage out in the industry, we think it could come into play. I think that's the way to think about it. We do know that there is some activity that -- of customers wanting to make sure that they could secure supply for important projects. some of that going on.

Kevin mentioned the price increase. intra-quarter, we saw some people moving orders earlier in the quarter to take advantage of the price increases. But generally, it's been business as usual. And as we look into Q4, we have a really healthy funnel, and we're off to a really good start. So we feel really confident about how we're guiding.

Our next question comes from the line of Mike Genovese with Rosenblatt Securities.

I guess upside in Extreme One orders and the RPOs kind of answered this question in a way. But is there any more detail you can give us, Kevin, on cloud and services attach rates and how those have changed since you've launched Extreme ONE?

Well, yes, Mike, I mean, I would say -- I mean, Ed nailed it earlier where he said our plan this year, we're running ahead of our plan. So we launched in July, obviously, Q2 being the first full quarter and now Q3, we've doubled what we expected from Q2, and we're expecting to double again from a bookings perspective in Q4. That's going to start to play out and continue to accelerate subscription and support revenue over time. This is what we've talked about, right, for about a year now with launching Platform ONE as a platform that gives a higher attach rate, a higher ASP and obviously better renewals in the future. From an attach rate perspective, I would just tell you, the Agentic AI is the interesting part where we're getting higher attach rates, both on the wireless as well as the wired side. And that's where you're continuing to see strong bookings there. And like I said, we saw really strong bookings in the third quarter related to Platform ONE.

Great. And then my second question, it just seems...

Looking at the data that you've been gaining share from Cisco for a while. But I'm wondering, has there been any inflection that you can point to on the HP Juniper side where kind of have the share gains there started? What's the confidence that they're going to accelerate? Kind of what's going on, on that side?

Yes. Mike, the answer is we're seeing opportunities both with end-user customers, and then we're seeing a lot of opportunities in the channel. a lot of channel partners, maybe they were Juniper partners, and now it's the HPE show and they're disillusioned and they're looking for alternatives. There's a lot of activity in the channel right now where we're engaged with new partners that are larger partners as we move upmarket and a lot of those partner opportunities are coming from the disruption of Juniper and HPE. Those opportunities as it translates into end-user business, I don't think we've seen that materialize yet. We have examples, but in a meaningful way, but we're expecting that to gain momentum as we go forward.

Our next question comes from the line of Christian Schwab with Craig-Hallum.

Our next question comes from the line of Eric Martinuzzi with Lake Street Capital Markets.

I wanted to revisit the Investor Day comments you had regarding long-term growth rates. At that time, this was -- you guys were talking about a 10% plus growth rate between FY '25 and FY '29. Given the good numbers that you've seen here, certainly top line, both since the December quarter and the March quarter, is there any change to that outlook as far as a double-digit growth rate?

Eric, there's not. When you look at our guide into Q4, that the implied growth in Q4 is, call it, a 7% to 9% range. But keep in mind, -- last year in Q4, we grew 20%. If you average that out, you've got a mid-teens growth rate that we're running at. And so I think that assumption holds and it has not changed.

Okay. And then from a macro perspective and probably more for your EMEA market, but the war with Iran has been going on for a couple of months now. You obviously put up good numbers here in the March quarter. But anything on the margin, good or bad tied to pipeline in EMEA with the war?

Yes. I think during the quarter, there were a couple of shipments that were impacted where we couldn't ship into the region. And -- but at this point, a lot of those projects have resumed. We talked about our massive project in Rasal Kina, which is just north of Dubai, right near the Strabormz. It's a Wynn Casino and resort. It's the first casino in the Middle East. It's the first phase is a $10 billion project, and it's a massive project for us. They're back and working. And it's hard to believe, but it's business as usual there. The shipping lanes and our ability to transport product into the region is open.

So at this point, I'd say we're -- it's somewhat business as usual. We have seen -- because of the incident, and we have seen some delays in some of the projects, but it feels like projects are getting back and that will recover from prior delays. I guess the other comment on that, Eric, is that for us, it's a smaller -- a much smaller piece of our business. The Middle East is tied to EMEA for us, and we had a strong quarter in EMEA, and we've been taking share in the meta market, and that continues. We have excellent customer references there. So we expect that market to continue to grow at a healthy clip.

Our next question comes from the line of Christian Schwab with Craig-Hallum.

There are no further questions at this time. I will now turn the call back to Ed Meyercord, President and CEO, for closing remarks.

Okay. Thank you, Melissa, and thank you, everybody, for joining us. I also want to shout out. We have employees, customers and partners that tune into these calls, and thank you for the hard work and support on delivering an excellent quarter. Also mentioning to stay tuned. We have some big announcements coming out next week. We have our user conference, Extreme Connect, which is going to be in Orlando. We will be talking about some new technology solutions and the evolution of our portfolio. and some exciting new developments on that front. So we appreciate your support, and I hope you have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.

I'm going to read some disclosures that you've heard many times. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. We're delighted to have Extreme Networks here today, Kevin Rhodes, CFO. We also have Stan Kovler in the audience. And then myself, I'm Meta Marshall. I cover networking here at Morgan Stanley.

So Kevin, thanks so much for being here today.

Good to see you again.

You recently rolled out some impressive targets at your Analyst Day calling for share gains in the market. which we'll dive into in a minute. Can you just kind of refresh everybody here on Extreme's value proposition and kind of the key verticals that you serve?

Sure, sure. Happy to. And by the way, at the Analyst Day, I would say that was a good day for us to roll out for the next several years what we are going to achieve 10% growth on the revenue side, 20% growth on the bottom line side. And we've been executing pretty well, right? 7 quarters in a row of growth as a company. And so that was a meaningful kind of event for us to talk to investors about what we're trying to do.

From a market perspective, as you can probably appreciate, we're on the wired and wireless solutions on networking. We combine software that helps with cloud management. It also helps with security. And we do this to enterprise, the campus enterprise. And so our vertical markets that we focus on more of the complex environments that we see. We see venues and stadiums. We see health care facilities, education, hospitality, retailers, manufacturers and the like in government systems as well. We've actually had some recent really good great wins on government entities outside the United States.

So I'd say, yes, we've got good momentum going as a company and feeling good about the momentum that we are seeing on the enterprise side. We can talk more about the trends, Wi-Fi 7 enterprise campus refresh over time. But effectively, we are seeing some real good wins in our sales right now.

Got it. you've had a lot to deal with over the last year in terms of tariffs and memory, not so distance we're talking about supply chain issues. What are you seeing in terms of impact to the top and bottom line from kind of tariffs and memory impacts?

Yes, more of an impact on the stock price, right, than it is actually on our ability to execute, to be honest with you. I mean, at the end of the day, we are seeing good, strong demand for enterprise network solutions is what we see. People are getting worried about supply chain and whether they're going to be able to get the equipment that they need to support their customers.

I think from our perspective, a lot of companies did not do a refresh post-COVID. And if you didn't do one right after COVID, the reality is your network is likely 5, 6 years old at this point. And so you really are in a point where you need to do a refresh because you've got AI workloads going over your environment. And naturally, that's going to pull more and more requirements for networking resources. And so I think from our perspective, we see an opportunity, a long-term opportunity for us to get ahead of some of these supply chain issues and be able to supply the enterprise customers, the equipment they need.

Got it. And then just in terms of your own availability of memory or how you're seeing kind of that elasticity of demand when you're having to contemplate price increases? Just how are you thinking about that?

Well, so one thing that we are doing, and we saw this early on last summer, we're getting ahead of the DDR4 memory issue. And we've been procuring supply of DDR4 and we've got upwards of 2 years of DDR4 memory. Now I used to not do that. My ODMs used to just buy the DDR4 memory for themselves to be able to supply us. But now we're actually jumping ahead of that, and we've been jumping ahead. So our supply chain teams have done an amazing job of getting ahead of that.

And so we would like to get like 3 years worth of DDR4 memory, and we'll use some of our balance sheet to be able to do that. But from our perspective, I think that's a smart and wise investment for us to get ahead of that. The next wave of probably WiFi 8, which is a good 3 years away is really when you're going to make the move over to DDR5. But DDR4 is still going to be around for at least another 3 years on the switching and WiFi access points perspective.

Okay. And then just on elasticity of demand?

Well, when there's scarcity and there's worry about scarcity, I think demand starts to get pulled in a bit. We are communicating out and you talked about price increases as well. We put some price increases like the rest of the industry out in November. I think the industry is considering price increases yet again. We're still waiting -- Cisco tends to lead the price increase train, if you will, from that perspective. And so still waiting to hear what's happening there on their end. But we anticipate another price increase coming through in the next 3 to 4 months would be our thought because of just the cost of DDR4 memory. And you have other components as well, copper, aluminum, other raw materials have gotten more expensive.

And so I think from our perspective, the demand for enterprise equipment is still strong. We think it will be elastic from a price sensitivity perspective with all the AI workloads going on right now, and we're actually seeing some customers thinking about doing like basically creating their own data centers in addition to hyperscaler because they want to balance the workloads and where their data sits, especially sensitive data sitting in an environment that's an enterprise data center versus in the hyperscale cloud. And so we can see kind of some shifts happening there as well.

Okay. We're in a very healthy investment cycle for campus kind of currently. Why do you think we're seeing such a healthy refresh? Maybe you mentioned some people didn't during COVID. And we hear this like AI preparedness or AI at the edge. Do you think it is really just pent-up demand? Or we're starting to see some of this kind of preparedness come in?

It is certainly AI preparedness. And I would say you're also going to see more workloads going over the network, right, than we've experienced in the past. So if workloads go up and you've got an older network, let's say, a Wi-Fi 4 or 5 network, you're going to feel the real pain in that world with more and more adoption of AI. And we naturally see adoption of AI being more ubiquitous. And so people are looking at all the different use cases across sales, across product development, et cetera, and that's just going to drive more and more use cases there. So we think that, that is certainly one trend that's there.

Naturally, you've got WiFi 7 right now that's in its early innings, and it's starting to get adopted more. And naturally, it's much faster. It's got a 6 gigahertz band on it. And so it's a cleaner spectrum than the 5 or the 2.5. And so we think that the Wi-Fi 7 is going to have another impact around WiFi refreshes, especially on the wireless side of things.

I'm trying to think of other catalysts that we're going to experience here. But I mean those data sovereignty, I'd say, is probably the last one on the enterprise side, especially in Europe, we're seeing more and more interest as they're thinking about where their data sits. And if it's in the hyperscale, what sits there. And especially in Europe, like Germany, we actually are building an RDC in Germany, and we've got some government opportunities there that will benefit from that.

And so I think from our perspective, that's also a trend that we're hearing is data sovereignty is important, especially in Europe, and that we're trying to meet that. I would remind everybody that we are cloud agnostic. So our cloud management works in all 3 hyperscale environments with GCP and Azure and AWS. And then we also allow for on-prem as well. So Gartner is like, hey, do you realize you guys are the only ones that can do this? And so that's something that we're starting to lean into from a market messaging perspective.

Yes, the kind of that hybrid future. Can you just remind us kind of on the split of the business between kind of edge or campus and data center?

Yes. I mean -- so I'd say the data center opportunity is an opportunity for us. It's smaller. It's less than 10% of our revenue today. Most of what we're doing is on the campus side of things. What we are introducing -- so we have a 400 gigabit per second switch that we are doing for a particular client. We're going to commercialize that 400-gig switch for commercial use.

And then we're also working on 800 gigahertz gigabit solution for campus data center later this year and roll that out later this year. Between 100, 400 and 800, you cover almost every enterprise data use case out there. And so we feel good about that.

Got it. You've most certainly been focused on kind of selling the fabric and Platform ONE for a number of years now. Just what kind of differentiation do customers speak about on the product?

Yes. So Platform ONE is the newest, right? We just launched this in July of this year. And we are the only networking provider today that provides an Agentic AI solution for networking. We've got others like Nista or others will talk about AI, but it's more on the AIOps side, and we've got an Agentic solution that will proactively go out and monitor your network.

Let's say that you've got -- so I would say that the paradigm is this. Most of the networking experience today is someone has a problem, they create a trouble ticket, it goes to IT. IT is evaluating log files and everything else to find out why that particular person is having a problem. And then they find the problem, it's an access point, they need to firmware upgrade, they go and fix the problem so and so issue is solved.

What we're doing on the Agentic AI side, these are service agents that are monitoring and managing and looking at your network. And they are identifying in advance that, that access point has got a firmware need. And so it will come back to you and say, we've identified this issue, human in the loop, do you want us to go and fix that issue proactively? Our person could say, yes, go fix it or no, don't fix it. I want to fix it myself. I want to validate this issue. And then if you choose for it to fix it, it will go and actually fix it for you.

They can also -- another use case is say, hey, by the way, we see some activity over here that we don't normally see. Someone's knocking on this door that they shouldn't be, do you want to go and investigate that? So it's got cybersecurity elements to it as well. So we're excited about the Agentic AI that we put into Platform ONE. We see a lot of customer adoption to it. Another, I'll call it, financial benefit of our Platform ONE is that we were selling cloud management. separately from support contracts, separately from like Universal ZTNA, those were all sold separately by my salespeople, all their own sales cycles, et cetera.

Now with Platform ONE, it's all one bundled solution. And so with that, I get higher attach rates because of the Agentic AI. People want this solution. We have a higher ASP on it than buying them individually. And then on the back end, where people tend to not renew support contracts later in life with the equipment because why renew it if the equipment is going to be past its life, let's say, it's 5 years old. I'm not going to spend money on that support contract anymore. Well, we're basically bundling it all together. So we're not going to see that drop off in the value on the support contracts.

And so from a financial perspective, it's going to drive our recurring revenue. We just saw this last quarter, 25% ARR growth as a SaaS CFO, traditionally, I want that recurring revenue, and I want that recurring revenue to stay sticky. And so from that perspective, I think we're going to get really -- those 3 levers are going to be beneficial to our financial model. And it's high margin. It's high-margin revenue that we retain and that we're able to continue to grow.

Got it. I mean just on that security piece, you have been rolling out kind of more security products around the portfolio. Just are you seeing a combined buyer? Is there a type of buyer who -- or type of customer set who is really embracing kind of that combined network security?

I mean we're seeing a convergence certainly of network security solutions and actually embedding technology or software into the network itself. If you think about the SAT scalers at Cloudflare, over-the-top solutions you wonder how much AI will be able to solve for some of that knocking at the back door point that I made. Like at the end of the day, it's all about proactivity and making sure that all of the different places in your network are secure. And if they are secure, then you should be fine.

And it's really being proactive around what is happening within your network. And are people accessing the areas of the network that they should? And are there any actors not supposed to be there? Are they there? I think at the end of the day, what we are seeing is we're seeing that convergence. We're seeing that we are continuing to drive more and more security features within our own networking applications, and you will see a bit of a convergence there over time.

Okay. There's been a lot of M&A in the space. You've had HPE Juniper, you've had Ruckus that's kind of in the remnants within CommScope. Just how have you been able to kind of capitalize on some of these dislocations in the market?

Sure. And so really competitive landscape. You've got the HP-Juniper merger that they've identified, what, $600 million plus, maybe up to $1 billion of cost savings that need to be made over the next several years. We've been the beneficiary, quite frankly, Meta, of some of that. So we picked up the Head of European sales out of Juniper. He just started with us about 3 months ago. He's a rock star. We picked up the Global Head of the Resellers and the Partners, Joe Spencer. He's come over. He's also a rock star.

And then we picked up other people across the board. Naturally, sales folks at these others that are coming to join us as well. So we're getting the benefit of just some good talent there. And naturally, those talented individuals also have relationships either with customers or resellers as well. And so there's a bit of a pull-through and a halo effect of some of those folks.

What we're hearing from the HP-Juniper perspective is just they haven't really solidified the road map yet and that they haven't really communicated to customers what that road map is going to look like. And I think that's -- and that's just what we're hearing. I don't know whether it's true or not, but it seems like that's been the real delay that is kind of causing any sort of concern with customers and that they don't want to wait to hear what's going to happen. They want to know right now what the road map looks like.

And Ruckus, you mentioned Ruckus. I mean, Ruckus and Ubiquity and others at the lower end, I think they might start to feel a little bit more of a pinch on the cost of the DDR4 RAM issue because they operate at the lower level and more price-sensitive markets that it's a higher percentage of the BOM for them as it increases. And so they would have to raise price a lot more in order to cover and maintain margin there. And so we'll see. I mean it's a good company. They've got good vertical markets, et cetera, but time will tell whether that impacts them or not.

Got it. I mean...

We don't compete against them that much.

Yes. I mean you've been focused on kind of key verticals for a while. Does some of this dislocation either make you think about expanding your lens? Or does it just make it much easier to be effective in kind of your key verticals?

Yes. I mean key verticals for sure, but I think the point I made earlier around expanding into the enterprise data center is probably the area where we think that there's more expansion opportunity, more TAM expansion above and beyond what we have today. Today, we tend to kind of sit at core to the edge and not as much in the data center. But once we commercialize this 400-gig switch, I think that, that's going to allow us to really go after a different market.

Okay. Perfect. You've mentioned kind of the flexibility in consumption models with customers and kind of some of the encouraging things you're seeing around the recurring revenue. But just what trends have you seen around what customers are looking to kind of lock into as consumption models?

Yes. We've had some really good success with our consumption models. So we've created an MSP program. That MSP program enables MSPs who want to buy equipment from us, but they're able to flex up and down as customers flex up and down on the amount of licensing that they have and the support contracts that they have up and down on a consumptive basis over time.

So if you have 100 customers and 1,000 licenses today, but that drops down to 95 and 50 you don't pay for those 50. Effectively, we flex down with you. Also, if you flex up to 1,050, no problem. You can go up and down over time. That's been a really successful model for us so far, and we've gotten some good benefit there. We also have created this Extreme subscription private offer, which is kind of a different model for enterprise customers who want to buy a large bulk of equipment, but they don't want to buy, but they don't want to spend a lot of money on the CapEx, and they would rather have a license model.

But we have the ability to be able to do that where they buy the equipment through our distributor, not from us, at near cost. And then we put a license model in place for them to buy that way.

And then the last thing that we're doing right now, Meta, which you might find interesting is that we're doing ENaaS, Extreme Networking as a Service. And so think about it as $20 an access point per month or $100 a month for a switch. And so we are bundling the hardware and the software and the cloud management and the support all together in one monthly, almost rental model, if you will. Now there's going to be a year requirement as a commitment. But beyond that, you can basically just buy and continue to rent, if you will, the equipment on a monthly basis so long you're paying.

Are you seeing enough of that to kind of change how we should think about the P&L or any headwinds, tailwinds?

I think it's just -- this is incremental. So I don't think it's going to cannibalize what I'm doing today. And I think at the end of the day, this is going to drive more and more recurring revenue for us as a company. And so that's what I'm excited about is how can we drive -- how can these new commercial models create new opportunities for the company to expand its TAM and get into new models that enable us to sell more.

Got it. You noted an overhang from professional services on gross margins this last quarter. Just kind of go into detail on just how you would expect to see resolution there?

Sure. I won't apologize for lower margins on deployments. I mean, at the end of the day, we said this last quarter, we see product margins continuing to increase into Q3 and Q4, which is the most important point is that product margins continue to drive and grow. On the support -- on the professional services side, we sold a couple of large deployments, which is good. And the lifetime value of that customer is still very healthy. It's got healthy margin at the product level, heavily margin at the subscription level, but then they're more price sensitive to the actual deployment.

And they've asked us to do those deployments because these are specialized. And we don't have a problem with that, but it's like more like 15% margin at that level. It's not going to be systemic or extend likely beyond Q4. So I think from our perspective, we were just highlighting for the Street to understand -- help them understand why margins -- overall mix margins might be a little bit lower in Q3, Q4 because of those lower services margins. But at the end of the day, product margins remain healthy.

Got it. You talked upfront about kind of this 10% revenue growth, 20% EPS growth target. Just is that all -- just what are kind of the key -- if you dissect what are the drivers to get to those targets?

Yes. price increases will actually come in back in November. And now all of a sudden, we're sitting in our March and price increases can actually help that even further. So I mean, I think at the end of the day, we see the demand environment being strong. We see our pipeline building. We see conversion rates going up. We're excited about what the demand environment is going to look like over the next 12, 24 months because of that.

I think from our perspective, we're thinking that the market growth rate generally, if you look at some of the 650 Group or others are saying that equipment sales could grow 3%. We think it's going to grow for us 7% to 9% that we talked about last in November. But that subscription and support growth would be more in the low to double digits, 12% to 14%, I think. And so that's going to give us the 10%. I feel pretty confident in our ability to continue to drive that double-digit growth. And we've seen, by the way, I would say, also for the last 7 quarters, growing sequentially each quarter and year-over-year on a double-digit basis.

So I see us continuing to be able to do that at that level. And then on the operating leverage perspective, right, we've just done a really good job of managing expenses against the revenue growth rate. And even this last year, we had a 20% growth rate, higher than 20% growth rate on operating income against our revenue growth. And I think we're pretty focused and dedicated towards continuing to have at least twice the revenue growth rate and profitability.

What are those levers kind of on OpEx that you're still able to?

Yes. I mean AI is going to be helpful there, right? I mean instead of hiring more and more engineers, we're using AI to basically add more engineers on a virtual basis. And so I think that we can continue to do that. I'm also deploying an AI sales expert that is helping our SEs and our RFP teams to answer more RFPs. So I can grow my business by churning out 10 more or 15 more RFPs per week because I'm using AI to do that as opposed to just trying to have people do as much as they can. And so I think the efficiencies we'll get through AI is going to enable us to raise and grow our business without having to necessarily add the requisite dollars and people costs to do that.

I mean you mentioned kind of MSPs earlier, but just how are you thinking about kind of different or adjustments you can make to go-to-market to kind of better capture some of these opportunities?

Yes. On the MSPs or others, I mean, the new commercial models, I think, are going to give us that opportunity. When we talk about the competitors, one thing that we didn't talk about on the Cisco side is that they are changing their partner program, and they're changing it to a point system. And the early indications are that, that point system where you get points for selling everything is going to benefit the larger partners. But it may not benefit, I'll call it, the longer tail of resellers that are just network and network only.

And so we think that there's more of those resellers that might consider, well, if I'm not going to make as much money there or if I'm concerned about making money, maybe I should consider Extreme as a potential partner as well to kind of diversify myself a little bit more. So we're thinking that, that could be an avenue for us to continue to drive more growth rate there. Again, not having to add a lot of dollars there, just adding more resellers to the base will tend to grow the business more. And we're seeing success.

I mean, one of the success stories that we have right now is a Cisco takeaway in Japan. We got the government of Japan, and we're getting all the ministries in Japan as well. Well, that was KDDI and that was NTT East as well. Now that they know who we are, now they know how our technology works, we feel like we can get better leverage with them and better opportunity for them to sell Extreme into that market as well. So it's also going upstream with higher and bigger resellers as well.

Got it. And then just -- I mean, some of that 10% growth that you spoke about versus kind of an industry that's certainly not growing that. Just is the share gain opportunity that you're seeing just adding more products to kind of customers? Or is it just adding more customers kind of faster? I guess, is it coming from expand or land?

Yes, it's a good question. We will continue to grow the business. I think, a, it's keeping the existing customers that we have happy, expanding TAM on the data center side with those customers. So not having that in the past, but having it now will help us expand, adding more resellers and more resellers at scale that give us more opportunity to attract new customers into the fold who we have not had relationships or experience selling into. And so more resellers coming in, more proof of concepts, more opportunities at bats, I call them for us to hit a double single or a triple, we're a home run.

At the end of the day, if we get more at bats, it's more opportunities for us to convince other customers that our technology is great and it sits a little bit below Cisco from a price perspective and that we can provide really great networking support and service.

Got it. And then maybe just the last question for you, just on capital allocation priorities or just kind of how you're thinking about the balance sheet.

Yes. I mean, first and foremost, I would say this DDR4 RAM issue is...

That's the #1 priority.

The #1 priority is making sure that we've got that and that we've got plenty of ability to go and land the equipment that our customers need over the next several years. The second thing is buybacks, right? We've been buying back historically, but we are in market right now buying back shares as well. And so we will continue to prioritize buybacks as well. We've got a little bit of debt on the balance sheet, but not much. And so I'd say the third order of magnitude there would be just paying down some of that debt over time.

Okay. All right. Well, Kevin, thanks so much for being here today.

All right. Thank you, Meta.

Hello. Thank you for joining us, and welcome to the Extreme Networks Q2 Fiscal Year '26 Financial Results. [Operator Instructions] I will now hand the call over to Stan Kovler, Senior Vice President, Finance and Corporate Development. Stan, please go ahead.

Thank you, operator. Good morning, and welcome to the Extreme Networks Second Quarter Fiscal Year 2026 Earnings Conference Call. I'm Stan Kovler, Senior Vice President of Finance and Corporate Development. With me today are Extreme Networks' President and CEO, Ed Meyercord; and Executive Vice President and CFO, Kevin Rhodes. We just distributed a press release and filed an 8-K, detailing Extreme Networks' financial results for the second quarter of 2026. A copy of the press release, which includes our GAAP to non-GAAP reconciliations and our earnings presentation is available in the IR section at extremenetworks.com.

Today's call and Q&A may include certain forward-looking statements based on current expectations about Extreme's future financial and operational results, growth expectations, new product introductions and strategies. All financial disclosures made on this call will be on a non-GAAP basis, unless stated otherwise. We caution you not to put undue reliance on these forward-looking statements as they involve risks that can cause actual results to differ materially from those anticipated by these statements. These risks are described in our risk factors in our 10-K and 10-Q filings. Any forward-looking statements made on this call reflect our analysis as of today, and we have no plans to update them, except as required by law.

Following our prepared remarks, we will take questions. And now I will turn the call over to Extreme's President and CEO, Meyercord.

Thank you, Stan, and thank you all for joining us this morning. The second quarter marked our seventh straight quarter of revenue growth, driven by strong demand for our AI-powered platform, fueling share gains and double-digit year-over-year growth. Over the past 12 months, we've grown 3x faster than our largest competitors in the enterprise networking space, highlighting the fact that we're winning market share.

Our revenue was $318 million this quarter, exceeding our guidance, and up 14% year-over-year, driven by continued competitive wins with large customers across all verticals. Product revenue increased double digits year-over-year for the fourth consecutive quarter. Cloud subscription momentum lifted SaaS ARR to 25% year-over-year growth, landing at $227 million. And finally, we experienced our strongest subscription bookings on record with Extreme Platform ONE leading the way.

Our technology differentiation and the quality of our team's execution are driving growth and enabling us to move upmarket and win larger enterprise networking projects. This quarter, we closed 34 deals over $1 million, highlighting confidence in our differentiated technology and our ability to win in highly contested head-to-head competitive situations. Our innovation is translating into purpose-built solutions for larger, more demanding enterprise environments.

Why are we winning? Competitors can't match the capabilities of our end-to-end campus fabric, which continues to be a major driver of large enterprise wins, differentiated by capabilities like zero-touch provisioning, subsecond convergence and the creation of hyper-segmented networks that hide IP addresses and thereby limit the blast radius of lateral cyber attacks, a major security benefit. For those of you who recall our Investor Day, a Fortune 100 customer remarked that what takes Cisco's 6 hours takes Extreme 6 minutes. And this is the power of our fabric.

Platform ONE is unique with a true agentic AI core. Our AI agents can autonomously diagnose issues, guide resolution and provide clear actionable insights. Our platform is particularly useful in troubleshooting, evidence collecting and solving complicated network issues, turning days and hours of work into minutes.

We're the only vendor that delivers true cloud choice, whether public, private or hybrid, including sovereign cloud solutions. We meet the data residency, compliance and security demands of regulated environments, unlike competitive solutions that are locked into public cloud only and expensive purpose-built architectures. And no one delivers complex WiFi solutions better than Extreme. And this is why we're the preferred WiFi vendor for dense environments like the NFL and Major League Baseball stadiums as well as large, highly distributed environments like Kroger, FedEx and other large retailers.

Given this ongoing innovation and strong competitive differentiation, we expect to accelerate our leadership position and continue to drive share gains. In the quarter, we had several large wins across verticals and geos, including a multimillion dollar sale of Platform ONE to a large retail customer to centrally manage their network across 3,000 stores. Baylor University, Henry Ford Health, University Hospital, Birmingham NHS and the Pittsburgh Steelers, all leveraging Extreme's WiFi 7 solutions. TJ Regional Health in Kentucky and Group [indiscernible], a large health care provider in Belgium, complete modernization of their networks with Extreme Fabric to deliver reliable, high-quality patient care. One of the largest school districts in the United States selected Extreme over Juniper after a head-to-head evaluation in a multimillion dollar full network refresh of wired, wireless, SD-WAN and importantly, our AI platforms. At SK Bioscience, a leading South Korean biotech company deploying Platform ONE to support rapid growth across its expanded offices and new R&D center.

We continue to see strong momentum across our commercial models with MSP partners nearly doubling and billings up more than 3x year-over-year. Our consumption-based billing eliminates upfront costs, while poolable licensing enables MSPs to easily scale across devices, locations and customers.

In addition to product innovation, we're helping partners make more money with enhanced commercial terms. Last week, we launched Extreme Partner First, our new partner program, which simplifies deal registration, delivers transparent pricing and rebates and embeds AI directly into the partner experience. We help partners access critical sales content in seconds, close deals faster and scale profitably with role-based dashboards, faster approvals, real-time field visibility and accelerated rewards. Partners can make 20% more profit at Extreme than our competitors. And we've dramatically simplified the way customers are buying from us with a single bundled license that offers AI, fabric, hardware and security.

Platform ONE keeps getting stronger with continuous updates that materially increase customer value. Today, we're attracting highly sought-after talent from across the industry and our retention remains at all-time highs. Recently, we were able to recruit top-level talent from Juniper, who see tremendous opportunity at Extreme, including 2 at the SVP level leadership positions in global channel and EMEA sales.

Looking ahead, the strength of our our funnel reflects a robust demand environment across all our industry verticals with double-digit pipeline growth in state, local and education, and continued momentum across manufacturing, health care and general enterprise.

On top of these dynamics, a return of government spending in Europe, expansion in APAC and continued momentum in Americas underpin these trends. A major end-of-life refresh cycle and changes to the partner program at Cisco are creating a significant multiyear growth opportunity for Extreme where billions in total addressable market. And the HP, Juniper merger is creating share gain tailwinds for us as well. These market trends create openings for Extreme as new AI requirements, aging hardware and next-generation technologies like WiFi 7 are driving customers to reassess their vendor choice. Many are turning to Extreme to modernize their networks.

As it pertains to supply chain, networking is mission critical. It's not a nice to have. Everything our customers run depends on the network [indiscernible] demand for network working infrastructure, giving us price flexibility to protect our margins, and this is an industry phenomenon.

Given our operational agility, we are confident in our ability to meet customer demand going forward. One of the ways we saw for component shortages has been a replacement strategy. [indiscernible] memory chips, that Broadcom is already qualified. Our teams are nimble and get us in front of the curve.

In the case of component scarcity, our size and scale can be an advantage as we are chasing lower volumes and can be more focused. For the remainder of fiscal '26, we expect to continue to grow profit faster than revenue, with expected profitability growth of around 20% on double-digit revenue growth for the year. We're set up with a solid foundation exiting the second quarter with well over $200 million of annualized EBITDA at a healthy net cash position.

Now let me turn the call over to Kevin to discuss financial results and guidance.

Thanks, Ed. Total revenue of $318 million grew 14% year-over-year and exceeded the high end of our guidance range. And as Ed mentioned, this is our seventh consecutive quarter of revenue growth. Earnings per share of $0.26 also exceeded the high end of our guidance range. Earnings per share grew from $0.21 in the prior year quarter, a 24% year-over-year improvement. So our profit growth rate outpaced our revenue growth rate by 10 percentage points.

SaaS ARR also accelerated to 25% growth on a year-over-year basis, driven by our success with Platform ONE subscriptions. Platform ONE bookings were well ahead, even twice the amount of our target, resulting in accelerating year-over-year performance in subscription bookings. The expected acceleration in growth for the high-margin subscription revenue we laid out at our Investor Day in November is playing out as expected. We are excited about the continued growth in our recurring revenue base, up 12% year-over-year, and we have a strong pipeline for Platform ONE sales. Geographically, we had a strong [indiscernible] the target partners and deals across the world. We continue to gain traction with new larger partners and associated new customers when it comes to our new logo wins. Subscription and support revenue reached $120 million, up 12% year-over-year, and up 3% sequentially.

Our SaaS deferred revenue continued to grow to [ $34 million ], a 15% year-over-year increase. Overall, deferred Recurring revenue climbed to $628 million, a 9% year-over-year improvement. We are pleased with the predictability that this high margin revenue gives us.

Non-GAAP gross margin was 62%, an increase of 70 basis points from the last quarter and at the high end of our guidance range, which we highlighted at our Investor Day. Product margin increased due to mitigating actions that we have taken to offset higher component costs, including a price increase we implemented last quarter.

Higher support margins were driven by improved product quality and lower warranty costs and subscription margins also rose on higher revenue, which also helped our mix.

Our teams are doing a great job managing an ever-evolving supply chain environment, taking actions to mitigate component price increases and [indiscernible]. We are confident in our ability to meet customer demand and deliver critical networking products without disruption.

One item I'd like to point out, which is built into our guidance this quarter is that we have several multimillion dollar deployments at large venues, which we will deliver during the third and the fourth quarter. These customers have asked Extreme to run the point on the installations with our professional services team. Installation services carry a much lower margin profile than our traditional subscription [indiscernible] margins, and we expect these implementations to impact our mix during that third and fourth quarter time frame.

We expect the combination of the actions that we have taken and a vigilant approach to supply chain planning to result in further improvement in our gross margins over time. We're still very confident in our ability to achieve our long-term growth margin goal of 64% to 66%.

[indiscernible] of revenue from last quarter and last year, providing further operating leverage. This was despite higher-than-expected sales commissions due to higher revenue.

Operating margin was 15%, up from 13.3% last quarter and 14.7% in the prior year quarter. I'm pleased to report that we generated $52.4 million in adjusted EBITDA, and our adjusted EBITDA margin was 16.5%. We generated $43 million in free cash flow in the second quarter and continue to reduce inventory levels and based on hand. This demonstrates our continued focus on working capital management.

Now turning to guidance. We expect our third quarter revenue to be in a range of $309 million to $314 million. This reflects normal seasonality in our underlying business, which we expect to carry forward. As I mentioned earlier, we expect third quarter gross margins to be impacted by these larger professional services deployments, and therefore, gross margin is expected to be in a range of 61% to 61.4%.

We do expect improvement in product gross margin in the third quarter and expected [indiscernible] carry forward for the remainder of the fiscal year.

Operating margin is expected to be in the range of 13.6% to 14.8%, and earnings per share in the third quarter is expected to be in a range of $0.23 to $0.25.

Our fully diluted share count is expected to be around 136 million shares.

For the full fiscal year '26, we expect guidance as follows. Revenue is now increasing another $10 million at the midpoint from our last quarter to be in a range of $1.252 billion to $1.270 billion. The midpoint of this range suggests 11% growth year-over-year. We expect earnings per share in the range of $0.98 to $1.02. And with that, I'll now turn the call over to the operator to begin our question-and-answer session.

[Operator Instructions] Your first question comes from the line of Mike Genovese with Rosenblatt Securities.

Great. Congratulations on the good quarter. I think you guys gave some compelling metrics about share gain. Can you talk about more about that, though? Like the evidence that you use to show that you're gaining share and to prove that you're gaining share? And also kind of restructuring that you did in the kind of the go-to-market model during the quarter, whether that in terms of putting Norman charge and other types of restructuring, how you approach share gain? Whether that had an impact in the quarter or whether that impact is more in front of us?

Thanks, Mike. I'll take that. Yes, we don't make up the numbers in terms of share gains. We use third-party analysts and we look at like 650 Group and Deloro, et cetera. When you look at Extreme and you compare us to Cisco or now HPE, they have a lot of other businesses. They play in a lot of other market segments. So it's it could be difficult to dive in and really understand what's happening in the enterprise market, which is where we play. So the analysts do a really nice job of getting the information and kind of zeroing in on how competition is performing where we compete.

And so when I say we're growing at 3x the market, we're using third-party industry data looking at the enterprise deployments, which is campus enterprise data, et cetera -- data set, et cetera. So that's how we get the data. In terms of how we know we're winning. I think everybody here knows we compete every day head to head with now HP and Juniper is turning into HPE and they've got their hands full, and then Cisco. So we have hands-on information of our competitive wins and win rates, and we understand kind of how and why we're taking share from that standpoint in terms of winning new customers from those larger accounts.

To your point, Mike, the -- Norman has been in charge of -- Norman Rice is -- we put him in charge of sales. It's hard to believe it's been 2 years, but he's brought a lot of discipline into the process in terms of how we forecast, driving accountability and then making a lot of changes in terms of the personnel and leadership. And so I would say we have more confidence today than we've ever had in our bookings outlook and our bookins forecast, with, I would say, top grades across the channel and our direct selling organization. We also brought in Monica Kumar, a couple of years ago, our Chief Marketing Officer, who has done a phenomenal job overhauling our marketing team and efforts. And we've created very targeted markets. We call them pods. We have 19 of them, where we have our direct sales team partnered with localized event marketing teams partnered with channel resources focused on events and activities that drive funnel and then focused on how we drive and convert that funnel. So it's a concerted effort.

Obviously, all of this connected with our product teams and our service and support teams, but working together. So we have 19 different pods that we forecast each quarter in terms of funnel creation, in terms of conversion. And obviously, that gets down and ties to bottoms up bookings for cash from our sales team. So we've come a long way. We have a lot of confidence confidence in the demand outlook, and we're really confident in our ability to take share. And as we talk about move up market, we're excited about what we have in the funnel and that -- especially with some of these larger opportunities that would be meaningful share gains for us at Extreme.

Great. That was such an extensive answer that I almost still hesitant to ask a follow-up just for time's sake and other analysts. But I will ask a follow-up, which is, I don't think that you guys mentioned -- if we looked at AI mentions on this conference call, there probably weren't a ton of them. So in either in terms of sort of agentic offerings or enterprise switching, upgrade cycles and confidence that, that's going to happen, can you just talk about the importance of AI and what you're seeing from your offerings and from your customers' activity related to AI? And then I'll pass it on.

Sure. Well, look, AI continues to be top of mind for all of our customers. Everyone is trying to figure out, "Hey, what's the use case for AI? How can I use the modern AI technology in my environment to drive better business outcomes?" And we're all over that. We had our AI Summit in majorly baseball headquarters in the fall with a great, great response. We're probably the only networking vendor that has an agentic AI platform where our AI sits at the core of the platform. And it's something that gives us a real advantage when we're having conversations today. As people are contemplating AI, they want to look at players that have developed platforms. And this is, again, a place where our size becomes an advantage for Extreme because of the capabilities that we've built and then what we're going to be able to do in terms of integrating our network capabilities with ecosystem partners of our customers when we start looking at AI agents, creating an agent exchange, creating the ability to create workflows and drive outcomes for customers.

So we have -- we've always been a leader in cloud. We've been a leader in AI Gen 1, if you will, I'd say, alongside a Juniper Mist and Meraki. Now we feel like we're in a position to pull ahead because we've created this platform. And again, as I said, it's the only one with a pure agentic AI core. And we think this is going to give us enhanced capabilities as we go forward. And so yes, it's top of mind for customers. Everybody wants to know about it. This is an advantage for Extreme.

I will say we doubled our forecast for subscription bookings for Extreme Platform ONE, which is our AI platform. So things are going really well. Our sellers are having a great time with us out in the market.

Your next question comes from Tomer Zilberman from the Bank of America.

Great. Maybe going back on the share gain question. when you look at the opportunity that you're seeing from these competitive displacements, are you coming in all at once replacing both the WiFi piece and the switching piece? Or are you seeing it start in 1 area, kind of landing in 1 or the other and then further expanding? And then I have a follow-up.

Yes. Tomer, it's -- each project will have a life of its own. So we'll have a unique opportunity because we're the only player that can provide this sovereignty. So cloud choice becomes an issue in Germany where a customer has data sovereignty requirements, and we bring a unique solution with our cloud choice. So the lead-in becomes cloud choice. Interestingly, our fabric over SD-WAN won the day with the Japanese government and the huge wins that we've had over there. So it was really about the differentiation of our fabric technology and the fact that we were able to bring fabric over the wide area network with SD-WAN to create this unique solution that none of our competitors could replicate, and therefore, it opened up the channel and open up huge opportunities in Japan.

The hottest technology for us today is our fabric. We -- everybody has an IP fabric in the industry and IP fabric for data centers, that's great. Nobody has a fabric for campus, that's layer 2, and that's what we have. And so when we get into beauty contest where customers, let's look at the Cisco refresh and now it's time to upgrade the network, and now a customer says, "All right, well, let's bring in a few other competitors, people are blown away. My comment, what takes Cisco 6 hours takes Extreme 6 seconds, that is a real quote from a Fortune 100 customer. The agility and the speed of turning up network and provisioning network as well as the delivery of service as well as the resiliency of the platform, the ability to create networks in the network, again, this is Miami-Dade County -- I can go across to huge government customers around the world, huge manufacturers, health care providers. When we get into a head-to-head competition, we physically show customers what we can do and let them play with the technology and our competitors can't replicate it.

So all of a sudden, Extreme goes from maybe a just in third or fourth right into contention as a finalist, and our teams are doing a great job executing and winning in some of these competitive projects.

Got it. Maybe as a follow-up, talking about memory prices, you started talking about it last quarter. And I think in between or maybe it was last quarter, you implemented a mid-single-digit price increase. So my question is how did customers -- first tire customers react to that? And since we've seen memory prices continue to rise, what's the signal for another price increase? And are you seeing any decommitments from suppliers?

Yes. Tomer, great question. And we're well aware that supply chain and component availability is top of mind for everybody out there. Yes, we implemented the price increase earlier, a 7% price increase. And I can say it's like a tree fall in the forest, a total nonissue. I mentioned the price elasticity of networking. If you think about an organization, think about your organization, there's no discussion about whether or not you need a network and that you need a modern network with modern networking tools. So this is true for all of our customers. So it's kind of a nonnegotiable.

So I'd say our customers are very resilient from a pricing perspective. Going forward, we will evaluate price increases as we go forward and use that where we need to. We're very good at it as a company, and I'd say we're very good at it as an industry.

Specifically, meeting demand for things like DDR4 memory, I believe size is an advantage for Extreme here. First of all, we have a very, very strong team. It's the same team that we've had going back into the COVID era and supply chain disruption is normal for us in our business. And so our teams are very strong. We have excellent vendor relationships. So I'd say we get out in front of these things before our competitors.

Size is an advantage. We're solving for fewer problems. We're solving for enterprise networking switches and access points. Our competitors have much bigger portfolios that they're trying to solve for. And then what we need, what we're chasing for is lower volume. So in a way, it's easier for us to get our hands on it. So these are some points that allow us to be kind of resilient in that environment.

I'll give you an example. With DDR4 memory chips, we were working with a vendor. And yes, prices are going up. We talked about raising price, but we talked about how we can find other sources of supply, and we were able to unlock DDR4 chips that had been designed and developed for another industry. And they are actually aging inventory for another industry. We were able to pull in the chip, bring it to our vendor, bring it to Broadcom, work closely with them, and they certify the chip, and that opened up a new source of supply, for example, of memory. That's the kind of thing that Extreme does that I think is a little different from our competitors.

And so our teams are out there very creative, finding ways to replace components and find alternative sources of supply in the market. And again, our size is somewhat of an advantage for us to meet demand.

Your next question comes from Ryan Koontz from Needham & Co.

Nice quarter, guys, and nice [indiscernible] outlook, hanging in there strong. Maybe unpacking the ARR, the cloud ARR in the quarter a bit. Can you maybe talk about puts and takes where you're seeing strength in selling subscription and areas you're still working on within that sales process?

Yes, thanks, Ryan. I mean the strength has been with Platform ONE. Ryan, I mentioned that we don't disclose our internal plans, but we had an internal [indiscernible] the way that we've structured our commercial terms is that our customers can buy Platform ONE and then they can move at their own pace and migrate from XIQ and our our cloud platforms. And so customers have really embraced that. And so that -- I'd say that's where we're seeing most demand. Kevin, do you want to comment?

Yes, I think you're right. We laid this out the , right, that we expected mid to high 20s growth rates and we're seeing that now the 25% growth rate in ARR, it is absolutely just a product of a really good platform, a simple licensing model that includes the cloud management, includes the agentic AI, it includes the support contracts and everything that we talked about. And the people like that model. It's simple for them. It's easy. They understand what the pricing is. They're not going to have hidden costs in the future, et cetera. And then our customers really enjoy the agentic AI.

And now let's making their network operations is that much more efficient. It's like adding [indiscernible].

[indiscernible] or close to it last for several years. Can you maybe unpack what's behind that strength? We heard from kind of a private networking peer last night that also had very strong EMEA sales. And there were some regulatory requirements around sovereignty coming down from the EU. Maybe you can explain if there was any impact on some of your sales due to regulatory?

Yes. And Ryan, I'd say I don't think we've seen the benefit of that yet, but I think that portends good things to come for Extreme. When you talk about data sovereignty, if you talk to the Gartner Group, they'll tell you that Extreme is the only player in the networking space that can deliver data sovereign solution in networking. And so -- and that goes back to Cloud Choice. And when you look at our competitors in a public cloud, it doesn't quite get you there or you have a purpose-built cloud that isn't built and operated in-country. This is an area where we have an opportunity.

I will say we are seeing as governments -- government coalitions in Europe form and get organized and get United around creating budgets and spending, for us, I'd say it's taken longer than we had expected.

[indiscernible]

Kevin, do you want to add anything?

No, I mean, I think you covered the other thing I'd add is we just added a new leader to our [indiscernible] and sales group. And he's come in and he's been very impressed with the opportunities that are in the EMEA market and he is very excited. So I think that we've got the right team in place, and there's plenty more opportunity there in EMEA for us to continue well.

Your next question comes from Dave Kang from B. Riley.

Just a question on the rumor about this Ruckus and you guys just wanted to hear [indiscernible].

[indiscernible] if assets or businesses are potentially for sale or if potentially available in the marketplace, we're always going to have a look. So at Extreme, you'll always see us -- I would say we're always in the market looking at different assets, be it adjacencies or being players in our direct space. So I think you can always expect us to be engaged in dialogue to get smarter and to learn. And I would say to the extent that there's an opportunity that presents itself, we will always -- we have the condition that anything that we do would be accretive, but I would say, at this point, that's conjecture. There's really nothing for us to comment on that front.

Got it. And my follow-up is the tariff situation, just any changes you think that we should be concerned about?

No. I mean, data goes back to supply chain, et cetera. Changing tariffs is a way of life for all of us, especially with the current administration in the U.S. So this is a core competency at Extreme. So we're well versed in manipulating and managing through a changing tariff environment. So at this stage, it's -- I'd say it's a nonissue for us at Extreme.

Your next question comes from Christian Swab at Craig-Hallum.

So thanks for the guidance for fiscal year '26, but as we look a little bit longer term, Ed, given market share gains in conjunction with, we call it, better solutions as well as the disruption by 2 of your leading competitors and recent strong sales strength, is it safe to assume that we should expect a continuation of double-digit top line growth in '27 over '26 without any [indiscernible]?

Christian, as far as the outlook for '27, what you're saying makes a lot of sense to me because we're seeing this continuation of not only demand in the marketplace, but the strengthening of our competitive position, especially considering what's going on with the larger 2 players. So us commenting [indiscernible] the [indiscernible]...

Yes. I mean, my comment would be we feel confident with -- and positive about all the improvements we've made from the go-to-market perspective I say we feel comfortable with the FY '27 setup. Obviously, we are not guiding to 27% yet. We still have plenty of time. And I would say this market is pretty dynamically right now. And so it's really hard to get that far out 1.5 years from now. We feel really good about our guidance for FY '26, and I'd say we'll circle back on '27 in the coming in the coming quarters.

Just don't want to comment too much about that far out given where we are in the market.

That's fair. And unfortunately, I'm going to ask another long-term question. Given the gross margin headwinds in the near term, [indiscernible] to give the level of improvement with clear security, but is -- and your ability to raise the prices, which appeared to be currently happily absorbed by the customers given their networking technology needs, the memory component costs in particular. Would we -- should we expect gross margins and [indiscernible] to improve in '27 over '26 as we begin [indiscernible] march towards 64% to 66% goal?

I mean I think that the safe bet to say that we will expect improvement. Just a reminder, the product gross margins coming out in Q3 and Q4 will improve Christian, right? So you've got the product market an improvement happening there already, it's really just the lower margin professional services that will overhang in the third and fourth quarter as we do those installations. Normalized amount of professional services [indiscernible] in '27, you would certainly see a mix improvement in margin in '27. Okay?

That's a fantastic answer. Congrats again on the great results and outlook.

Your next question comes from Eric Martinuzzi from Lake Street Capital Markets, LLC.

I also wanted to focus on the gross margin color that you gave. Just at the bottom line, the $0.98 to $1.02 for FY '26, relatively in line with where you were before, is that to say then that there's not a substantial incremental [indiscernible] because I would have expected given [indiscernible] for Q2 that the guide for the EPS for the year would have risen?

Sure. I mean you would expect, Eric, right, that the overall deal is a good margin deal, right, but that we do tend to price the professional services installation with a much lower margin than our subscription [indiscernible], which tends to be in the [indiscernible] range. And it's just low margin. And these all the [indiscernible] have a different margin profile to them. But I would say they're in the 15% to 20% range of margin, not certainly at the 70% level, like you see in subscription and support. So that's where I would comment that, that's why you see a mix shift in the third and fourth quarter being a little bit overall lower margin. But again, product margin including in the second half of the year.

Yes. I guess I jump in and add -- I would just jump in and add, Eric. Like in some cases, we get involved at our customers as we we'd really like you to do the cabling work, for example. And then we'll bring in a contractor and mark it up 10%, 15%, right? And that's not our traditional business, but it's almost like us doing a favor for a customer in a large complicated project. And we have some large complicated projects going on right now where customers have said, we feel more comfortable [indiscernible] and other services in the 60%, 70% range, it gets pulled down when we get pulled into some of these large projects. It's the right thing for us to do for customers, but -- and it has a near-term effect.

Over the long term, once we've deployed, once we're in the stadium, then obviously, those margins go up as we continue to work with those customers.

Your final question comes from David Vogt from UBS.

Great. I have actually kind of a 3-part question here, Ed, and Kevin. I appreciate all the detail. But the pressure I have is on sort of pricing demand and margin. And I'm just trying to triangulate all the comments that you made in your prepared remarks and in response to questions. So maybe just from a demand perspective, obviously, we understand that you took prices up by 7%. Are you suggesting that the price increases are not filtering into revenue this year in fiscal '26 relative to where you thought you'd be 3 months ago or 6 months ago given Kevin mentioned you had several multimillion dollar deployments in the outlook going forward? And is the guidance raise just those multimillion dollar deployments?

And I'll give you the second question along that. So even if I take that into consideration, the low margin of the installments, it sounds like gross margins on a pure product basis adjusted for the installments are down relative to where you were 3 months ago. Can you talk to like what that dynamic looks like if the pricing is not going to affect us yet?

And then the final point I would ask is, when I think about '27, I know it's quite a ways away, would you imagine that, that pricing has a much bigger impact on margin next year and demand versus where we sit here in 2026?

Kevin, if you want, I can jump in, and then you can...

Go ahead, and then I will follow-up. Yes.

David, the pricing comes in pretty quickly. I mean I think -- so you'll see the impact. Kevin mentioned that our product margins are going up. So our product margins are up this quarter over last quarter and will be in the second half of the year. So there are just a few of these large projects that have professional services that drive the margin down. But on the services side. But on the product side, we're expecting a growing product margins in this environment.

The other thing that I'll say is when -- as we go forward, we still have the ability to use pricing as a lever. And so you'll see us, and you'll see the other players in our industry passing through pricing as we make adjustments for what's happening in the supply chain. Kevin, do you want to add to that?

Just from a timing perspective, Ed, right, we put some price increases through in the second quarter. We had minimal effect on our results in the second quarter. We expect more to flow through in the third and fourth quarter from those price increases we made in November.

And can I just ask a clarification. Is the guidance range for '26 updated reflecting the multimillion dollar installment revenue in Q3 and Q4? Or are you seeing a price increase driven revenue uplift in the guide or a combination of the 2?

Our guide reflects, a, the installation revenue and the lower margin related to that; and b, all the decisions we've made so far on pricing today. [indiscernible] in any other decisions yet and so we can't reflect anything in our guide that hasn't [indiscernible].

There are no further questions at this time. I will now turn the call back to Ed Meyercord, President and CEO, for closing remarks.

Thank you. Thanks, everyone, for participating in the call. We appreciate it, and we always appreciate the questions. We also want to thank employees tuning in and customers and partners who are listening in and more importantly, to them for the partnership in driving an excellent quarter. So we're looking forward to continuing on the journey in terms of our innovative solutions, driving growth. And we look forward to meetings upcoming and delivering on another quarter. Thanks, everybody.

All right. Welcome, everyone. Thanks for joining us at the Extreme Networks Investor Day. This is our first event since 2023. So it's been 2 years since we have seen all of you, and thank you for joining us at NASDAQ. Can you believe this company has been public for over 25 years. This -- Extreme went public in 1999. We just rang the bell this morning downstairs, and it's so exciting because it feels like a startup, right?

I mean there's so much innovation happening and new people coming on board, joining us. I know, Ed, you're eager to talk about some of our new executives that have been -- that have joined us over the past 2 years. And networking is changing. Networking is growing again. And so we're delighted to be here, and thank you all for being with us.

Obviously, I'm the IR guy, I have to say this. We're going to be talking about non-GAAP financials in our financial results. And of course, it's an Investor Day, we're going to be making forward-looking statements. I think that's why you're all here, right? So without further ado, I wanted to introduce our President and CEO, Ed Meyercord.

All right. Thank you, Stan. And we appreciate everybody being here. I was -- I think we lost -- I think we had casualties of about 10 people to travel. And yesterday, we were coming in and the team was coming in. And Nabil shared what looked to be -- I don't know how many people have ever worked with etch a sketch. And if you tried to draw circles with an etch a sketch, Nabil had this funky they were -- I don't know where you were circling, Nabil. But I don't know, hours later, we got in, but we were able to get the full team here.

[indiscernible]

He could. That's right. But yes, so it's -- we really appreciate everybody making the effort to be here. I think about Stan, to your point, it was pretty amazing to think that it was 6.5 years ago that we were actually at this location, and we go back in time and we look at where we were and literally, there was -- we didn't have cloud. We were just talking about that. And Dr. Steegen, we were having a little chat beforehand from Barco. She'll join me soon up on stage. She was saying when did you get into cloud?" And it's pretty amazing to think that the last time we were actually here in this location, cloud was part of the future.

And obviously, we've gone a long way since then. I also want to say that we're executing at a very high level with this team. And we're going to pull people aside. Any of you who can enlighten us. There was an article in the Wall Street Journal that said 80% of the S&P 500 companies announced good results and nothing happened in the market. And then we announced what we thought were pretty good results, and we beat the numbers and we raised and we're down 20%.

So it feels like a little bit of an elephant in the room. But from an investor perspective, yes, we'd love for those to enlighten us as we try to -- as we go on our journey, we figure this out. One of the things I'm going to talk about at Extreme today is going to be the quality of execution and the quality of the team. We have several new team members and then people who are taking on different roles. Nabil, who is going to follow me, and he's going to be talking about our platform and Extreme Platform One, our innovations in the marketplace and our differentiation from a technology perspective.

Nabil has been our Chief Product Officer, but he's taken on a new role of President of our AI Platforms. Two years ago, Nabil moved his family out to Seattle. We're very close to AWS and Microsoft. And we are way out in front in terms of what we're doing with AI technology. And Nabil is a thought leader in the industry, but also executing on this. And so you'll hear from him about how we believe our size is an advantage in this new world of AI and platformization, and we'll talk about that.

That's going to be kind of on the front end. Our teams, I'm looking at Kevin, the last time we had Investor Day at Major League Baseball, Kevin was 6 months old. And since he has learned an awful lot about the networking industry and is coming together as a key member of the team. I look at Monica Kumar, who's coming as our Chief Marketing Officer, world-class marketing, not only building our brand, recruiting amazing people in the team, elevating our status with industry analysts, but most importantly, working very closely with Norman Rice, who is now our Chief Commercial Officer and Sales and really focusing on how we invest dollars to drive opportunities in pipeline and funnel.

How can we be efficacious? How can we be very efficient in the spend? And Monica is a real pro, and she reports directly into me but works hand-in-hand with Norman. And so you'll have a chance to hear from her. Anisha Vaswani has joined us, significant experience as a CIO and in the tech space in Silicon Valley, she's come in not only as a CIO in terms of how we're scaling our systems, and we've revamped our systems for SaaS.

We'll talk a little bit about that, but also in her role as customer #1. And so she's working very closely as part of our process. None of our technology is going to get out to customers without first going through customer #1, which is Anisha and her team, and she'll share some of that, that she's doing. And also as we're elevating as a company moving upstream, we're spending more time away from just maybe a network operator or a network admin and more time with CIOs and having more strategic conversations, and that's what that's about.

And I mentioned Norman. Norman Rice has been with us for many years. Since I started, it's been over 10 years, hard to believe. And he has worn many hats at the company, but most recently, he's taken on the role of running sales in addition to other functions he's got, including supply chain. And Norman has done a fantastic job organizing that team, building up that team and getting very, very precise in terms of the processes he's putting in place and our ability working with Monica in terms of funnel, funnel conversion and how we call our numbers.

So I would just say that our team, all in all, that you'll hear from today is a big upgrade from where we were just a couple of years ago. And we work very well together in the quality of execution. I'm going to kick off here. I'm going to make a few comments, and then Nabil is going to follow me and talk about platformization, and he's going to talk about our technology differentiation, as I mentioned before.

I think there's going to be a lot of questions, so we thought we would just break there and open it up and let you ask questions. And then we'll take a break. And then we'll get into productivity at Extreme, customer #1 with Anisha. I forgot to mention Dr. Steegan, who's here. I'm going to -- if you had my comments, I'm going to pull her up on stage, and we're going to have a quick conversation. We also have Stevens Institute here, and we'll talk about our solutions, CIO to CIO, and then we'll get into market and go-to-market trends. And then Kevin will wrap up from a financial perspective.

So we say we're set up for success. These are the main pillars. The bottom line, as we look at our Extreme today in the industry and where we are, the bottom line is that we have strong fundamentals in the enterprise networking space, and I'll touch on that. Extreme is taking share. We've been winning large customers and success begets success. And we'll talk about how small gains on the customer and the share front side have a big impact on Extreme.

And it's really about our technology differentiation today and also where we're going with our technology. Interestingly, the competitive landscape, we usually get a lot of questions as it relates to competitive landscape. And I would say it's -- our competitors are actually creating tailwinds for us. That's our view of what's going on in the marketplace. And finally, again, this is all leading to an outlook -- financial outlook that we believe is very attractive.

So when we look at the industry, a lot of -- a lot -- we also -- in our audience today, we have industry analysts and people are talking about what's happening with this catalyst Cisco refresh because they came out and they said $43 billion of Cisco gear has got to be upgraded and refreshed. And that's for us to chase as well. And so that is a big deal for us as we look at refresh cycles and we look at competitively what's happening in the industry.

We have a chart on the right to look at adoption cycles of WiFi technology. WiFi 7, we have a different expectation for WiFi 7 in this cycle than we did for WiFi 6E. And you can see sort of that trend and the comparison, WiFi 7 is already 20% of our WiFi business and growing rapidly. So we believe that there is a wireless refresh that will be taking place and that will be fueled by pent-up demand from WiFi 7, and we talked about Cisco.

I'm moving up from the bottom here. We are seeing the macro fundamentals and trends have been strengthening for us. In the Americas, we're seeing strength in Europe. We've seen government solidify spending plans, solidify spending return and then Asia Pacific, in specific, we have been doing quite well in those markets, and we'll talk about that. So it's in our geos, and it's also across all of our verticals. We have horizontal solutions, but we apply them. We have solution sets that fit into our vertical segments in terms of government, in terms of education and health care and manufacturing and retail and entertainment across the board.

And we're seeing a very healthy spend environment for enterprise customers there. Finally, everyone is focused on AI. Every -- if you're a CIO or even in the boardroom, everyone is asking the question, how are we leveraging AI? And what tools are we using to take advantage of this new technology? What are the use cases? What are the outcomes? And in our case, we're a leader here, and we'll talk about that. And I hope at the end of this morning's session, you're going to walk away with a better understanding of why we believe and why we have confidence that Extreme is a leader here.

And as we are building this platform, what does that mean for customers in terms of how we'll change their use cases and drive outcomes. Outpacing the market. Net-net, we have been winning larger customers and taking share. And what happens when we win a large customer, for example, like the Japanese government, where these are -- it's a project worth tens of millions of dollars. This is a cross-functional project where Nabil and our engineering teams put together a unique solution for the government where we're taking our Fabric technology and applying our Fabric technology across a wide area network, providing them with a private cloud solution and cloud flexibility that is truly unique and our competitors couldn't replicate.

When we win that business, when you drop down and you look at customers like NTT or KDDI, these are the biggest partners in that country. They see that solution and Extreme winning and then their teams train up on our technology. We then start working with those partners in different ways, and they start bringing us more opportunities. So the point here for us is as we're moving upmarket and winning some of these bigger customers, success begets success.

And as we start winning large customers, it spills into the partner community and then we start winning more and more business. It also helps our brand recognition. And you're also seeing that in the marketplace as more and more people are aware of Extreme and they want to hear from us. And we'll talk about how the competitive landscape is also driving that. But net-net, we're growing at twice the industry.

And you'll hear Kevin talk about the fact that as we look forward, we're looking forward at double-digit product growth and overall revenue growth. And you'll hear us talk about earnings growth in the 20% range as we look out over the next 5 years. These are some of the verticals. The point here is you might recognize some of the logos. We are actively engaged with all of these customers in developing their networking solutions and working with them.

So it's across all of our verticals. It's across all of our geos. These are names that you know. But for us, this is where -- when we're successful in penetrating and getting into these kinds of customers, usually, they have multi-vendor environment. Usually, there's an opportunity for us to take wallet share. And as we take wallet share, this is where we would say large crumbs. If you look at our relative market share and then you look at the impact of winning some of these larger customers, it has a bigger impact on Extreme.

So as we're able to move upmarket into these kinds of customers, success beget success, references, large customers feel more confident going with Extreme, knowing that we are in these kinds of networking environments. And then that gives our sellers and our sales teams confidence and a little more swagger when they walk into these accounts. And then next thing you know, we get in and we win more.

In addition to the funnel of opportunities that we get, it's also the quality of the funnel. And when we get through into a head-to-head competition, we're winning. And that's the exciting thing that's giving us a lot of confidence. Why are we winning? This is a quote from one of the largest defense contractors in the world, actively putting together a comparison between Extreme and a large networking vendor that they've been with for many, many years. And because of the strength of our Fabric and the automation of what we're able to do in terms of how we provision services, and I will encourage all of you in the break to go out and visit Mark De Laval, who is showing Barco implementation, where we have a mission control setup where you can see our technology at work and the Fabric at work.

But our ability to provision services across a complex enterprise network that may be distributed is unique. And literally, this is a customer quote that said, "Oh my gosh, what you guys have just done in 6 minutes literally takes the other team 6 hours." And so then we've had a lot of fun with that, and we've done sort of the photo play and the Extreme people reading the newspaper, well, the other vendors still working feverishly away to try to stand up the network services that are required.

But this is the power of our Fabric, and we'll talk more about Fabric technology. And when you get into environments like manufacturing where milliseconds matter and your network has got to be up. Renschler is a company that's based in Germany. They're also in Massachusetts. They are a very active pharmaceutical company. I think it's something like 25% of the new drugs that are coming out there involved in the manufacturing.

But here, again, it's -- for them, it's all about Fabric. It's about being able to segment the network into services. It's about the resiliency of our platform and the security. And it's very popular when we get into manufacturing type of environments. Nabil will talk about how an enterprise environment is very different than hyperscale data center environments where you might hear more about Fabric.

In this case, everybody knows we do a great job marketing our sports and entertainment franchise and the business that we do. This is really about complex wireless environments. And no one does better than Extreme in complicated wireless environments. And I would say complicated and complex environments in general. But this is where we shine. The giants were the first Major League Baseball team to actually have WiFi in their stadium. They are staunch supporters of Extreme, and I would say they're right out on the edge of how do we leverage AI and then how do we leverage networking capability to enhance the fan experience.

So for them, the 3 things that really matter, it's the game itself and the players, it's the fan experience, and it's the network that they're using to deliver. This is where Extreme shines. And then Kroger, Kroger is one of the largest cloud-managed wireless networks in the world. We have 2,800 stores in Kroger that are running in a private cloud environment.

One of the unique things that Extreme brings to the table in addition to our Fabric, in addition to complex networking environments is flexibility as it relates to cloud. And we have more and more customers like the Japanese government or like German customers where data sovereignty is becoming more and more important in a world of more complicated security landscapes where people want to have control over their data.

So they want to bring the cloud inside their environment and run the cloud inside their environment. Who offers that capability? Extreme is the only player in the industry that can offer the kind of cloud choice and cloud flexibility that we do. And so this is something that we've done for Kroger, 2,800 stores and a private cloud running in their environment was a big differentiator in how we won that deal.

They're also using our technology. I would tell you Kroger grocery store is a complicated networking environment. When you look at all the sensors they have and how serious they are about leveraging technology to drive the customer experience in their stores. They have methane gas sensors hanging from the ceilings over the fruit section to determine how ripe the produce is and at what point they clear the produce. It's pretty incredible how they're using this.

And it's a petri dish for the Internet of Things. And obviously, we're their partner on this journey. If Extreme is in a Kroger environment, we can be in any retail environment. And so this is where we leverage the relationship with Kroger and the kinds of things that we're doing to drive other relationships with other prospective customers.

All of this comes into Platform One. So Nabil will come up here soon, and he'll talk about platformization and what does that mean. But effectively, what we're doing is we're bringing our entire portfolio and our entire solution set into a platform. And the platform effectively the way that it's designed and the way that it's architected is such that it will make it a lot easier for customers to consume services and will make it a lot easier for us to bring new capabilities and services at a pace and a speed that will be faster than what was ever available before.

The net-net for me around AI and what does this mean is it's about automation, it's about visibility. It's about use cases where you're saving customers' time and you're providing better visibility into the solution set. We believe because of our size relative to larger competitors, that it's an advantage. This is really complicated stuff. And if you're standing up a consumer-based AI offering, the requirements in terms of accuracy relative to a mission-critical environment on -- it's got to be right.

The data has got to be accurate. When you get into B2B applications, this is where you're dealing in a whole new universe of complexity. And this is where, for us, we believe that our size is an advantage in terms of what we're able to bring together and then the time to market and speed to market advantage that we'll have. So platformization for us is a strategy. Agentic architecture for us is we built a true Agentic architecture that will allow us to roll out new services and new agents very, very quickly, and that's also something we'll touch on with Nabil.

I talked about our competitive tailwinds. Look, any time you take 2 huge companies and HP and Juniper are fairly large companies, there's a huge synergy requirement. They have to let a lot of people go from a cost perspective. They have a lot of really complicated decisions to make in terms of their technology road map. They just came out and said they're revamping their partner program, but they're not addressing Juniper. So if you're a Juniper partner, I don't know what you do with that. But there's just a lot of confusion out in the marketplace, and we all sell through.

So as we look at it, our lens, there's human talent. We've picked up -- we have been picking up talent from these companies. We're very actively doing that. So we have people who are motivated and energized to join the Extreme team. And we have partners who are coming over and looking at an economic outlook where Cisco, for example, is -- the big news is completely overhauling their partner program, it appears to favor the top 50 partners. And the other 55,000 partners out there have to jump through more hoops.

Their economics just got worse, and they're going to be looking for alternatives. And so this is an opportunity for Extreme to step up. With HP and Juniper combining as one company and with Cisco in their market position the way they are, Extreme is, by size, the third largest player but we become the choice, especially as people are considering AI and having the most modern tools, how long is it going to take for the HPE/Juniper people to create this true Agentic platform with Velocity. [indiscernible] I want to be with a company that can bring me kind of the most modern advancements in networking technology.

We're getting more at bats. The net-net, the headline of this is that we're getting more at bats at talent and partners and customers, and that's real. So all of these things are leading into a financial picture that for us is attractive. We looked at our growth rate. We have 6 quarters of consecutive growth. Typically, we have seasonal dips, but we've grown right through that. And we have 15% year-over-year growth in the last quarter.

Our ARR is growing at a faster clip. We talked about already the 10% revenue growth number, 20-plus percent earnings outlook, EPS and then just the scale of our ARR as we go forward. And the drivers is what we've been talking about. It's -- we're winning upmarket with our Fabric, with our Cloud Choice, with our complex networking solutions and then the future of Platform One and how it's all coming together and the advantage that we have. The bottom line is that people want to talk to Extreme more now than ever before. They want to hear what we have to say.

And as they evaluate the landscape, it's creating opportunities for us. So that's the high level and the high-level points. We're going to dive into each one of these. But before I invite Nabil up, I have Dr. An Steegen, who is with Barco. Barco is an important partner of Extreme. And so important that we haven't offered her a chair. Maybe I chair. But Barco is -- it's Belgian American radio company from 1934, believe it or not, they've come a long way since then. An has been -- has a long and distinguished technology career. She was at IBM, so she's been here in the U.S. for many years.

And then she was also on the Board of Barco before she became CEO. So we also share that. We have that in common. But one of the things that is interesting about Barco as we talk about complex networking environments, and they have command and control systems that they bring visibility. And when you look at what they're solving for in complex environments like in health care, robotic surgeries, when you look at disaster recovery and oil and gas environments, it's -- you've got a very complex solution and a very interesting relationship with Extreme. So thank you so much for being here. I'm going to get a chair and come sit next to you.

Thank you.

I do this all the time. I get in front of a mic and I talk in front of the mic, but I actually have. What's this?

And I have to advance the slide. Okay. And I think we have some visuals here. But An, I think it would be good if we just start off maybe if you want to share a little bit about Barco [indiscernible].

So good morning, everybody. Thank you very much, Ed and Extreme Networks for inviting me here today. It's a real pleasure to be here. And it's exciting times, I think, for both companies, definitely times where technology is going to make a difference. So very quickly, Barco, we're a global technology company. We're specialized in visualization, collaboration, connectivity and also automated workflows.

Basically, what you can say about Barco, we do everything in the visual and audio chain except making cameras. So we do everything in postproduction, transmitting of data, rendering them to any format. And of course, we make high-end professional projectors as well as high-end medical displays. But the future is a little bit more than that. So we're sitting on data. We literally transport data through our networks. So all about what can you do with data, can we basically make intelligent workflows out of that.

That's also part of our road maps moving forward. So we're in 3 markets, very critical mission markets, as you said, enterprise, entertainment and health care. And they are truly mission critical, which means if you're in an operating room and you need a network in an operating room, there cannot be any failure. Even when you're in a cinema theater, you do not want the projector to go down. So mission-critical, no failure is really important in all the markets where we're in.

And can you talk a little bit about what is the networking challenge overall that you face when bringing all this together?

Well, there are definitely a couple of challenges. So first is latency. So again, example, operating rooms in a hospital, more and more surgery today is minimal invasive or surgical robots. Well, there is one commonality between the 2 is basically the surgeon is not longer looking at the patient. It's because the camera, the endoscope is in the body and the surgeon needs to look at a surgical display. Now of course, you cannot have any latency, no delays on the video.

And surgeon can be remote.

Can be remote, can be in New York. So there were demos done where there was a surgery done in Italy, while surgeon was in New York. So yes. So you see the future is really -- and again, latency is critical. Other things are redundancy. So again, system can never be down. So you need to make sure that you have enough redundancy built into the network.

Cybersecurity, more and more important. We always say every system that we design, every pixel needs to be secured by design. And that's important. And then interoperability. So more and more, we hook up many systems from many vendors to our network, to our operating systems. And the question is how can we easily hook those up? And that's, of course, where Extreme Networks comes in and can help us.

Yes. Well, that's an easy segue to the next question, which is. But it's really about the Fabric technology and maybe your experience with the Fabric technology and how in these complicated environments, Fabric comes in and plays a role. And I know, as I said before, we haven't set up -- we're actually connected to a Barco environment. So when we take a break, I encourage you to actually check it out live and you can dive as deep as you like into the technology.

I see [indiscernible] back there, who will take you through and explain some of the challenges that we face. But I'm curious as to through the lens of Barco, how you think about it.

The easiest one and the demo is also all about control and command and control centers. So traditionally, these control rooms, as you know, air traffic control rooms, they're very siloed. So they're on one location and the data is reprotected in that location. Now the future is no longer siloed. It's really distributed. So you have many remote control centers that need to be somehow they're distributed, but the operation system needs to be aggregated.

So you need to basically be able to run an operational system across all those distributed sites. So that's the new trend. So yes, if you think about that, I think from Barco side, again, we run an operating system in a control room. So video distribution, audio distribution workflows on top of that. And we need to make sure if they're now all distributed that all of the data come together. And we do need Fabric clearly to basically make sure that we have the best possible connections between all those distributed sites.

And my team tells me that, so I think I dare to say this here, but they basically say, Fabric is magic because we have now many use cases where we deploy Fabric together with Barco control and where you really see the advantages. Some of the advantages are clearly in just the way -- and you showed it, how easy it is to implement the Extreme switch and how easy it is to configure it.

That's already step #1. How easy it is to pick up in an automated way to pick up the different devices, the different systems on that network. Hyper -- we said a hypersecurity, security is important. So the hyper segmentation that you do to make sure that users, devices are really dedicated to a subdomain and that can be laterally protected then from lateral attacks. So that is, of course, risk mitigation that we do need on our networks, redundancy, the way that you build in redundancy, the way you dedicate devices and users to subsegments and making sure that you choose the fastest path to connect is also very important.

So all of that fits very well, again, on our mission-critical infrastructure. And if you think about it just again, like you said, surgical -- remote surgery, it's something it's happening. Remote diagnostics, you do mammography, but the physicians are sitting somewhere else, but you need instant data.

We're talking about oil and gas and disaster recovery for oil and gas, right?

Yes, many opportunities there. Yes, yes, yes. So I think, again, the world is going distributed, but we need operating systems that combine everything together from these distributed sites. So is that happening? We have 17,000 installs -- control room installs today. First of all, they need to be upgraded, but also many of those are evolving into distributed sites. So there are many opportunities in command and control.

We're in so many different vertical segments present. And again, we see actually in almost all these segments, this distributed -- the need for distribution and bringing the data then back into one central place. So I think that's many opportunities that we can work on together. We have already many examples also that we work on together. So I think we can say one Bayercrop science is one where extreme networks of Fabric as well as Barco control, we basically made the management of many chemical sites of Bayer crop science actually much more efficient, much more simplified, but robust, resilient, secure, and I think that was well appreciated by the customers. But many more to come.

1

Many more to come. And I think one of the issues that -- I mean, obviously, we look at it through the competitive lens and one of the things that we want to highlight for investors is the differentiation of our technology versus our competitors. And a lot of things that we're talking about here through our fabric technology just can't be replicated. And I know it's one of the things we can -- Mark can share a few things in our live environment, but there's a resiliency to the fabric technology.

And there's also the acknowledgment of where you're playing. So if you're in hospital rooms, it's different than being in a data center. If you're in an oil rig, it's different than being in a data center. So these are -- I don't want to call them messy environments, but they're -- in a way, the enterprise environment is a lot more complicated in terms of the technologies that exist and the potential for failure. And so having a technology that has this subsecond convergence where things just don't go down that we can demonstrate, this is where we've won.

This is how we've been winning some of these larger accounts. And the largest agricultural equipment manufacturer in the world chose Extreme after a lengthy, lengthy competitive process over our competitor, the largest -- one of the largest competitors in the space because they couldn't replicate. And after many, many attempts, it couldn't be replicated. And so again, it creates new opportunities for us. So where do you see the opportunities?

:p id="D01" name="An Steegen" type="D" />

Well, again, if the world is going to go distributed, so all these segments where you're going to see distributed sites, that's where the opportunities are. And we see many of our markets moving into that direction. And again, it's like you said, the backbone is very complicated, but the user should not feel that. It should be really simplified. They should feel secure. It should be resilient, shouldn't fail, but it's up to us to make sure that the end user, it's easy to use for the end user. And I think that's something that we have and the combination of both technologies is definitely going to make a difference there. I'm pretty convinced about that. Yes.

So Barco has been growing at a great clip. And under your leadership, the company, I think, has never been stronger. So congratulations.

Thank you for that.

And we're looking forward to growing with you. And I would say what I'm looking forward to is the and we'll segue into this conversation, and we were talking about this earlier, which is what happens when you take the capability of Fabric, right? And then what happens when you enhance that and then you add Fabric fully into Platform One, for example. And now you have enhanced capabilities of Fabric, enhanced tools, enhanced visibility that just brings your solution to yet another level. So that's what we're really excited about.

absolutely. Yes, AI is going to make a difference there. Absolutely agree. It's going to speed up things. That's one thing. It's going to make it more robust, more learning you can do. So this is definitely going to help. Absolutely.

Thank you. Thank you for sharing, An, I hope you don't mind, but well, I think we're going to let Nabil come up first before we open up to Q&A. Nabil, I'm going to turn it over to you. I think we've given you a little bit of a background, but I think people want to hear about our competitive differentiation.

Yes, I think so.

And this platform. You take that.

And when you put investor community and the industry analysts in the same room and you put a technologist on the stage, then it's like how far down the technology rabbit hole do I want to go? But I'll try to address both of the audiences here because while technology itself could be very complicated, its impact on the enterprise value is very clear and very simple.

So we'll be able to address both of them. Okay. So one theme that I think everybody would say came out very loud and clear from Ed's presentation was that we are winning more and more upstream. It's not that we have never won big customers. We've always had big customers that now we are seeing a big systematic improvement when it comes to large customers in every vertical and every geo out there.

So I wanted to start from there why? Why is it that the big customers are really putting their confidence in us, right? So what is it that the best customers look for? Well, first and the foremost thing, obviously, they are looking for a breadth of a portfolio because big networks, big complicated customers out there, they're not buying point solutions. They have data centers, they have campuses, they have branches, they have across the van, they have security requirements.

They have all sorts of different things. So they want a vendor that has the portfolio. And not just have the portfolio, they're looking for a vendor that has very specific differentiation in various portions of their portfolio. But is that the only thing that they're looking for? No, absolutely not. The next thing that they look for is the speed of innovation.

Because when a large customer buys into a vendor, it takes them 2, 3, 4, 5 years to just roll it out. So they are not buying it into your product for that point, for that quarter, for that year. They want to partner with you, making sure that you can take them to wherever they need to go to differentiate in their industry. So they're looking for the portfolio. They're looking for technology differentiation.

And most importantly, they're looking at your, the vendor's ability to innovate faster than anybody else in the market. And these are the 3 things that we check boxes on each one of them. And that is why you see more and more large customers not picking us up as alternatives, but as the first choice. So what are some of these key advantages that I'm talking about?

And this is a very quick summary. So let's just start from the bottom. You heard a lot about Fabric. When we acquired Fabric 7 years ago, it was a campus core technology. Today, it goes everywhere where an enterprise can possibly want to go from the data center to the campus to the campus edge, across the WAN, into the branches, into people's homes, everywhere.

You remember -- some of you might remember from last 2 years ago when I stood up and said that one of the key strategy for us is Fabric everywhere. And here we are where we can deploy Fabric in every and any portion of an enterprise. And that, too, without a click of a button, not even with a click of a button, but without a click of a button. So Fabric is at the core of our technology differentiation. But WiFi. Now WiFi, as you know, is -- this is what the new generation things Internet is.

Back in the day, it used to be a cable hanging, while the new generation thinks it's WiFi. My 5-year-old, he knows that if the WiFi goes down, he can't see his cartoons, and that's mission-critical, right? So WiFi. And I know the person -- when it comes to WiFi, somebody that is sitting in this room, maybe in the front row called us the kings of the complex environment when it comes to WiFi, and he's absolutely right.

Whether it is highly distributed environments or it is highly complicated, highly complex, concentrated environments. So Ed gave both of those examples. On one side is Kroger with 28,000 stores, highly distributed. On the other side, pick any of the stadium where there are 10,000 people with -- or 100,000 people with 200,000 devices crammed into a stadium. We go across both of those and everything in the middle. But we don't stop there.

Then comes security. And as Dr. An mentioned, security is becoming more and more important. It is no longer a bolt-on on top of a network. It has to be pulled into the network. So from hypersegmentation, which is in the Fabric, all the way to universal ZTNA, which combines NAC and ZTNA into one environment and both of them coming together and working together. So isolation not only just in your over-the-top model, but down into your data plane, all of them together.

But we don't stop there. Let's continue up stack. Then comes cloud. Well, cloud is where your management sits, that's where your security management sits, that's where your analytics sit. I'm not going to go into the feature and functionality of there, but I'll give you a simple differentiation that is resonating across the world for us, and that is our unique ability to provide you the same capabilities of the cloud, either in the public cloud or a private cloud or on-prem.

Again, Ed gave examples for that. Kroger, one of the largest private cloud customers out there, why private cloud? Because that is where all of their operations live, and they want to make sure that it is specific to them and is very secure for them. Now you go to a different portion of the world, you go to Japan, [indiscernible], there, all of that cloud is actually on-prem. Why on-prem?

Because their biggest requirement is sovereignty. They want to make sure that they can produce a sovereign cloud on it where all of the data and all of the controls are within their jurisdiction, right? So whether you go from public cloud or private cloud or on-prem, same cloud capabilities. And the key thing here is if you look at our competitors and our vendors, yes, they all have on-prem options, but those all-prem options are different applications, with different feature set, different requirements in most of cases, different licenses.

So that's cloud. And then on top of it, you can have the best technology in the world, but if you can wrap -- if you cannot wrap it up in the right commercial model for that customer, then down goes that technology differentiation. So in addition to all of this technology differentiation, we have the flexibility on the commercial side from traditional models all the way down to consumption and everything else in the middle, and you'll hear a lot more about it later in the day as well.

And then I cannot forget our world-class support because eventually something will go wrong. And when it does, can you support the customer. The key message here is you do not win because of one thing, and you do not get displaced because of one thing. You win because you create a portfolio that addresses the needs of the customer. You win because you create very specific differentiation in each one of those layers.

You win because you put them together in a zero friction environment, you wrap it together with a commercial model that is flexible and meets the need of the customer, and that is why you win upstream. And that is why you see examples after examples after examples across the world of us winning larger customers from our competitors in a head-to-head fight.

So that's -- in a nutshell, that's really what our portfolio strategy is. We talked quite a bit about fabric. I'm not going to go into the technology detail of it, but I will answer one question that I get asked all the time. Well, why is it that you can't bring a data center fabric into an enterprise environment? Well, you can, but it just doesn't work. Why? Because I know Ed used the word messy, so I'm going to stick with that, but that is true.

Enterprise environments are messy. What do we mean by messy? When you're building a hyperscale data center or a very large data center, what do you do? You get new space, you get all new servers, the latest and the greatest and their racks and rolls of servers out there nicely cleanly plugged in and you say like, okay, this is my data center, and now I'm going to configure it. It's a simple [indiscernible]. I can script it to be automated.

Well, that's not a good example. I should be able to script it. I would say that anybody can script it to be automated. But when you come into an enterprise environment, you are dealing with multiple geolocations. You are dealing with multiple skill sets because how many of the enterprises actually send $200,000 a year worth of engineer to go work on a branch.

If you do, you have a lot of money because others don't. Then you are dealing with multiple generations of technology. Do you know on average in an enterprise environment, how many different generations of technology there are? 5.5. 5.5 generations of various different technologies, that's the messy environment. You simply cannot take an IP fabric from a data center and assume that you're going to throw it into an enterprise environment and it will actually work and that is what translates into what Ed was talking about. You can take hours and hours and hours just trying to set it up.

This Fabric is built from ground up to work in those messy enterprise environments. And that is the unique advantage that we have. We have more than 10,000 deployments out there. It's not 1 or 2. It is 10,000 deployments in every geo, in every location, in every vertical. And what is the biggest advantage? In spite of all of those complexity and that messiness, it is 90% less when it comes to operations between this fabric and an IP Fabric.

And before one of you or any one of you thinks that we are like, "Oh, you guys don't have IP fabric, that's why you're saying it." No, we actually do have it and we sell it in the telco side of our equation. So we have both of the fabrics, the right fabric for the right environment. And now with Platform One, it's just the magic just got better because the advantage is, yes, fabric just simply works, but you put Platform One on top of it.

And now you have real-time visibility of that segmentation, and you can do a lot more with it. And with the power of AI on it, there are so many more use cases that get unlocked.

All right. On the WiFi side. Now as I said, WiFi is Internet when it comes to normal people or everyday people, I shouldn't say normal, but everyday people. Like when you and I are talking about it, when we think about Internet, it is WiFi. And WiFi is becoming more and more mission-critical as well. We are actually seeing more and more enterprise applications run over WiFi as opposed to wide environment. So WiFi is no longer like, "Oh, well, it's a coffee shop, WiFi, if it goes down, so what, right?" WiFi is mission critical at this point in time. So for us, biggest portfolio, widest portfolio on the 6 gigahertz spectrum, so WiFi 6 and 7, you heard us talk about we see that WiFi 7 transition is a lot more robust compared to WiFi 6. By the way, that also drives changes on the edge switching side as well because now you need those multi-gig ports and so on and so forth.

So it's a network transformation out there. Now for us, what are the biggest advantages. First, when it comes to complex environments, nobody does WiFi as good as we do. And what are those complex environments? And guess what, most of the large customers are complex environments, whether you're talking about stadiums or venues or you're talking about distribution centers or you're talking about hospitals, these are all complex environments, and our technology actually works really, really well on them.

Number two, we are probably the only vendor out there that at this point in time is 100% cloud, 100% architecture agnostic. If you have come up in the Wi-Fi world, you would probably have heard all of these debates. Do I deploy a centralized controller based WiFi or do I [indiscernible] cloud first and distributed. At this point in time for us, we don't really care. Most of our large customers deploy both of them under the same platform 1 license. That's the second really big advantage for us. And look, the last part I would say is the proof is in the pudding.

When it comes to complex environments, we have more than 100 venues around the globe that are running day in, day out on our WiFi and as Dr. Ann said, going down is simply not an option if you're running an airport, it's not an option. If you're running a health care environment, it's not an option. If you're sitting in a stadium and your big boards and everything are running on WiFi, that's simply not an option. WiFi is mission-critical.

And when it comes to mission-critical WiFi, there is nobody else that does it as good as we do. Okay. One more technology differentiation, and I promise then I'll talk a little bit about strategy, right? And the last 1 is the cloud part. Look, we continue to grow our cloud. We are more than 3.3 million devices connected to our cloud. And remember, these devices are not just being managed but these are 3.3 million data streams.

And I want you to hold that thought in your mind because I'm going to come back to that when we talk about it yet. And then at the same time, we talked about our cloud continuum public-private on-prem. We started doing that 3, 4 years ago. I actually remember it was probably the last 1 where we stood up and we said, let look, the cloud definition is not the same for everybody, for some people when you talk about cloud, they think AWS. For other people, when you think about cloud, they think about their data center and for some people when you think about cloud, they think of a cage where they hold the key. So that is the continuum from public to sovereign cloud, and we provide all of them.

And then when it comes to cloud, there's more and more requirement for certification around the globe. That is just something that's the world that we live in that is proliferating around the globe, and that is something that we not only are heavily investing in, but we are further on this than anybody else. So whether it is fabric, whether it is WiFi, whether it is cloud, we have specific differentiation in all of them. But the beauty is when they all come together to provide that value to our customers.

Moving a little bit off of this and coming back to platformization because I remember last time when I talked to the investor community 2 years ago, we said we are embarking on a platformization strategy. And there were a lot of questions around what the hell is a platformization strategy, right? It was early days at that time. Now it's a little bit more common. So we'll take a quick kind of swag at it. So we still believe platformization is the core to our strategy. But let's say why. Number one, what's the advantage of the platform to the customer.

And these are something that are becoming more and more relevant. The first and the foremost is it's end-to-end control, it's end-to-end portfolio. Why is it important to the customers? Total cost of ownership gets less complex. It reduces your operational inefficiencies when you're running the entire thing on 1 portfolio.

Number two, and this is really interesting, it's 0 friction expansion across [indiscernible] and technologies. My CIO is sitting right here, those of you who either know CIOs or have been CIOs, imagine the time when you have to take multiple vendors and actually integrate their technologies together, you probably spend most of your time and budget on that. Platforms bring it down to almost 0.

Last part is vendor sprawl. Vendors sprawl is a real thing, especially for larger customers, platforms help with that as well. Share telemetry plus shared AI. This is one of the most critical thing here. When it comes to AI, the value of a data set is great. The value of multiple data sets together is amazing. The value of AI grows exponentially as you have more data feeds going into your system. And by the way, there is simply no way to accomplish this without a platform and a data architecture to back that platform up. And the last part is obviously compounding value.

This is the flywheel effect. Every time you add one more solution into that platform, every existing solution gets better. You add Universal ZTNA to our platform, not only does your security get better, your fabric gets better as well. You add WiFi into your platform. Not only does your WiFi get better, but your universal ZTNA gets better because now it is all the way to the end client, you get the part.

When it comes to platform, this is a flywheel effect. Once you get the flywheel going, it's very difficult to get off of that. Okay. So what's the value to us as a company? Well, why are we spending or why have we spent money and so much effort in building platforms simple.

Number one, stronger recurring revenue. We do sell a lot of devices. And for every device that is attached to a subscription that is higher recurring revenue for us and you have seen our growth in recurring revenue over the last few years. And Kevin will walk you through what we are looking at as we move forward. Gross margins, very simple.

I'm not going to go into that software and subscriptions a much higher gross margin compared to hardware. So as the mix changes, it is better for us as a company. But the middle one is the 1 that is really important to me. That is the customer lifetime value. A hardware sale is a onetime sale. I'll sell you a switch. I'll sell you an AP and 5 years, 7 years later, I'll come back when you're refreshing. But when I sell you a platform and I sell you a SaaS application, I'm working with you every single day to help you get value, drive value out of that and that is a lifetime equation.

And what happens, customers start building their operating models on top of your platform. And now you're sticky sticky not because you have put some artificial boundaries where customers cannot get away from you, but sticky because you're providing that value to them every single day increases the customer lifetime value, right?

Last part, it is scalable for me from an innovation and R&D point of view. The cost of bringing one new thing to the platform is considerably lower than bringing a new product. So as an R&D leader, as a technology leader, that's how I scale without scaling my R&D budget in a linear fashion. And the last part, larger wallet share at the customer because on the platform, the most interesting thing is one more thing.

And you have seen that in every other industry, once the customer is on a platform, selling them the next widget, the next value, be it an app, be it an AI agent or whatever have it, they're all much easier. So value to the customer value to the company. But then why is it that we don't have so many platforms out there. Why isn't that every company, every networking company is building a platform and they've already shipped a platform because it is difficult to build platforms.

You can take this. It is difficult to build or you can take it as this is the moat. This is why we are so far ahead of everybody else because this is the work that we have done. Number one, you can't just build platform as a product. Platform is a multiyear commitment to a full stack execution. What do I mean by that? How many of you were sitting in a room like this where 7 years ago, I stood up and I said, like, hey, we acquired these 6 companies. And the first thing we're going to do is combine all of their portfolios together, we call it the Universal portfolio. You were there, you were there, a bunch of you were there. That was 7 years ago.

You can't just stand up and build a platform. You have to bring your entire portfolio together from the hardware, from the operating system, from the AI, from the data part up. And this is a multiyear effort. Why is this important? Some of our largest competitors have been trying to do it for 10 years and still haven't done it, and some of our other big competitors are just starting on this journey.

You cannot enter the world of platformization without that. Second, really, really important one. Why do you need to have all of your portfolio in oned1 architecture data. When people talk to you about AI, they are really talking to you about data. The AI revolution is actually a data revolution. And the old adage that garbage in, garbage out, it is absolutely true for AI. You can have the best AI agentic system and you throw in garbage data in, and there's garbage insights that come out of that. Building that data architecture is absolutely critical. Now you can think in the market and see how many of our competitors actually have it.

And let me tell you this, if you have 7 platforms, you don't have any platform. When you go to a platformization strategy, there has to be one because all the data has to be combined together. There are a couple of more 1 -- this one is really interesting to me because people think about technology, but one of the biggest hurdles to building a platformization is actually your organizational structure. The silos within because you have different business units and stuff, different requirements.

Your go-to-market becomes different, trying going out and selling to a large customer, where you open up your jacket and here all of the watches that you can buy from me versus you go in and you have one go-to-market model, which is you get onto the platform and you buy the value that you require. Last one that I would point out here is the first-mover advantage. We were absolutely the first ones that announced platform. We were the first one, the GA platform earlier this year, and I'll show you how that is doing.

That advantage only compounds. In the world of AI, once you get ahead and unless you stumble that flywheel effect that I've talked about that make sure that you stay ahead and that distance between you and your competitors only increases. It becomes very difficult to catch you. Why because you were the first platform out there, the more customers use your AI, the better your AI gets, the better your AI gets, the more customer, they use it, that's the flywheel effect and time is the biggest metric in it.

So once you're ahead, it's very difficult to catch it up. So we introduced Platform ONE back in December, last December, we [indiscernible] in July. So it's been out there for about 90 days. So you could ask me, how is it doing so far? So the 3 things early days, 90 days is not a long period of time. The 3 big things that I want to point out to you. First, there is a huge amount of interest and adoption from our customers early on.

Now before you ask me exact numbers, Kevin is sitting right there, he told me not to say exact numbers, but I'll give you an idea nonetheless. So it is tens of thousands of devices that are already connected to Platform ONE and it is hundreds of customers. And when I say 100s, it's not 101, it's multiple, multiple, multiple hundreds. And these are -- this is in the first 90 days. So clear adoption and clear interest that we see from there. Behavioral shift. This is very important to us. Is it just that, okay, well, now this is a new thing, but I'm going to go connect. No.

By the way, commercially, when you get a Platform One license, you have right to use for Platform One as well as all of the existing ExtremeCloud IQ applications as well. So the customer has a choice they can use whichever platform that they want to use. And we are seeing very clear preference from our customers to use the workflows in Platform One, specifically the ONE that are built on top of the AI Corp, which brings me to very early but still measurable AI-driven gains.

So what are these gains? Well, the most important gain that you're getting in from AI is capacity, which means that, hey, I needed to spend 10 hours to do this thing, AI does this 10 hours. So now I have 10 hours to go spend on something else. That's the gains. And just to give you an idea, our early adopters, they are on track to gain a capacity of up to cumulatively across them around 300,000 hours a year.

If you know the average price of a [ net OP and sec OP ] person out there and you can look it up, you can do the math of how much capacity gain that is, and these are just our early adopters. So early days, 90 days, but we are extremely confident with this, and we are seeing our customers really jumping on to it and adopting it. Now of course, we have a lot of customers and a lot of devices, so it is a journey for us, but very good early signs.

The last part, when Ed asked me to take over this additional role on the AI platform side, the question that we talked about is the job to build AI and the answer that we both came up with was no because these days, when I go buy a toy for my 5-year old, it also says that it is built on AI, although I don't really know whether I want AI on a 5-year-old toy or not. But AI hype is at the height of it. So the biggest question really is how do you build an AI moat. As an investor, the biggest question you should be asking or you probably already is asking is that you stand up here and you talk about all of these AI things and then I turn around and look on YouTube and TikTok and in the media, and it says like, "Oh, a high schooler with like a cursor prompt can build anything in 5 minutes."

So where is the reality. The reality is, yes, you can build anything, good luck trying to scale it and running it on enterprise. So how do you build an AI moat for enterprise? And this is my last slide and the last message that I want to leave you with. There are 2 AI moats that we have built, and we will continue to make them bigger and bigger and bigger, and this is why we are so confident on our prospects on AI.

Number one, I talked about early is a complete unified data across the entire portfolio. Single data architecture, single data pipeline for every piece of equipment every product that you can buy from Extreme. Now I'll let that sink in for a second. How many of my competitors can actually stand up and with a straight face, say that? And if they don't, you should ask them. But how are you going to get to that?

And until you get to that, how are you going to deliver the cross-domain AI advantages that every company seems to be promised on? This is an AI moat that is difficult to bridge. Second one, models are commoditized. There is a new model that comes out every day and every model. They're small language models, they're large language models, they're domain-specific models. There are so many models.

Just like we have been cloud agnostic, we are model agnostic as well. So we can actually go ahead and use any of the models. Now you'd be like, well, anybody else can do that as well. Yes, they can with a lot of spend and a lot of money. And you guys have seen that in the industry that a lot of people are like, "Hey, I am spending a lot of money on AI, but I don't know where the ROI is so many millions of dollars went down the drain" Why? Because they're experimenting with AI. They don't know how to build AI for unit economics. And this advantage that we have, which is a proprietary technology that we have built, and we have filed patents on this as well, is our ability to use the right model with the right cost for the right query in real time across our entire portfolio.

These are the 2 big moats that we have developed, and we'll continue to build on top of that. But there are other advantages that we have as well. Again, I talked about we got on this journey many years ago, building Universal and a single [indiscernible] OS and all that kind of stuff. So that is an advantage. One that I want to talk about is the AI for unit economics. This is the difference between productization and experimentation.

So one of the study that recently came out is that, hey, 95% of the projects that people Enterprises are doing on AI are going to fail. Very interesting. Everybody focuses on that 95%. But I'd like to focus and Anisha is sitting here, we were having this conversation recently, we like to think about the other 5%. So what happens to the 5% that are actually successful. And if you double-click on that report, it shows that those came from vendors who actually understand how to productize AI without blowing their costs away.

So if you can't build AI for unit economics, you can't really have an AI portfolio. This one, the third one is really near and dear to my heart, which is creating engineering capacity through AI. Because in the end, Ed said, we are the third vendor in the industry, but we are quite a bit smaller than the one ahead of us. And that translates into the budgets and the R&D that is available.

Can I actually go compete person to person with my larger competitors? No. And I don't want to because not only are we putting these agentic systems into our product, we are actually utilizing them to create capacity with it.

I will leave you with this number, and you can do the math like this year, and this was still an early year for us we actually created capacity equivalent to 12,500 man hours this year. And next year, we are on target to create 150,000 hours of productivity without additional cost associated with that.

This is how we compete with our larger competitors. This is when Ed was talking about that, hey, this is the advantage that we have. this is the size advantage. By being nimble, we can actually go and nullify the dollar advantage that our competitors have. And this is a huge use for us. AI Plus platform is the advantage. I have said that many times before, I will repeat it. If you do not have a platform strategy, your AI is a chatbot.

And if it is not a chatbot, then it's a siloed AI. And siloed AI will not go anywhere. You went from, there's an app for it to there's a chatbot to it and now there's an agent for it, that sprawl does not help. So how do we help by bringing AI and platform together. The last one, and this is the one that I repeat to everybody in Extreme all the time, this is the one that we live on a daily basis, move first, move fast. We were the first to announce Platform. We were the first to say we're going after Platform. We were first to announce Platform. We are first the [ GA ] platform, and we have moved first, and we will continue to move fast. In the end, it's never one thing. But is all of those different things in our technology, in our culture, in our differentiation coming together. That is helping us to win up market, helping us to win more and that is why we stand here very confident about the future of the company. With that, I'm going to set this one down.

We'll take some questions from the audience at this point. And I know I'll reiterate a couple of things that Nabil mentioned. First of all, we've been working on this for over 3 years. You came out and talked about platformization and what does that mean for us. And so when we look at Extreme as a company and we look at, our investment line, we've been investing in AI. This is not something that is newer.

And what I would say is that Nabil, part of the reason why we wanted to elevate Nabil into President of AI platforms, which is well deserved. One, he's got an amazing team under him that have come up that are sort of taking the mantle inside of Extreme; two, it's because with a very small team, we can make a big difference. And so instead of having a lot of dollars or a lot of [indiscernible], we can actually have a bigger impact with a smaller initiative, with the smartest people we have focused on solving these problems. And so that's the rationale behind this, the decision that we've made. And we do believe that being -- our relative size is an advantage.

Absolutely.

So I'm going to pause here and then we'll open it up to questions.

[indiscernible] from Bank of America. You've been around for many years, and you have your strength and weaknesses and you're still a very small player. The question I have is what changed with your customers that enables you to grow beyond your weight limit. Meaning, why now, what enables the 10% growth in the market that doesn't grow 10%. And is it about technology? Or is it about go-to-market? Or is it about the decision-making process that you see with your customers?

I think that's a great question. I assume everybody heard heard the question. And I'm going to answer that with somewhat of a nonanswer, which is, I think it's about all of those things. First of all, our technology differentiation today is different than it's been. And I'd say, we're at a -- from a competitive standpoint, we're at a different place than we've ever been, certainly, since I've been here over the last 10 years.

And I would let you chime in on that. But what we find is that the quality of the opportunities that we're being brought into is a lot higher. And then when we have a level playing field, in other words, there's not kind of a strange personal relationship somewhere at the top where there's some strange economic decision to just give away the business and then someone bites on that. When we go head to head, we're winning. And I would say, since I've been at the company, this is a phenomenon that's been happening over the last couple of years, hasn't really happened prior to that.

As we win these kinds of customers, it has an effect on the channel. And so there is this effect. When we win that -- I talked about the farm equipment manufacturer that's global, there are in 80 countries around the world, tens of millions of dollars of networking. They went with Extreme exclusively. They love the fabric. They're excited about where we're going. We had to build a global channel network to support that customer. So we came and knocked on doors and we opened up a lot of relationships, and we're bringing in a very high-quality customer.

Well, that partner now says, well, wait a minute, this is not the Extreme that I used to know. This is really interesting. Now I'm going to bring an opportunity to Extreme. And so it takes time. And you're not going to see the networking industry flip. I mean it's just the nature of such a large industry with an installed base. Nabil talked about 5.5 generations of technology sitting in enterprise environments. But we're seeing, and it was somewhat of a flywheel effect for us.

We're more confident calling this higher growth rate. As far as I'm concerned, it's not enough. But yes, the team we'll get Norman and Monica up here, Kevin, and we're talking about kind of how we're doing. But again, there are large problems. So when we take a point a share, it has a much bigger impact on our growth rate. But what I will say is that we're seeing [indiscernible]. We're moving further down competitive processes, and we're winning more than I've ever seen. And then the market kind of takes notice from a partner program.

I'm not going to call it an unknown today because it's early innings as it relates to AI. We haven't seen any evidence of the larger competitors coming out with a real platform, I'm just going to say. And with that, we're excited about where we are and what's coming. We are hosting our first AI Summit on Thursday. We're bringing out some real innovation as it relates to new agents and agentic change and sort of accelerating the services that we can bring into our platform.

And Nabil highlights and points out that because of our size, it could be an advantage for us moving forward with customers in terms of what we could bring to enterprise customers. There may be a follow-on question.

I just wanted to follow up, in the past, in the last 25 years, not always the best technology wins in networking. Does AI change the market environment in a way the technology matters more, meaning will AI provide tools to customers that -- or maybe changes just the decision-making process in a way that benefits companies that have better technology.

I'm going to take a high level and then Nabil, I'm going to let you kind of -- I know you've got to be asked. The investment in AI, the investment wave in AI is the largest investment way we've ever seen in technology by a wide margin. What we see is at the Board level, Boards are talking about to CEOs, how are you leveraging AI and CEOs are saying to CIO, how are we leveraging AI. So there's this question where everyone is trying to answer and what are the use cases.

So I feel like there's a lot of interest today in the -- is there a lot of AI washing? Yes, is there a lot of misinformation about AI? Yes. But I do think, inherently, there's a lot of pressure on leadership and management to bring AI use cases to bear. And this -- we feel like this is really a unique opportunity for Extreme. It could change the inflection of growth for us. Nabil, I'll let you...

Yes. No, I think you're spot on it, and I'll answer your question directly, yes. Absolutely. Because what's happening in the larger customers is because of this pressure of AI transformation, whether hype or not, whether it's going to happen tomorrow or it's going to happen in 3 years, starting from the Board, as Ed pointed out to the exec teams and lower down, leaders are all looking at it it's formal. It's fair of missing out. Nobody wants to miss out the AI transformation. So it has become a really big component of decision-making. So that's one point. Then what happens is that when they look outside, they look at their existing vendors, but most of the large existing vendors by just the nature of their size are slower to react to this AI market as I talked about, the platformization then they look at other vendors and say, who else is a little bit ahead on this AI access and that is the point that we made that, look, it plays into our size.

It plays into our technology differentiation. I would say for us, we had a lot of point products with a lot of differentiation over the years, the last 25 years. This is the first time we have the platform effect where they all work together. And at the same time, AI disruption is the biggest new component and the decision-making, combine them together and there is a huge opportunity for us.

Yes. And I'm going to ask [ CEO of Barco ] when you're thinking about sort of the technology, is it different?

Yes, it is different. So AI is definitely going to change the world. This is -- you cannot avoid that. Today, a lot of investments are being done in AI infrastructure, but the true value is going to come from AI applications. Every Board know that, every company knows that. So now it's a question truly true AI technology to find use cases ahead of your competition and be first with those use cases in the market.

And I think that's what Extreme Networks is doing right now with the Platform One. That's what other companies. That's what we do in our niche markets, too. We look at AI applications that change and improve the workflow of our end users. And that's where you're going to make a big difference. And it's unavoidable. It's unavoidable that this is going to -- yes, the new leaders will stand up. Those who have basically -- and yes, you have to look for it, and you have to work hard to find the innovative solutions, the value add that you have there. But if you find them, you have a win. I'm pretty convinced about that. Yes.

Nabil, have you -- NVIDIA has created this huge tailwind in AI, much of their [indiscernible] in networking is very data center focused.

Correct.

And I mean that's created a great investment thesis for that. So when you think about kind of the uniqueness of the fabric, have you thought about how you take what NVIDIA has started with the role of the network that it plays and extend it to the campus and use that as a lever to drive more fabrics...

I think you might want to repeat the question because I'm not sure everybody got that.

Yes. So yes. So the question was, with the tailwind that NVIDIA has created around driving the value proposition of the network to enable better AI, how you then take that value prop and extend it out from the data center to the campus and use that as a way in the branches, yes, as a way to really use this as a moment in time to articulate the value of the fabric as the network for the AI era outside of the data center.

Yes. We have talked about this before with you, actually, absolutely. Look, so just for everybody else, NVIDIA, the 2 terms that they really use is scale out and scale across. So their point is like they're just simply not data centers big enough that can run all AI. So you've got to expand it and not just like adjacent buildings, but across metros and so on and so forth. So that's the scale out and scale across.

Anybody remember their DCI, scale across is the new AI name for that, right? So that's a NVIDIA part that's talking about. Now when AI workloads or more -- less workloads, but more inference as it comes towards the enterprise side or the campus side, what are the requirements on the network? And is Fabric really well suited for that. And that's really the crux of the question. And the answer is absolutely yes.

Now one thing that I would say might surprise you is that on the data center side, bandwidth is probably the most important thing on the workload data center workloads as they're concerned or AI workloads in the data center. But when it comes to campus, it's actually not really the bandwidth because inferences are not really bandwidth extensive. So what's really required is #1 security where hypersegmentation plays really, really, really well. And the second part is reliability, the lack of latency and reliability, which Dr. An talked about. So these are the 2 characteristics that we see will become the most important thing for a campus enterprise network that really wants to have AI at the edge -- inference at the edge.

And for that fabric is the hands-down best network that's out there. Are we seeing that already in the market right now? I would say very, very early conversations. So we haven't really seen people really go after that yet. But we are ready for it when customers are ready for it. So we already have the tech for that.

-- maybe 1 for Nabil and Ed kind of a combo. So Nabil, you talked about like telemetry and frictionless and hypersegmentation as being an advantage of Platform ONE. Maybe can you drill down, like I know it's early days, it's only been basically a quarter, but what is -- like what is the key sort of functionality that is really driving that early adoption from your customers? Is it the a agentic AI piece?

And then Ed when you talked about getting more at bats and winning more, I mean it's early days again, but is Platform ONE leading to more of bats? Or is that just better closure rates? Or is there something else besides sort of the market disruption that you're seeing that's leading to more at bats and door wins. And then I think Nabil, I know it's a multiparter, but you said it's hard to do this platform. There's obviously an 800-pound gorilla in the marketplace, like what's, in your view, is kind of your lead or your sort of intellectual sort of competitive position that kind of keeps them in the rearview mirror, if you will, kind of going forward from a platform perspective?

Do you want to take the first one?

I'll take the first one and then I'll hand it to you. Okay. So the first one, what are the key -- some of the early advantages that people are thinking, they are not just in AI. So they're in multiple places. So one of the biggest advantages on Platform ONE is simply this amazing end-to-end visualization. Believe it or not, there is nobody in the industry out there that can show you every single endpoint in an enterprise and one visualization environment.

So that's one of the biggest things that people love about it. The second part that we are seeing is that this is multi persona. So it has something for multiple different people. So think about, and Norman is sitting out there, he'll probably give you that anecdote be like, "Oh, platform ONE, this is amazing, so many use cases, and we showed it to 20 new customers, and you know what was the 1 use case, they did all love more than anything else." The fact that they can actually see manage all of their contracts and all of their subscriptions in one place. And there's no other company that can actually do that.

So there are multiple use cases. Now as you go on to the actual network management side, what we are seeing is that people love these cross-domain workflows. So you're going from fabric to WiFi or you're going from WiFi to universal ZTNA, singular policy, way more easy to operate. And what it does is you don't have to do integrations. Everybody used to say, like, oh, give me an API and I'll build a script on top of it. Yes, good luck.

We all know that. This is all built into it. So that's the second category. And the last one is AI. So you could ask me like I gave you a number on the productivity, what are the big use cases. So the 3 biggest use cases that you're seeing at this point, 1 quarter in, number one is knowledge acquisition. It is still, like, look, prompting is the new search, right?

I mean we know that in the market. That is true for networking as well. And believe it or not, not everybody knows in a network environment, what are the new features and stuff. Search is the first step for every network deployment. What is this new product? What are the features of it? What I can do that, how do I configure that blah, blah, blah, right? So that is one big use case that is coming in.

The second one is troubleshooting. Troubleshooting is a massive use case. And I'm not going to come here and tell you that, hey, yes, AI is going to fix all of the problems, find them and stuff? No. But it accelerates your troubleshooting 100x. So what you needed 6 days to do, you can do it in like 6 minutes, right? So you still need to be involved in there. So that's the second use case.

And the last use case that we are seeing is evidence collection. So when something goes wrong and you need to open up a ticket, obviously, every support team will like, hey, give me this dump and that dump, and this information and that information, can you tweak this and tweak that, AI has taken that load away. So those are the 3 initial use cases on AI.

I would say visualization, [ cross-demand ] workflows and these 3 initial AI use cases, that's really what's driving adoption because they all translate to immediate value to the customer. One thing that I will say is anybody that comes up and stands up and says, hey, we're investing a lot on the AI, we believe that these use cases will come out and then show you the slides on it, yes, they don't know how to do AI.

When we did connect we showed no slides, and we brought a true production environment into our user conference. Nobody does that. That's madness, right? You nobody brings a production environment, but that's the power of the platform. That's what's shifting people's mind. It's not on slide, it's not tomorrow. It is value today, right? So that's what's driving it.

Yes. I mean good answer. I think that covers a lot of maybe both questions. But what I would say, yes, the big differentiators today are the fabric technology that we've got, our competitors cannot replicate it. So we bring outcomes, and they try and they can't replicate it and customers challenge other players. And so that -- it becomes a differentiation.

And I would say our sellers, and Norman will talk about this, we've changed our process so that we can better accommodate larger customers. It's a different kind of sale when you're selling into much larger customers. And so I would say in terms of our process or selling process holistically, we have a better approach. Marketing, what Monica will talk about in terms of brand, brand awareness and so how we're working. So it's sort of a paradigm shift at Extreme, where we still have our existing customers. We still have existing environment and solutions, but we're in a position now where we're moving up. And then it all fits really nicely into the platform discussion because everyone is curious. p

I'm just like everybody wants to -- people want to know like, hey, what is your solution? Who are you working with? And we have a very clean story to tell and people are intrigued. So they they want to hear more from Extreme. And so that starts generating more at bats, considering our relative market share because, again, we're a lot smaller than the big 2, right? .

I'm going to answer your last one because that's an important 1 because you asked how [ far back ] somebody like Cisco or HP is to us, right? Look, they're smart people, we have a lot of respect for them, right? Everybody is a smart person in the industry. So it's not about we are smarter than them. It's just simple math, and it's just simple facts. It took us 3, 4 years to bring this portfolio together. You remember universals and then like cloud and cloud agnostic. We have been on this journey for at least 6 years, 6, 7 years, and this is where we are. Now when it comes to HPE, they're just restarting this journey with the acquisition of Juniper. So sure, you can make your own bet, whether they will do a little bit faster than us or a little bit slower.

But either way, it's a multiyear difference between us and them. When it comes to Cisco, I just don't really know. The key is -- look, you can't throw money at it. That's the part that I was making. It's a multiyear execution. It is ground up. You need to break those silos, you need to bring those products together, and that's not a money problem, right? That's almost like a political will problem, if you would, right? And anybody's guess is better than me whether Cisco will be able to do that or not. So if you ask me, we have a multiyear lead across -- against both of those large competitors.

And on top of it, I will add 1 more thing, although you didn't ask, "What about startups" because people ask me like, well, AI startups are so cool. They can come up, what's our advantage against the startup, scale and data. I can -- it's very easy to go and say that, hey, I'm going to build synthetic data, I'm going to build this model. You have good luck scaling it unless you actually have access to real data. So we have really considerable moats against our larger customers, and we have considerable notes against startup. We find ourselves in a really good situation, right?

All right. I think you have time for 1 more

Thank you. I'll limit to 1 question. Ron Westfall, Hyperframe Research. And yes, a good day to ring the NASDAQ bell and put the spotlight on Extreme differentiators. And yes, the competitive landscape is shifting dramatically. And I think you answered part of the question that I have is just recently Cisco came out with this unified edge platform, and they're arguing that in addition to working and security, you need tighter integration with storage and compute. And so my question is, how does Extreme see this coming from a competitive perspective, i.e., has extreme going to address the storage and compute requirements of enterprise customers. And are you seeing this type of demand coming from the customer base .

So great question. So first one, I would say is that this is like the fifth edge strategy that Cisco has come out in the last 10 years. So maybe this will be successful, I don't know. I wish them all the luck on that. But here's the thing, right? So they are still thinking in terms of workloads because when do you need storage and compute and network together, that's a workload. This is the same old rebrand of the world is going to go towards a micro data center that is going to sit at the edge of the enterprise.

MEC was that strategy, there were multiple strategies that came out with it, and each and every one of them failed. Why? Because what we actually are seeing is that workloads are massively gravitating towards these massive big data center and inference is going to the edge and inference does not require compute does not require storage. Your phones can do more inferencing than you would ever -- actually, that's not a fun. But you get my point, they can do more in inferencing that you ever need. What is required is what I was talking about earlier, a network that can provide you the uptime and the security.

And a network that needs to do that, it needs to do it all the way from the data plane which is our hypersegmentation all the way to user and identity, which is our universal ZTNA and guess who can provide you both of them in one platform under one policy. There was a reason why we went in that direction. So if you ask me, good luck to them, but I think they're trying to solve a problem that does not exist when it comes to enterprise AI inferencing as Dr. An said, on the application side, they're still trying to solve the infrastructure problems. And I don't think that AI infrastructure is coming to enterprise edge. We are seeing like open AI is doing $1.7 trillion or $4 trillion over the next 10 years. Yes, good luck selling mini data center to an enterprise for the edge. My very straight and honest answer on this, right?

And I would add 1 point that I think Anisha would support as a CIO as the decision making process is still very different. And so we're seeing that on the security landscape as well. So the fact that Cisco, for example, is redoing their partner program and they're acquiring security, they're acquiring like every piece of the portfolio be sold, it's actually helping us because that's not how enterprise customers are working today. And I would say the same thing is true with HPE Juniper. .

So thanks for the questions. I think, Stan, we're going to take a moment here for a break.

Yes, we're going to take a break, and we'll be back at 1:15, so a little bit more time for launch.

Where do people go.

People can come out towards the back over here and enjoy some lunch, demos and then talk to some of our executives, it's time for some executive engagement.

Thank you, everyone.

[Break]

Good. Well, the back half, hopefully, the first session was productive. In the back half, we're going to focus. We're going to kick it off with Anisha who is our Chief Information and Customer Officer, I mentioned Anisha before. We were lucky to recruit her. There was a lot of people chasing after her talents, and we were glad to get her at Extreme. We will talk about -- she'll talk about how we have made an investment in our back office to support the SaaS business and the growth of the SaaS business and the scale our back office. And so we're at the tail end of those initiatives, and Anisha has come in and has been driving that home.

And then also, importantly, what I was looking for is a CIO who would report directly to me on the executive team who would represent our customer. And someone who internally could go toe to toe with Nabil, he's not in the room, is he? Okay? But someone who could go toe to toe with Nabil around our products so that as we're releasing Platform One, as we're coming out with upgrades that it's being vetted and tested through our own people through our own lenses of customer #1, and Anisha is driving that in addition to driving customer #1 in terms of handling all of our customers and being front and center as in front of our largest customers, and she's done a phenomenal job.

Anisha, I'm going to ask you to come on up and then maybe say a few words about yourself and I'll put you on that spot and why you decided to come to Extreme?

Great. Well, thank you, and great to be here. Thank you, everyone, for attending today. Since I'm the new kid on the block, I'll spend a minute, as I said, giving an intro to myself, Anisha, I joined 6 months ago now. Time flies when you're having fun. And I have spent 30 years in IT, I've been a CIO at a few different places. And most of them have one thing in common. They've been fast-growing companies that are scaling, and that speaks to one of my passions and one of the reasons I came to Extreme I thought it was at a really interesting inflection point. I was very sold on the product vision and the strategy and what they were trying to do.

And so that was one of the big compelling reasons. I was a CIO at Box for a little bit, which is a content management provider. I went from there to Toast, which makes restaurant hardware and software solutions. I was there for CIO, I helped them go public. We went from less than $500 million in ARR to now they're over $2 billion in ARR. And then I was also at Shockwave Medical, the medical device company that was doing about $1 billion in revenue when we got acquired by Johnson & Johnson.

And so the compelling product vision, the inflection point where we were at. What I thought was really, there's a lot of AI white washing. We talked about this that especially CIOs get to hear and have to tolerate through. But when I interviewed with the leadership team at Extreme and what we were trying to accomplish with Platform One, [indiscernible] earlier in the year, we hadn't [ GA ] the product yet. It was super interesting and compelling to me.

So that, combined with the culture and honestly, the quality of the leadership team that had assembled, the big, big reasons I chose to come to Extreme. And I can say I have not been disappointed, been busy, but not been disappointed. So with that, I'm going to jump in, as Ed said, cover a few things about what we're doing inside of Extreme, right, in terms of driving productivity.

So we think about AI in sort of these 4 buckets, right? We talk about AI native products. And the first 2 circles here engineering productivity, you actually heard some really interesting commentary from Nabil on this. What we're doing, our platformization strategy, what we're doing with building the one, the first, the only comprehensive AI network management platform in the industry. And then you heard some really compelling stats around what value Nabil and the engineering team have seen around productivity using AI.

But we're not stopping there. Certainly, as a CIO, one of the things I'm interested in driving is AI use across the rest of our business process and functions. So how are we using AI in the rest of our business. So that's one area of focus, and I'll share a little bit about what we're doing there. And then also how we're enabling AI employee productivity with the help of AI, right? This is a very common use case to hear about it. We're no different. We're thinking about how do we get more value? How do we scale efficiently, how do we give employees time back to do productive work and move away from doing unproductive work.

So those are some of the focus areas that I'm looking at across the company and partnering with the leadership team, especially in business process. I'm working with Kevin and the finance team, working wiht Monica in the marketing team. We're working with the HR transformation and what do we do to drive use of AI in all of these functions.

So pretty exciting time to be a CIO certainly from that perspective. We always talk about CIOs being change agents. And I honestly 30 years of technology haven't found a better time to be truly living up to that promise and that that opportunity. So if we look going forward, we've been on a 2-year journey. I mean, AI, and Nabil mentioned this in the context of product, but it's very true in the context of enterprise IT, right?

Your AI capability is only as good as your underlying systems and data. So we have been on a 2-plus year journey, and I can't take credit for that. I'm the new kid on the block, but the leadership team had already initiated this, right? I hopefully have a little bit to do to completing the journey. But we've been on this 2-plus year journey to really modernize and optimize our tech stack internally.

We have streamlined our application footprint dramatically. We just released about a month ago a brand-new front office tech stack that really streamlines how we do opportunity management and quoting and making sure we have a single system for hardware/software renewals. We're on the cusp of launching a brand new set of capabilities for the back office, finance, order management, supply chain, with the tail end of that journey as well. And what we're trying to do really is the second point.

We're trying to build for scale and really make sure our systems are set up for running a SaaS business, and it's -- we're building an agility. So one of the things -- one of my goals as a CIO is to make sure that these systems are agile as we introduce new commercial go-to-market models as Nabil and Carla and the team think of great new monetization models that we haven't thought of before that our ability to pivot and support those is matches the velocity of the business, right?

So that has been a big focus for us to make sure we do that. And then we want to boost employee productivity. We are also looking to scale efficiently. We want to, as our business grows, we want to bend the curve on the operating cost of doing that, right?

So it's really important that we think about how we continue to drive productivity in different groups of employees and see benefits from doing that. So these are some smattering of examples of where we applied AI for results in our own organization. And I will underscore that this is a journey, right? Like this is not where we want to add. It definitely wants more for me in some of these metrics that are up there today. But I would, again, underscore we're experimenting, we're learning. And as we learn we drive for more value out of these.

Some of these are not uncommon -- or not specific just to us. You see a lot of use of AI in tech support. We're certainly seeing benefits of that. We're seeing faster resolution time by doing some of these things. We have deployed sales and partner AI tooling that really focuses on making our salespeople and making our partners more efficient in being able to quote and respond to RFPs and in the sales cycle support them as they're quoting Extreme products.

Super excited about this. We're rolling out capabilities in configure, price and quote and internal IT. We're on the cusp of doing some stuff around security operations. So lots going on here. And I think the message is we're not sleeping on AI, just like no CIO is, but we are, in addition to having a strong story around how we're building AI-native products for our customers, we're also leading the charge in terms of adopting AI internally for our own use to drive efficiencies to drive productivity in our employee base.

And this will continue. We are excited about going down this journey. And the great news is the leadership team are not at all resistant to change. Sometimes you get that, right? They're very embracing of this, and we are looking to partner and continue to drive this going forward within the company. And then lastly, before I go on to sort of the next section, I want to talk about Customer One. Ed alluded to this. One of the other really big reasons I was interested in coming to Extreme was this part of the role.

I've been at enterprise software companies, and I've always felt like the CIO's role has been underutilized in terms of understanding value. I'm your CI CP. I'm your chief ideal customer profile, right? You should be talking to me. So I've had some experience doing this semiinformally, some degree of formality around playing that Chief Customer Officer role. In terms of being the first one to adopt and give feedback on the product, right?

And so again, lots of credit to Ed and the leadership team for thinking very -- in a very forward way about this. And that was a big part of what really, really interested me in the role, the dual mandate of running this IT organization as a CIO, which I know how to do and have done many times before, but then formalizing this Chief Customer Officer role, we're not -- am I the first one to deploy and use our products and give feedback. So our goal at the end of doing this is really to make sure we deliver products that hit the mark with our customers, right?

We deliver the value, we think it should. It delivers with the quality we think we should. And so we're really focused on being the first and best customer, and we want to be a referenceable customer. We want to have close interaction with product and engineering on ideation around what product features should we build, what capability should a product have? And then we also work with sales and sales engineering work with my GTAC team and support to like articulate what's the best way to use products, what are best practices, how do you troubleshoot issues and give real world like usage and implementation advice back to these teams that are on the front lines supporting our customers.

So super excited about being able to do this. At the end of the day, what we're interested in doing through all of this is really building greater customer centricity across the organization. And I see myself as a customer advocate first, right? And I can be that voice of customer internally across the function. So whether it's how we're delivering support, whether it's what features we decided to prioritize what areas we decided to focus on, I get to do that as a Customer One.

it's been exciting and invigorating frankly, to be partnering with Nabil and the product team and Norman and the sales team and talking to customers, it's a really unique dimension to the role that I'm enjoying in. At the end of the day, what we want to see is that translate into better products and better experiences for our customers. So that was a little bit about what we're doing internally and what my role is internally. What I'd like to do next is invite Michael Perenti up, and I'll do a quick fire, no fire, but chat, CIO to CIO chat with Michael. Michael is the CIO of stevens Institute of Technology and a customer of Extreme. And thank you, Michael. Appreciate you coming today.

Thanks for having me and the extreme team for having me.

So why don't we start with tell us a little bit about yourself and about Stevens.

Sure. So my name again is Mike Parenti. I'm the Vice President for Information Technology and CIO at Stevens Institute of Technology. I actually graduated from there, left for the private sector, came back by chance and went through a whole bunch of different roles. I've been there for actually 16 years now; in the CIO role, 2 weeks officially. .

congratulations.

Thank you. So just real briefly on Stevens in case for those of you that don't know, we are a private nonprofit research institution, right across the river in Hoboken, New Jersey. We are primarily STEM focused. We have a business school. We have a small humanity school and most recently, a school of continuing and professional education. And we have 9,000 students give or take. It's split about 40-60 undergraduate graduate, and we have over a dozen research centers and labs. So a very diverse population and diverse needs on campus.

Right. So what does that translate to in terms of complexity of your environment? Talk a little bit about that because I don't think I fully appreciate what you're dealing with. So I think the audience would love to hear as well.

Everybody has a particular need when you're on a university campus. And everybody also has their own idea how things should be running. And it's really balancing all of that on your enterprise network. So we really have -- really it's around 3 areas, right? We have our students who -- they want to just bring their devices. They want WiFi everywhere as we were talking about earlier. That's more of your BYOD network. And then we have administrative staff. They're running enterprise apps. They have our enterprise data, that's more locked down. That's like your corporate network.

And then you have your faculty and your research groups, they need a little bit of both because they need the flexibility to stay open. But we also need to be able to ensure that it's secure and performing So -- and then we also have -- there's IoT devices all over campus also. So it's just -- we've got a little bit of everything on our campus.

Yes. Great. So I know you've been there 2 weeks in this role, but give me a little bit of history, how and why did you start working with Extreme?

Sure. And actually, if you don't mind, I'll back up real quick and also mentioned. In terms of our infrastructure, we are both -- we're hybrid, we're cloud and on-prem. We've moved a lot of our -- most of our enterprise applications and our commodity stuff like e-mail to the cloud. But we do have an on-premise -- a good presence in research computing. We have a high-performance computing cluster in our data center and probably 70% of our data center is research servers.

And that's where I mentioned we need that particular part of our network to support that. So why Extreme? So unfortunately, we had a -- Stevens had a bit of a cyber incident back about 6 years ago. And part of unpacking that was looking at the network architecture. And we were also, at that time looking to do a core refresh. So we use that as an opportunity to say, "All right, how do we go about doing this the right way, more resilient, more secure. but also with a very small team."

So we don't have the luxury of having a large team. We have 5 people on the team. That includes our team lead. That includes our infrastructure project manager. So it's a lean team that has to support all campus. And so we were looking for a vendor that we could grow with that, eventually we had hoped we can get on a full platform because, again, I know point solutions we referred to in one of the past talks. And we like point solutions for certain things, but something like our network technology stack, more efficiency if we can get on the full stack.

So we started off by just doing the core at the time, we did the core. It allowed us to do all the segmentation that we needed to do, that we didn't have in place before them. And we did that with the expectation that we would grow with the platform as more more got release, we got into fabric tenant and started realizing the benefits of that, the simplicity, the scalability, having a small team, again, as we're building this out, that's extremely important.

And so fast forward 2 years, when it was time to do our network refresh, we went with the [ stream ] for that. And as of right now, I think we have about 2,200 access points deployed across campus, and we've since moved out to distribution. So we're almost completely on the Extreme stack now at this point. And now we're really seeing the benefits then of using fabric across all that we can spin up services, put in new hardware without -- very, very easy. And I know our team enjoys working with the technology stack also.

Great. And what's has been like working with Extreme for you and your team?

Well, like I said, enjoyable. And I think we got over the initial learning process, and now we're really seeing the value. It's one of the things that we strive to do that we would not have been able to do in the past is aimed for 100% uptime during our semesters. I was joking around somebody said we're not doing robotic surgery on-campus, but our students, our faculty have the same expectations. The -- our President does not want us to go down even for a second.

So like that 99.999 mentality. And we've actually been able to achieve 100% uptime, no unplanned downtime over the past 2 years during our fall and our spring semesters and then we push all the upgrade work to the summer and the winter break. And a lot of that -- all of that, I think, is due to the fact of how we architected the network on the platform. So yes, it's been great. And the other thing I want to mention is we chose Extreme because we felt that the company was forward-looking, and I think there's a lot of evidence to that in terms of what's been rolled out now. And -- but most importantly, it's not just about the technology for us. It was about the partnership. Every time we go and we look for a vendor, especially in something that we're using across the enterprise that's this critical.

We want someone that not only has great technology, but that also invests in us as a customer. And the technology is, we're going to run into a problem at some point. And we want to have someone there by our side because, again, we don't have an army to support this. And so I feel like we've gotten that.

Awesome. Well, it wouldn't be a CIO chat without talking about AI. So what are you doing with AI? What are your plans?

It wouldn't be a day without AI or minute. So we're doing -- we're still as a university, I think, in the infancy, I'd say of where we're at. We're trying to put together a campus strategy, but everybody is still using AI in different ways across campus for individual and group success. And we -- our administration is using it for the productivity gains that we talk about in every day. With the students and the faculty they're using it for teaching and learning in the classroom and to create curriculum and to use it as a toll and to gain the skills that they're going to need when they go on in their careers.

Our researchers are using it as subject, the subject that they're researching or as a tool to finish their research. We're really focusing right now on using AI for student engagement, but we are here talking about networking. And so in the IT side of things, we're using it right now in all our operations, whether it's our systems administration for automation or networking, looking at it inside the platform. cyber security.

Again, we have a small team of cyber security. So you have to level up that way instead. And so that's why like Platform One, very awesome. I mean I would love to see -- I think we could get some great gains out of that. And there's been a directive at Stevens much like a lot of everywhere else, where can we use AI. And so we try to use it wherever we can. And it's embedded in a lot of our applications. We're using it separately, but using it here, I think it would be great.

So speaking of Platform One, you have a captive audience, Nabil is like literally sitting right in front of you. If he could build you any agent to do anything on your network, what would it be, what capability, like right here.

I was going to say -- I'm going to cheat and say it's the Overwatch agent that can do everything. So that's the one task right. .

Agent.

Yes. So I mean if you're going to ask me what are the 2 areas -- the one area would be cybersecurity, so like protection, network protection because at the end of the day, that's the one thing that would keep me up at night more than anything. But looking at -- an agent that can look at the network and basically get ahead of problems before they have problems, whether that's capacity issues, performance issues or security issues and essentially be that 24/7 network engineer that's either doing some or alerting our team with analytics and information so that we can take action. That's what I would do.

All right. Well, thank you so much for your time today. I appreciate it, Mike. And thank you for being a customer. Appreciate it.

All right. So with that, I'm going to invite on to stage Monica Kumar, our Chief Marketing Officer, Monica?

All right. So this morning, we heard about the market opportunity from Ed. We heard about the technology innovations and leadership from Nabil. And the third piece of the puzzle that we are going to talk about now is the go-to-market execution because, in my opinion, that is a key ingredient for success. But before I do that, let me talk a little bit about myself. Some of you I know are industry analyst friends. I don't think I've met the investor community before as part of Extreme. I've been just like Anisha 3 decades in B2B tech as a marketing leader.

I spent almost 2 decades at Oracle running the Oracle Database business marketing for that. And then at Nutanix about 4 years, again, helping Nutanix' transition from an on-premises hyper-converged infrastructure company to a hybrid multi-cloud company. So I was very excited when I connected with Ed about Extreme Networks and where the company is headed.

I joined Extreme in January last year, so it's going to be coming up to 2 years now. And I'm super excited at all the great work we've done to come this far, and I'm going to talk about that in a moment. Now the way I think about marketing, it's not just brand or demand. Yes, those are important ingredients of marketing. But at the end of the day, marketing is a growth and impact driver.

What I mean to say is turning brand equity into measurable ROI and revenue performance is our goal. And that's what I'm going to take you through. So I know you were talking about, so why now -- why Extreme, why now? And I'll show you a few reasons why Extreme, why now from a go-to-market perspective. Yes, the campus networking market is growing single digits, 5% CAGR over the next 5 years.

We all know that. However, there are subsegments of the market. Cloud managed, in particular, is one of them that's growing double digits, 13% CAGR. Extreme is already a leader in that segment. We are one of the top 3 cloud managed providers. We are also growing -- we also have a 10% market share in that segment already. And as you can see, we are growing at 2x the market growth rate currently with a 24% growth in our annual SaaS ARR.

So this is a segment that we are very focused on as a company is driving more growth within the cloud managed market. However, I knew you wouldn't be satisfied just with the 13% growth rate come on, right? Neither are we, neither are we. The reason why we are so bullish is look at this, how the campus networking market is progressing over the next 5 years. We are literally at the tipping point of that. We're just starting out.

This is the AI networking piece of the campus market. It's about to take off. Over the next 5 years, according to the 650 Group, it's going to have a 72% CAGR and it will become half of the campus networking market. So while the campus networking market is $29 billion today, we'll go up to $37 billion. Out of that $19 billion will be AI networking for campus. So think about that. Think about how well we are positioned given the current portfolio that we described and the continuous innovation that we are bringing to market around AI networking for campus.

That's one of the reasons why we are very bullish about the opportunity for Extreme and why now, why Extreme now. So one thing I do want to say before I go into this is as a marketing leader, my focus is on driving again, pipeline and funnel and business growth. However, we need to be grounded in market realities. So I want to share with you the -- sorry. I think something is wrong with my slides.

Here we go. So market insights are the foundation of execution. And in order for us to run the right campaigns, have the right messaging, the right product launches, we need to ensure it's grounded in customer and market reality. And we recently ran this report, which is going to be published in a couple of weeks. It's called State of cloud networking. We surveyed over 200 IT leaders globally. And we question them about not just networking, but also IT solutions in general.

As you can see here, the numbers from last year and this year are significantly different. And if you'd like, we'll share both the reports with you and you can compare yourself. Today, over 74% of those we surveyed have deployed agentic AI already in some form or shape in their environments. It could be non-networking as well, but they've already deployed it.

About 5% have a greater emphasis on AI expertise within the organization. And then look at the last stat, 94% prefer AI natively built into networking platforms. This ties back and validates our Extreme Platform One value proposition and our strategy around platformization. It is grounded in customer and market reality. That's why also we are optimistic about Extreme now in this moment and why we believe we are very bullish about our growth coming up in the near future.

If I were to summarize the report, there are 3 key elements we got out of it. Number one, platformization is accelerating in networking. Number two, AI is transforming the networking workforce. Many of the IT leaders told us they are looking for AI expertise in the networking workforce. And last but not least, agentic AI is moving from theory to practice, meaning the ROI is becoming more and more important, and organizations are looking for AI to be built into their current solutions.

So what do we do about this as a CMO? How do I think about it? The way I think about execution as a CMO is around 4 Ps, and let me explain what I mean by them. Perception, platform, pipeline and people. It's not in any particular order, but let me explain what I mean by that. Perception is driving brand awareness and equity. It's, again, like I said, not just about messaging and content and grid visuals. Those are important, but really brand as a catalyst to drive growth, to create demand to ignite new logo growth and to create a bigger footprint for Extreme in the partner and customer ecosystem.

You talked about winning an upmarket. One of the reasons is in the last 1.5 years, we've been very vocal. We've been amplifying a brand in a big way, connecting back to our portfolio and showing customers how we can drive outcomes for the customers. So that's the value of brand in driving pipeline. Let's talk about platform. We've been very focused on driving campaigns to build Platform One funnel, close the business, but more importantly, focusing on adoption, so we can think about renewal and upsell opportunities in the future.

So that's Platform One. People arming our sellers, arming our partners with the right tools, insights, playbooks, so we can win faster, we can win more frequently is what we are doing in terms of enablement. And all of this together in the service of the fourth P, which is pipeline. And Kevin tells me it translates to the fifth P, which is profit, right?

So we have to make sure that we are building pipeline, but we have converting pipeline too. We have to convert pipeline, have the revenue performance alongside it and again, convert that into measurable ROI from an effective marketing perspective. I just wanted to share this with you because I'm really proud of the work that the team has done. Again, this is about extreme delivering on our brand promise to customers, ultimately driving outcomes for customers and partners, that's what makes our brand come to life. Just putting words on a PowerPoint is not enough.

So again, you will see -- as Nabil talked about Platform One, the whole genesis of Platform one is to drive extreme simplicity, extreme reliability and ultimately extreme value through automation to organizations, and we have tons and tons of examples of customers who are doing that with Extreme today across the entire portfolio. Now we've done a lot of work in the last 1.5 years to really amplify our voice.

And I'm going to show you a couple of examples of that. Some of you are in the audience here today are industry analysts advocates and friends. I hope you see that. We hired [ Ben Kalb ] to run our AR program. Ben, is somewhere -- there's Ben been the back. And we made it our mission. Thank you. Yes, he's amazing. And we've made it a mission to stay very closely connected with the industry analyst community to update you on a regular basis, to get insights back from you to ideate with you, to dialogue with you. And as a result, we've seen a whole number of coverage from our industry analyst friends.

And I know the investor community deeply values also the insights and knowledge you get from the industry analysts. So I hope you're seeing that. Also with the press and media, and again, the number of articles may not mean anything to you, but it means something to us. We've had thousands of articles written about Extreme in the last year, especially Extreme Platform One, with a strong positive tone. So again, we monitor this very closely. We want to make sure our placement in the key media publications is high.

All of this is, again, like I said, it's not just about getting placement. It's about making sure we are part of conversations that we are reaching higher levels within organizations, and there's awareness about Extreme as we go talk to new prospects. I have to show this. Thank you, IDC. You guys ran the IDC MarketScape. And I'm proud to say, Extreme Platform One got us a placement in the leaders segment of the IDC MarketScape for worldwide enterprise wireless LAN 2025 [ vendor ] assessment.

Again, this is all the payoff of the work that we've been doing across the technology innovation, the brand amplification and all the work we are doing with engaging with the analyst community as well. So what are we doing to develop funnel? This is a practice that we are building by deeply collaborating with sales. And Norman and I came up with this notion of pods, we have 19 regional pods, which comprised of sales, marketing and channel teams working together on the ground. They have a business plan, they have a bookings goal. They have a funnel goal. They have industries that they're targeting, partners they are working with, programs they're running, tactics they're running and so on.

All those 19 pods roll up into a global number each quarter. So we are running this type of best practices on the ground and making sure we're enabling folks on the ground while we think global, but we're acting local to enable our sales and marketing organizations with the ultimate goal of, of course, creating funnel, but winning business, and we are very clearly focused on conversion rates that are happening there as well.

So one of the ways that we are arming our sellers are by providing [ prescriptive win ] recipes. It is really important when we know what works well, we rinse and repeat that because we have a higher probability of winning when we provide fully integrated sales motions in place. And you can see from the left to right, these are all the ingredients that goes into every single sales play. So for example, Extreme Platform One play. We start with the segments, targets, use cases, campaigns, messaging, content, enablement. We are giving them tools like ROI calculators, demos, trials, enablement, and then we execute on the play.

This is the magic that happens when you have a very tightly run prescriptive play. We also have identified target account list, by the way, and segments that we're going after together working with sales. So I wanted to give you an example, we're running competitive place, cross-sell, upsell plays and Extreme One platform play, of course. There are many, many things we are doing as a marketing organization, working with sales, but I'll highlight a few high-impact programs that we're running. CXO program.

Of course, we are amazing at talking to our user community, and we have a very loyal and big user community base that loves Extreme. However, what we're realizing is in order to win more in upmarket, we have to start engaging more with the CXO audience. Ed mentioned recently that we have an AI Summit this Friday or this Thursday at the [ MLB ] headquarters here in New York City, we have 80 CXOs coming to that event. We launched our CXO program last year, and I can tell you this, every dollar of investment in the CXO program is yielding $55 of funnel for us today.

For me, it's very important. Even the AI Summit, we've talked about it as a thought leadership event. I love it. But at the end of the day, I want pipeline and closing business. We have millions of dollars of funnel that's walking in already into that event on Thursday, and we'll be manically focusing on how much do we close, how much new pipeline do we create and how do we convert that.

Connect, you guys are hopefully familiar with it, it's a user conference. It grew 26% last year. We had 48% more pipeline that got created out of funnel -- Connect attendees that came to Paris last year. We had 57% more executive engagement at Connect, big deal progression, I'll just mention one more thing. Norman and I are working together on all opportunities over $1 million, sales and marketing are working together to progress it. Make sure we can close them faster. And what we've realized is when marketing gets engaged with sales, we are closing -- our win rate is twice more -- is 2x higher and the deal size is 3x bigger.

So that's something we are working on together. Lots of new tools for our sellers and partners, ROI calculators to calculate business value, product tours and trials. So with that, what I want to leave you with is think about marketing at Extreme not as just a brand or demand engine, but it's a real growth engine for the business. It's the one that's working very closely with sales, aligning on segments that we go after, aligning on creating funnel and closing business for revenue impact. And I'll leave you with this because it really captures the philosophy that I have in terms of how I think about marketing.

Strong brands build more than just awareness. They build resilience. Our marketing investment today is creating the demand, loyalty and leadership that defines tomorrow's growth. Thank you very much. And with that, I'll get Norman rice on stage. Thank you.

Thank you, Monica.

Hello. Good afternoon. This is the coveted after-lunch communication, nothing better than being the after launch. Now I'm the setup person for our CFO, which is what you're supposed to be waiting for. Kevin is going to bring it home. So let me start with Kevin and Stan had asked me to make some comments about -- Kevin and Stan -- so my role, I'm CCO. And my role for many years was his COO and has been Coo, where I have responsibility for operations, supply chain, all of that. And I now have sales as well for the last 7 quarters. That's the CCO title. p

And bringing that together with remit, bringing that together and creating precision around what we're forecasting, where we're going. That's been a pillar of what we've been doing since I've been in this role. So let me rewind for a minute. I'm going to put on my COO hat and talk about supply chain. And this is in direct response to our earnings that happened a couple of weeks ago and some of the things that came out of that and some of the feedback loop.

So I'm going to rewind 7 years for a second. So at that time, we embarked upon a series of acquisitions to create scale, and we didn't have the infrastructure in place to scale. And so when we started to roll up and put together the Motorola asset from Zebra, the Avaya asset and the Brocade asset, we had a really unique opportunity to look at what are the best practices and what could we do to build scale within our supply chain.

So we did a 100% overhaul of our supply chain infrastructure that gave us complete visibility and automation across everything. So I can tell you where our parts are, whether they're in the origin through all the way through the origin to development to build right through to the channel where each part is with very high degree of accuracy, but on a, call it, an hourly notice. That's what we can deliver today. That came under complete stress but also performance during the supply chain crisis in COVID. So that team delivered. That team continues to deliver. Those infrastructure investments we made delivered, continued to deliver.

And in fact, what we saw is largely before we implemented our price increase, which took effect on November 1. So I have total confidence in our ability to recover and move through that. And in fact, I'm not going to take Kevin's thunder away from that. But Kevin will show you what we're doing and how we're recovering that space. So that's it on the supply chain. And again, I'm available in the question Q&A and find me in the hallway, happy to talk to you about any of that, any of the history and all those things. Oh, 1 more thing. We saw this coming a year ago.

So last November, we went public to our customers to our partners, to our distributors talking about the impact of AI. We thought that we would start to see longer lead times, part scarcity and increased costs as a result. We started broadcasting that publicly to all of our partners so that they would start ordering ahead, start thinking ahead, do a lot of the things that we learned during the supply chain crisis. Plan forward, think forward and be ready for a price increase that's going to be coming. We don't know how much or when, but that's not been implemented. So just to cover that, that includes [ DRAM ] as well.

All right. let's change gears. Sales. That's my -- so sales, what's going on. So there are a couple of cool -- really great questions that came up. It was told from [ Bofa ] cut right to the chase and said, Hey, you're a small market share older, how do you take share? And David, you from UBS also asked how do you compete against a full stack, whether it's a solution, how do you compete against a full stack that is compute, storage, all those types of things? And the answer to both is the disruption that's happening.

The theme to this event is disruption. So what are the disruptions that are happening. They're happening in multifold and how we answer those is how we've oriented ourselves and as all of my colleagues walked through how we're delivering on that. So the disruption starts with the people disruption. So our industry is mature. Some may call it long in the tooth, but it's mature. And there's a specialization what used to be really important was specialization.

And today, generalists are more important. -- generalists are largely filling the roles that used to be specialists. To put into other terms or use examples, that's a Cisco CCE hard coding a response dynamically to an AI agent application taking action proactively. That's how you accomplish that. That's how you create scale. That's -- the AI agents and all that aspect are starting to accelerate that movement in that disruption. The other disruption is what Ed said, $43 billion, $43 billion is the installed base of the [ Catalyst 9K ] coming to end of life. -- not end of service, not end of support, gone, dead, can't use it anymore. That is a great opportunity for us to take advantage of.

Now I'm going to [indiscernible] off a few stats because I think this is probably one of the most interesting and applicable disruptions for us. And Bob, you got to keep me honest, 500,129 Bob, what is it?

That's a number of Cisco channel partners.

So your last week at Cisco's channel event, they have 500, 129 partners. 668, ed, do you remember what 668 is.

The number of people that will make the same amount of money.

Exactly. So we talk to the industry experts. So one of the other fun things that's going on in the industry is when Cisco, HP and Juniper merge, we're able to pick off or recruit some of the better talents that are out there in the market, and we've done that in the channel. We've done that in a few places. And we find out information and we learn new things and we get to bring in some of the experts.

So the top adviser to Cisco, who helped build the program said 668 partners will make the same amount of money or more than they did last year. That leaves 499,461 partners that will not make as much money. That's a problem or it's an opportunity. That means 0.13%, where's Allan? That's 0.13%. 0.13% of all partners will make money. That means 99.87% will not compared to what they did last year. That's the opportunity for us.

Now we don't -- we're not going to go after all of those, but we have the technology disruption, we have the economic disruption, and we have -- and we're building the infrastructure to be able to execute on that, and that's our scale to go with it. So I just wanted to address a couple of those. So here are some of the building blocks. Now Monica talked to this, the pods, the trick here with the pod and the beauty is really just the alignment on a common goal a common funnel, common target, whether you're in sales, whether you're in marketing, whether you're in distribution, you're all working towards these common targets.

Those create symmetry and alignment with our teams and help us set up for execution. Big deals process. We put in place a cross-functional capability. So when we identify a project after a standard methodology so that we're all speaking the same language, we bubble it up and then we put the right attention on it so that we can go and win and increase our win rate in that category, so higher conversion rates in that category.

So that's a big part of the infrastructure, and it's function of both the training itself and the discipline when we go through all of the forecasting and build processes. Finally, targeting large partners, well, this is a great example. When I started in sales, one of the first things that I looked at -- when I was diagnosing the challenge, where do we scale? Why don't we scale?

Well, a lot of our partners are playing in the mid-market by definition, they're playing in the mid-market. I use a few different analogies of being not the tallest person on the NBA team, but that's effectively you can't coach that height. You have to be able to go and get bigger, broader players. And that's the example that we can use. So I'm going to talk to that and give you some examples.

Financial models. Nabil outlined this as part of our full portfolio of an offering. There's -- you have to deliver on scale and our technology, but you also have to bring different things that matter to those partners. So let's go back to those 499,461 partners, how do they make money? Well, we have different models. So we have the traditional CapEx model. Everybody is aware of that. That's the history. It's been here forever. The MSP model something new and disruptive for us. We added metered billing, metered billing, that means a lot to a lot of partners because you have cash flow protections

You're able to follow what your customers are doing, gives you more flexibility, so on and so forth. Then we move down into the lower right, we have our subscription private offer. This is where we've decoupled all of the software from the hardware. It's 100% software being sold as a subscription to a customer without a financial obligation tied to it. There's no leasing instrument. There's no other obligation, highly disruptive. We are transacting on that in every region in the world, Asia, Europe, Americas, and we have multiple customers using this model. And in fact, that, combined with our fully as a service offering are making up 14% of our new subscription bookings today.

So our pure OpEx model really uses that model to -- uses the subscription offer to power the offering to the end customers. That flexibility is our response to [indiscernible]. This is our version. So now a meter in 1 category, we have all of the above. So we have Nile and meter offer, again, decoupled from the hardware, 100% OpEx for the end customer without a financial obligation. We have the SPO or subscription private offer, SPO is our internal terminology, but subscription private offer for customers to have full OpEx flexibility.

We have the traditional CapEx model, and then we have a fully metered hybrid model in MSP. All of those things together are the tools that help us and be interesting to partners so we can go on and take share and meet the customers where they are in the market. So let's talk a little bit about some of these partners. So up here, there's a few categories, technologies. So we had to call out our friends from Barco. So thank you to them who are in the room but we have technology solutions that we bring to market with our partners.

We're embedded in their technologies and we're using their technologies like AWS, Microsoft and we're leveraging and using their capabilities to expand our networking. [indiscernible] for you. Just for you this.

[indiscernible]

Yes yes. What I want to draw your attention to is really in the center. So a lot of these transacting partners and traditional resellers. So I'm back to the numbers, the Cisco numbers, the 668 and everybody else. What's really interesting on here, and I'm going to show you examples, but the likes of [ Insight ], very, very large Cisco partner, historical, huge history there. We're aligned with the President. We're rolling out right now a subscription private offer through them to the marketplace.

That's coming to market as we speak. That's for them to go in and sell as a service, 100% the rate card out to their sellers. Their sellers are trained. It's starting to -- it's just now starting up. Computer Center, huge Cisco partner. A lot of history with Cisco in Europe, across Europe but around the world. Computer Center is going in and pitching to existing -- their existing customers. So they're the incumbent partner, they're pitching an alternative to the existing incumbent technology that they sold into them many years before.

So displacing Cisco, even in the core of their offering at computer center. Logicalis. The list goes on. And then I'll talk more about and give examples of NTT and KDDI, but it's the exact same thing. We're seeing that happen. Now how do we scale that? They're attracted to us. The partners are attracted to us because of the disruption that's happening, They are attracted to us because we have alternative models, they're attracted to us because our technology is different, it's scalable and there's a big future ahead of us in terms of disruption.

All right. Here's just some of the score, the tale of the tape as we say. So over -- in FY '25, which ended July 1 or June 30, over 20% of our business and new logos came from larger projects. 59% of our customers are buying our full stack in that time period, which is very substantial. They're not buying one aspect and they are not buying switching or wireless or our platforms. They're buying all together as a turnkey. 90% of our bookings from partners, our partners are selling the full stack.

They believe in the full solution. That's where we're competitively differentiated. So we talked a lot about our SPB fabric. We talked about our high-density WiFi. We talked about a hybrid where they come together. And then over the top, you have Platform One, where you can be on-prem, in a private cloud or a sovereign cloud or you can be in the cloud, so you get the scalability and speed of the cloud and you can illustrate that in a proprietary way with our technologies like our fabric that nobody else can do because they don't have those technologies to be able to illustrate. So it's a big differentiator for us.

And I already mentioned, 14% of our new bookings in subscription are coming from these alternative models. So they're taking shape. We like this slide. I thought this was interesting. So when you look at our new logo dollars, we're going up, and this is a proof point to illustrate that we're getting into larger projects, and we're winning. And so as we win larger projects, the 2 color tones, one's over $1 million, the other's over $3 million, our $3 million projects are taking a larger and larger aspect of all of our new logos.

And it makes a lot of sense. You're getting new logos, you're getting bigger new logos. It's great to win new customers. It's great to win bigger new customers. And I could say a lot of that is because of the share shift that's happening in the partner base with some of the largest partners in the world. Thank you to our friends at Cisco and HP.

So a few examples. So the first one here, it's a Fortune 86. Just to throw a number out there, in case you're looking, you want to look it up, anyone want to validate in the Fortune 100, one of the largest [ farm ] manufacturers in the world. We've already talked about this, but they selected us. I love this story. We were the last ones invited to the party. Literally, we're the last ones invited to the party. CDW and Verizon introduced us. We went in, they asked us to go first in a multi-day, multi-vendor eval because they figured they're going to kick us out first.

And here we are. We won the account. We're the global standard across the board. Our fabric stood out, the way we illustrate with our management suite stood out, the way that we're going in terms of private cloud for Platform One is what stood out. That's what illustrates the value standardizing on the technology front. The second aspect of that is the economics. Now the economics here, we use an alternative model. We use our private subscription offer. Why does that matter? A manufacturing company that does business in 36 countries, has hundreds of different sites, also has to deal with VAT taxes and tariffs.

Those go away when you're not buying hardware. There's software. Well, yes, be specific, but they are greatly reduced, and the savings was millions and tens of millions of dollars because of those in position. So a lot of how we delivered that model, how we delivered it with the partner, the partner, by the way, that we ended up working with, it's a number of partners, but it's primarily CDW, but there's -- globally, we're fulfilling through an infrastructure partners to be able to scale, illustrate we can scale, fight it that way.

But our CDW partner here stepped in, and they were the incumbent who had been pitching Cisco previously. And Cisco is the incumbent, not anymore. So now we are. And so we're rolling that out. That's a great story for us internally because of how our teams came together, we identified all the right sales motions and moved [ to the head ]. Wynn, Wynn is a great -- another great story. So the Wynn Casino Group or the Wynn Gaming Group, owns lots of different assets around the world. Historically, we've worked with them only in Las Vegas and we started with physical security.

So we started with managing their physical security, the cameras, the cameras that are watching things, cameras that are watching you while you're counting cards, all that kind of stuff, I know Bob does, but the cameras that watch us and make sure we're all safe. You're going to take a class on that. So they chose to standardize on us across the board. So they're working with us in Boston, Macau, and now we've added the newest and call it one of the largest -- the largest casinos in the world, which is coming up in UAE.

And that casino and that resort is getting a ton of attention because it's the first one in UAE, and they expect it to be one of the largest and biggest, most profitable ones that they've ever had. We're going to see fast follows happening in standardizing our technologies. The CIO of that group sent us an e-mail the other day, the PR folks are saying don't say it, don't say it. They came out and said, "Hey, we're one of the best partners to work with in so many words." But they're very pleased with how we're rolling out, how quickly we're rolling things out, and it's just a great win across the board in terms of being global.

I'm going to take a second -- Ed had talked about Kroger, Nabil talked about Kroger as a customer. One of the best things about Kroger was that Kroger not only their use case, but they put 110,000 access points in thousands of stores across the country. They set out -- they set a high bar goal of we need to accomplish this in 3 years. Remember, they can only do that at night. You can't close a grocery store during the day with people hanging access points and doing stuff. You have to do that at night. What did they do? They did it in 2 years. They started off a little slow, and they accelerated the rollout 2 years, 100,000 -- 110,000 access points across, thousands of locations because of the ease of implementation, ease of configuring and ease of deployment and management of our access points of our solution.

So that's one I wanted to hit on. All right. winning out market and regulated space. This is a hot topic, the regulated space. Now I haven't talked to all the verticals and all the categories, but we've been winning in our traditional ones that we usually talk about, which is health care, education, government, sports, different venues, we covered some of those, but wanted to focus on our enterprise business and how that's been scaling and helping us drive growth, helping us drive better predictability, better foreseeability and also in the regulated space.

Regulated space is a huge opportunity for us for a few reasons. One, our fabric is differentiated. So our fabric is certified. Our fabric is certified multiple governments around the world to their certification standards, so that they can check the box and say, okay, this technology meets the need on a secure basis for us to be able to buy the solution. So reducing barriers to entry in terms of purchasing. The second aspect of that is how we illustrate the value of that and how we manage it and how we orchestrate it and how we do analytics on it, that's coming from our cloud and our cloud offering is our cloud continuum, whether you're in the public cloud or your private cloud or you want it to be a sovereign cloud, those are the solutions that our customers are looking for.

We have really large projects going on around the world, and this is one of them. The one that we've spoken to a couple of times is the government of Japan. So in Japan, we have a design win. The technology team convinced the customer and worked with the customer and build a full end-to-end solution for fabric across the campus, across the SD-WAN and then a private cloud, sovereign cloud offering for those customers. It is the standard in the federal government of Japan, and we're just starting. So we're very bullish on the opportunity because we have already booked $20 million, we see, at a minimum, the foreseeability of this, over its life cycle, a minimum is $50 million what we can see in our funnel today and well beyond. So very, very happy about that.

It's one of our biggest projects around the world. We have others that we'll be talking to in the future, but they follow the same -- very similar architecture, very similar requirements, whether it's in the Americas or in Europe and the common theme is they're going after our differentiated solutions are standing out, led by fabric and driven by the sovereign cloud or the private cloud, which has our -- it's built on Platform One to be able to illustrate it. It could be or likely has other aspects to it like pull-through items like wireless and things like that. But the architectures are very, very similar, which is really amazing.

That's the strength of our value proposition there. One of the other things to stand out on this opportunity is and this customer is KDDI and NTT. So NTT is one of the largest providers partners in the world and certainly the largest in Japan, very controlled market, very stagnant market in many ways, decisions are made easily and displacements made even harder. But they went into their existing customer, the government, and displace the existing technology because ours is better, not because the economics are better, because the technology wins head-to-head and meets the customers' needs.

That's a huge testament to what we're delivering. And it speaks to -- we don't need more at bats. We need more quality and scale at bats. And it gives us the opportunity to be able to move from the back of our feet to the front of our feet when we're going out to customers and speak, hey, we can scale to that level. Why can't we do that everywhere. We can adapt to that economic model. Why can't we do that everywhere. And that gives our teams more energy and our partners more energy to execute.

NHS, a long-time customer of ours, why it's up here is it's a franchise. So there's 461 NHS, National Health Trust -- Health Service Trust in the U.K. alone and it's standardized on our fabric technology, and they've standardized because of the ease and simplicity of the technology, but they've been able to do that and drive value across 25% of those and it's continuing to expand. So just showing that we can land and expand, continue to build business within various categories, whether it's health care, manufacturing, education and the categories go on.

So just in closing, the thing I want to leave you with is that 500,129. 668 partners are going to make money. That leaves 499,143 that aren't. That's our opportunity, that, with our technology, the infrastructure we put in place to scale and it's up to us to execute. So with that, thank you.

Thank you, Norman. Appreciate it. Ed, did you save the best for last, is that you did? very -- thanks for all for coming today. Appreciate it. We did a really good job kind of hopefully outlining for you where we sit today. It's kind of an inflection point when I think about where Extreme is, right? Over the last 5, 6 years, we've really kind of brought our hardware portfolio together. Now we're moving on to the software layer, right? The software, the operating systems, the platform is all coming together as well. And as we know, software eats the world. And at the end of the day, what's going to drive the next 3 to 5 years in networking, we think is the software side. the agentic AI that we're bringing, this fabric technology, which is software as well, is all coming together and helping our networking be far more seamless than anybody else.

We talked about our new commercial models, generating 14% of our subscription. I think that's going to continue to grow as a company. And that -- those new commercial models, they're 100% attached related to subscription. So all of those have subscription related to them, which is really exciting. We talked about going and driving and winning upmarket with Monica and her marketing team in a newly rebuilt marketing engine that we have behind us and that's working out really well. We talked about Anisha and the scale that we are bringing as an organization to Extreme Networks. We can continue to scale this business over time because all of our systems are there and we've got the internal deployment of our IT that we're using before our customers even use it.

So we're really hardening down our technology before it even goes out the front door. These are the things that we are doing that I think is going to continue to help us grow as a company, which is exciting. When I think about kind of the metrics, right, we just in Q1, we beat by $14 million on revenue. We raised Q2 by $10 million. We stopped there, we pause for a moment.

We'll see how the second half of the year goes. But we just beat and raised in the first quarter and raised our revenue. And now at the midpoint of our guidance, we're looking at double-digit growth for this year. That's exciting from our perspective. We continue to drive our recurring revenue model as a company. To me, as a SaaS CFO, traditionally, I love recurring revenue. It's going to continue to build a highly predictable, highly visible revenue stream for our company in the future. We think that, that will give us a turn of the dial from a valuation perspective out in Wall Street. That's an important element.

And then as Ed said earlier, while we continued to grow our revenue double digits, we're also going to grow our profitability 20% plus per year. That is our commitment over the next 3 to 4 years. That's an exciting part of our story as well. We continue to do all these things in a way that like makes us different and unique to the industry. Let's talk about gross margin for a second because I think that, that was also an inflection kind of point here in the quarter. Little bit lower in Q1. We had to pay some expedite fees to get some of that equipment out to some of our customers.

We had a little bit higher cost as well on tariffs that caused us to be a little lower than normal, but yet we still hit our earnings per share in the quarter. But our outlook is still very strong. Our outlook is really -- and by the way, some things happened, Trump's visit to China recently enabled them to pull back by executive orders, some of the tariffs that have had. And so we expect now this is new news and Q2 to be at the high end of our guidance range on the gross margins. So that's exciting news for us to share with you today, even just 10 days from where we were just on our earnings call.

We also talked about being 100 to 200 basis points higher on our margins in Q4. And we still feel very confident as a company to be able to do that. So we'll be back into the 63% range, very close to our 64% to 66% long-term range even at the end of this year. So we're feeling good about that. When I look at our new commercial models, we talked about this 2 years ago when I was here talking about really MSP was the first new commercial model that we rolled out 2 years ago. 2 years ago, I said, "Hey, I think we can do about 25 MSPs per year. And we do 25, the first year; 25, the second year; and 25, the third year, we'll get somewhere around 25, 50, 75. We have 61 right now, and we're exactly 2 years from when I last said that we'd have 25 per year.

So we are certainly on track, if not a little bit ahead of track on the MSPs. We have these other commercial models that I think are really interesting. And they're just they're kind of nascent right now, but really starting to get a lot more traction for us as an organization. And we think these new commercial models. In addition, to the competitive fabric in addition to the Platform One strategy that we have, new commercial models that align our business with our partners business we think, is going to be very attractive for these partners who are looking to make more money. Well, if they want to make more money, how are they going to make more money, get into a business that's recurring revenue for them.

And if they're not going to make money with Cisco, if they're not going to make money with HP and Juniper, they can make money with us because we've got the commercial models that support their business. Next thing, let's talk a little bit about our growth rates. And I'll get into recurring revenue and the vectors of growth that we'll see there. So our revenue growth, first of all, is we're expecting it to be about 10% per growth per year. We're now at 20% product growth and 15% overall growth. What platform One and all these other areas that we have that these commercial models are going to continue to grow our subscription, our support and subscription.

What we are doing as a company today is we're combining the cloud management and the support. And then we're adding in other technologies like agenetic AI and Universal ZTNA as well as other security features that are going to make Platform One that much bigger, if you will, than what we have today. Today, we sell cloud management separately from our support separately from our ZTNA. All of those are separate products. When we combine them together and win platform, we're going to get some real benefits there.

That's going to drive our double-digit growth on subscription and support to 12% to 14%. And we'll be basically double that on the product side of the market growth. Market growth for product is typically 3% to 4%. And we think easily, we feel like we can be in the 7% to 9%. Let's talk a little bit about these vectors of growth for subscription and support on Platform One.

First and foremost, when I think about -- there's really when I sell the cloud management versus [indiscernible] support, there are basically different economics. They're sold separately. They're priced separately. And the customer has to make 2 different decisions. Are they going to buy the cloud management, are they going to buy the support contract. And sometimes, the attach rate on those are different. I also have different renewal rates for those. And then you can see the numbers up here, but our renewal rates are much higher on cloud management, you use cloud management to manage your network every day.

But as gear gets older, let's say, 4 or 5 years older, you kind of -- an inflection point of do I want to renew the support contracts, I think about it as like the Apple Care that you buy on phone. Yes, you buy that point of serve at point of sale, but then 3 years from now, do you renew the Apple Care, probably not. Well, we've been running into that issue too with a much lower renewal rate on support than we have on the cloud management. That all goes away. When we bundle it all together.

And when We bundle it all together in one platform, now we're -- now I'm making a lot easier for my partners to sell Platform One, it's got the Agentic AI in there. So that adds more value to it. I get a higher ASP increase. I get a better attach rate. Most importantly, on the support side, I get a better renewal rate in 3 or 5 years when they go to renew again, they're not thinking about this as just being a separate support contract. It's a bundled technology sale and they're going to basically renew the whole thing.

That's going to drive for us a pretty meaningful improvement in our SaaS ARR. We're about $200 million today in SaaS ARR, that's going to grow very meaningfully over the next 4 years. We're going to grow up to $650 million in SaaS ARR. That's because you've got support, and you've got subscription and you've got agenetic AI, you've got universal ZTNA, all those software features that I just talked about are all bundled together and the one subscription. That's going to be meaningful. 30% growth year-over-year, very, very healthy for our SaaS ARR.

I want to make sure that you understand, though, that the combined support and subscription at the same time, to support will come down because we're going to move our entire customer base into subscription and out of the individual contracts that we have for support. And that's where I get to 12% to 14%. So SaaS ARR is going to grow meaningfully, and we're going to basically convert the support those individual support contracts that don't renew as well into the subscription base.

But nevertheless, both ways, very high-margin business for us, which is going to be exciting. This is the last thing that I'll share with you on the recurring revenue model. Today, we have about 36% of our revenue comes from recurring revenue. We expect that mix to increase over time. And so 36% will become 41% over time because we're going to keep all that recurring revenue as we get higher renewal rates, we're going to keep that, right?

Product is onetime sale and recurring is recurring. And so the good news is we will move our mix. What that does for us as well, remember, I just told you, Q4 are going to be at 63%. I'm going to get a 100 basis point increase alone of this mix shift over the next 3 to 4 years. And so I'm already at 64% with my 63% in Q4 and then my mix shift here. And I think I'll be able to grow even further than that. That's the exciting part about the business model and the financial model that we talked about is really attractive. What would this do? This will obviously generate better cash flow for our business, and we're expecting cash flow to go up, and we're expecting profitability to go up as well.

And we believe that we can hit the 22% to 24% operating margin. So where does that leave us from a financial model and what we look for I'm looking at 64% to 66% gross margins. I think it's very fair for us to be able to get there. We will continue to work to generate scale in our business in OpEx. So we believe that the ranges that we have for R&D, sales and marketing and G&A are very reasonable to get us to 22% to 24% as a company operating margin. That will drive a lot of cash flow, a lot of margin improvement for us. and we think drive a lot of value in the stock price. We will also focus on buybacks. That is another thing that we would do with that cash flow.

We have a $200 million buyback in place as of July 1, and we will continue to buy back shares in the market as needed. And then last but not least, this is exciting. We just gave out guidance for the rest of the year only at revenue. And we said, well, maybe we'll actually flesh that out for you a little bit more. And here's the flesh out, which we will file as an 8-K later this afternoon.

But we are updating our guidance here and our guidance on the revenue is the same, but we are giving more granularity around where the margins are going to be at the end of the year. and what our earnings per share and our earnings per share, we're now saying there's going to be a minimum of $0.99 up to $1.02, which will move the street up in terms of what their -- the Street numbers are right now. So that's exciting for us as well. So our continued confidence as a team and all of what we're doing is kind of reflecting itself back into our numbers. And hopefully, we'll continue to beat race like we've been doing. 6 sequential quarters in a row at the midpoint, this will be our seventh sequential quarter in a row with growth. And so we're really on the growth trajectory that we are very excited about. So thank you for coming today. Really appreciate all your time, energy and support -- and I think now we'll bring up the entire management team, and we'll go through a Q&A session.

Sounds good.

Let's see who we have first. Sean?

I have a ton of questions, but I'm going to just limit myself to 1 and the 1 that just passed, so Kevin, your presentation was great. Thank you. I congratulate you on these flexible commercial models that you have. I feel like it really speaks to the flexibility and the relationship you have with your channel partners, and it's not something I hear a lot of from some of the other vendors. So congratulations. I was wondering if you could help us unpack hardware margins and all of that because your competitors struggle with this, and it's also something you can play with because that 800-pound gorilla, the margins they get on their hardware are significant. I feel from looking at that slide that maybe you're able to eat away at some of those or compete with them by eroding that, but does that mean that some of those models hit the margins more than others, like what. So if you could just talk a little bit about how that plays out, that would be great.

Yes, sure. These new commercial models you're talking, I mean, first of all, traditional gross margins on product tend to be in the 58% to 60% range, below our overall corporate rate, which means that the professional -- the subscription and support margins are higher to bring us up to 64% to 66% long-term.

These new commercial models are different. They are designed purposely for us to get more subscription, first of all, 100% attached on like the MSP program. The SPO program has no hardware on our books, right? It does -- the customer gets the hardware, the customer gets it through a different intermediary, they pay at a lower price for the hardware. And then we take all the normal profit and the operating system that sits on that hardware, we put it into basically a term license, a subscription for that customer, and then we sell that at an 85% margin.

We're not actually -- we're not -- we take 0 cost lower. The hardware is being purchased directly from our by what we call an aggregation partner. So the aggregation partner buys directly from the ODM at our cost. So think of it as the ODM gets to sell higher volume at the same price. It goesto the aggregation partner. So our cost of goods sold is 0. Our cost of goods sold as our operating system and our Platform One are sold together as a bundle. That's what we sell to the customer. Now we have costs associated with that. And as Kevin said, that's in the 80%, 85% range.

And I'll just say, think about it as an iPhone. iPhone is sold for $1,300, $1,400, it doesn't cost $1,400 to create an iPhone. It's probably $100, maybe $150 of components. You're paying for the iOS, you're paying for the cloud management, you're paying for everything else when you buy that phone. It's a similar concept, right? It doesn't cost us what we sell it for. All of our IP is the cloud management, the agentic AI. It's the operating system that sits on there, more of the cost is really in that layer as opposed to the hardware itself.

So that margin goes [indiscernible]

That's right.

[indiscernible]

We have flexibility to be able to allow the MSP to have a higher margin, along with our higher margin, and we can make those economics work for us. and for them in a better way.

David?

For Ed, Kevin or Norman. So implicitly in your outlook, you're assuming that on product, you're going to double the market growth, you're going to take share, but effectively [indiscernible] subscription, you're taking considerably more share, right, just in a different accounting or kind of economic model either through SPO or MSP. So how should we think about like your share position in the industry when you kind of aggregate those different models, right? So if SPO and MSP was more hardware-centric, like that would obviously make a much higher product revenue numbers, you'd be growing 2x, 3x the market. Just trying to get a sense for how to think about how the share play out.

So 1 relates to market share when we think about sort of hardware and like you think about projects and networking projects and us maybe taking share from other players. The other thing to consider is where we are today in terms of the percentage of our base that is on subscription. So we still -- we're still adding and there's an acceleration that's taking place because of us selling subscription licenses for switching and for all of wireless. And I also think it's also -- it's the math that Kevin went through that slide, looking at renewal rates and when you factor everything into a subscription model, which is what we're doing with Platform one, all those factors kind of come together for a higher growth rate.

Fortune customer [indiscernible]

Yes, it would be.

So using that as an example -- that's fair. Just using that as an example, they give us a $40 million traditional customer in subscription customer.

And Monica did say, right, that the market for subscriptions is growing at like 13%. And right now, we're growing at and I showed in the later that we really think that we'll be growing at 30%. And so I absolutely intend -- we intend to grow faster than the market on the subscription support side.

David, the way the modeling works is that we end up showing less revenue over time, if you look at it over 5 years, but we show more cash flow. .

I have a question about your support attach rate change you're going to plan on. So I think what the slide said is that support used to attach at 60% or 70%, and it will soon or will over 4 years ago to about 95%, right?

Right.

Okay. I just want to make sure I get that.

That's part of the driver of the growth.

No, I think I get that part. And that's very clear. I was one more on the expenses side. Are you planning for whatever, people on the other side of an 800 number? Or are you expecting there to be more of a platform on effect where it's going to do troubleshooting, AI magic, all the things. That's my first easy question. I just want to confirm that. Yes. Okay. But I also wanted you to sort of quantify what kind of price increase you took in percentage term versus old on November 1. Just give us the aggregate price increase if there's such a thing?

Mid-single digits.

And I would say, think about the cost that we will put in place with the support and Platform One. A lot of this might actually be cost savings because it's called deflection. So as the bio employs these AI agents, and they're fixing the network before there's even a problem. That actually could help us from a support management perspective. We will look to get more and more efficiency there with our own deployment of AI internally, as Abisha said, but also customers will get faster resolution within the system itself which will help us on that side as well. So I do believe that our margins will stay at or above where we are today, and I'll let Nabil comment as well.

I think you covered it perfectly, right? So I think as I said earlier, when it comes to AI, especially on the enterprise side, the thing as an investor and an analyst that you have to look at is [indiscernible] right? And if a company cannot adjust their unit economics downwards with the use of AI, they will blow out their cost. So for us, on platform side, the advantage is that we can increased installed base that gets support at a lower unit economics, that's exactly what Kevin is saying, and that's all done through tech, right? So that's why we can do that.

So one other comment as it relates to our price increases. We're very good at this. We have a team that's very well oiled in terms of how we evaluate price increases across the portfolio and how we do this. Typically, we have the advantage of Cisco and their pricing umbrella. And so we're able to stay under that pricing umbrella. So we're very careful about how we do that. And the teams move very quickly, and we're pretty efficient at that.

Mark, there's been a lot of chatter among marketing pros around adjusting from [indiscernible] or optimization. I'm just curious what you've started there. And then more importantly, how you measure that? Because I think -- I don't know if anybody has figured out how to actually measure the effect [indiscernible]

Absolutely. We've started looking at that in the last, I would say, 8 to 9 months years. The thing that we're working on is we know our buyers are losing AI to buy solutions. They're doing the research, 70% of the research is done upfront. Now more than search, it's LMs. So we need to use AI to sell and market. So one of the things we are doing is making sure our content is reformatted in a way that it can be served up to labs. So because LLM have a specific kind of format that they grab in terms of content. Number two, we are also looking at how many times extreme shows up in citations in terms of the quality and the quality of [indiscernible] and the positive mentions of extreme.

So we are working on making sure our placement in terms of number of citations in LMs is higher. We are starting with GPs. And then of course, we're looking at Google AI and perplexity as well. It's an ongoing effort. It's all hands on deck and marketing. I know Stephen smiling in the back. He and our content marketing team have been leading the charge along with [indiscernible]. One of the things we are doing is reformatting our web content as well as we speak to that. So I'm happy to give you more details, but this is one of the biggest initiatives we have in marketing as behind the scenes that's not visible to people. But we certainly won more of extreme content to be served up.

When questions are asked about -- what's the top secure networking vendor in the industry, I was extremely #1 there, and we're working on getting that. And we do have a way of measuring it. There's a number of [indiscernible] vendors out there now. There's a ton of geo start-ups out there. So we are also doing to some of them to see if we want to use their tools to continue to gain insights and train. I call it how to train the LLM, right? How to Train a Dragon, it's the same thing. That's what we [indiscernible]

[indiscernible]

Oh, yes. Well, we are using AI for translation as well, right? So we are doing -- we use an AI engine do not translate our content into various languages. And of course, we have a global presence, so you can imagine German, French, Japanese, Spanish and there's a variety of other languages we are -- we translate our content into. So yes, you're right. That's the next challenge is how do you then do that at scale globally in different languages as well.

Yes. I would just add, some of the tooling we've built, the sales assistant, the partner system, it works in 40-some languages and that we've actually seen a significant uptake from like our channel partners in Asia Pacific because it can dynamically interact with our partners in local language. And I just have to say it's a full circle moment. I mean we spend forever, putting captures in place to make sure the websites were being accessed by humans and now we're doing this complete 360 to get rid of them capture and then to make sure they're consumable by machine. So here we go.

You know what an interesting machines want more statistics, they want more -- as -- so now you might start seeing more FSUs appearing on the Extreme website, and you know why.

I'm going to read one from the web, while we transition -- so we got one from Eric Martinuzzi from Lake Street. And Norman, this is directed to you on talent acquisition. So we -- just asking about the disruption that we're seeing. And is that impacting your ability to attract talent? .

Sure. Yes, the question is around talent acquisition and the answer is yes. And yes. But we're -- what's great about Juniper HP is there's a lot of talent out there, people that don't want to be part of the HP apparatus. That works on both. Well, that really works for Juniper folks. So we've been able to identify those people and recruit them or they've presented themselves to us. There are some high profile ones that we'll be announcing in the coming weeks and months. We also have benefited I talked about our partner programs are built around the architect that wrote the partner program for both Cisco and Juniper now has a blank slate of paper, blank sheet on which we built our current offering to go after -- what's the number stand? 499,641 partners. .

[indiscernible]

It's [ Steve Schucker ] with Global Data. A question around customer flexibility and the subscription and support offerings. So to understand the support offering, bundling those together let's say, customer reach is like year 4. Some customers -- and I know this isn't happy for Extreme, but some customers like to stretch their investment a little bit. And a lot of your competitors simply won't allow that. They won't sell a software subscription without support. Would you?

So that's a great question. So when you think about support the way you were talking about, like, say, for example, Cisco and staff, there is a portion of support, which is simply break/fix, your access to your tack. That's typically the part that customers are like, "Hey, it's already 3 years old? Do I really want to renew it [indiscernible] stuff." But that's like the lowest common denominator for -- when we talk about Platform One, the part that we put in support is actually a lot of proactive stuff.

Now just think about like, hey, let us tell you that this Nick is going to fail before it's going to fail. Let's tell you that your security policy is actually out of threshold, and let's clean this up before you actually have an event on stuff. When you add those kind of support elements, the proactive support elements in it, we have never seen a customer that does not want to pay for that. So the answer to your question directly is in platform on the support angles that include the TAC as well as their proactive support elements that I just talked about. They are part and parcel of your subscription, and we do not separate them out.

[indiscernible]

You can migrate fix separately, yes, if you want to -- but when you buy a Platform ONE, it is part of it.

It's embedded.

And just let me add one thing to that, which is what we're trying to do is reframe our conversation around what Platform One is, right? If you think about a SaaS offering that you get out there, any SaaS offering, Salesforce.com, et cetera. It includes the sort. There's support you can call in and ask questions and that sort of thing, and there's a support element there already with SaaS applications. We're basically just including the support that we have within Platform ONE, similarly like other SaaS applications. And so we don't want think about -- we don't want people to think about a specific value towards the support.

At the end of the day, I think the support with the Agentic AI that builds, it's going to be so good that you're not going to call in to my support organization necessarily for help as much. because you will be able to ask the system itself, how to solve something, and they will proactively solve it for you or it will be a human in the loop, it will ask you, do you want me to solve it? Or do you want to solve it yourself, but it will tell you how to do that. So the amount of queries that we get, like, I'll call deflection is likely to go down on the support. There's always going to be break fix in RMA and all of that stuff. But that is -- and by the way, also our failures of our hardware are going down or yes, going down and down and down. That's really low at this point from a company. So all of those benefits kind of will come back to us over closer and they'll come back in the gross margins.

Right here, [indiscernible] So channel partners are going to be an important [indiscernible] folks going forward here. And without a question, I'm going to walk out of this room with 499,000 in my head. So -- but to Norman and Monica actually, how much of that are you going to target? I mean this is a -- so here's a question for you. How many partners do you have in your channel program today?

We have a few -- a couple of thousand that are transacting. So about [indiscernible] transact in the last trailing 12 months.

[indiscernible] overall?

Yes, 7,000 overall but 1,400 the transaction in the last 12 months. So -- and the answer...

So my question is how -- what are you doing to plan to grow that because a substantial investment, perhaps on your part to really grow that program successfully?

It's not quantity as much as it's quality. And so that's what spanning I see Tim shake his head back there. We can't spend -- we can't afford to spend a lot of time and effort and investment and opportunity cost on thousands of small partners that can't produce or my metaphor earlier won't be the [indiscernible] in the field on the basketball field board. So that said, what we want to do is focus on what we are doing is focusing on the partners that give us the best return and it's not hundreds, it's dozens, and that's very achievable for us to convert a handful of these partners and go after the share. And the pitch is very simple. We go in and we go into [indiscernible]. You have about an $800 million a year annual Cisco business. What do we want? We want your Cisco business. So that's simple.

We start there and work backwards. If we can get 10% of their business, they'll be the most meaningful, one of the most meaningful partners in our entire portfolio. We do that 10x. That's all we need to do to be able to grow our share. That's it. And so and that's exactly what we're actually against. The examples I put on the board, that's exactly what we're doing. And it's just that handful, and we just need those to convert. Who are they? And why did we target them we targeted them because they are below that top few hundred or a couple of hundred that Cisco has primarily in terms of earnings. So they're the most susceptible. They're the #3 or #2 in the market, not number one. They're the ones that are going to help us and have the most impact from the changes in the programs, the vulnerability of the program and some of the bigness of those programs.

And I wanted to add a marketing is completely with that strategy. So we have several high-touch programs. We have partner advisory accounts. So in fact, Logicalis was there, [indiscernible] normal slide from Europe were all at up in advisory council. We now have something called Extreme Partner sales exchanges, where we are doing about 50 road shows in the region, very concentrated, local on the ground to connect with our key partners, exactly the ones that he's describing. We call them and the whole goal of FCs to educate partners, share campaigns and create demand and win business together.

And last but not least, we also have some fun doing this, by the way, and I want to mention Cisco had their partners [indiscernible] last week and so we had a little gorilla marketing campaign that became bigger than I thought with I'm very happy about we had a van driving around the entire Cisco Convention Center. Many of you maybe saw it. Some of you were there. We got photos from you. We spent very little, but it was a big impact because the awareness was huge. And we actually had people on the ground, our SVP of channel was their meeting with several partners. And they took notice, and our time line was partner for profitability with Extreme.

And that's a key point, partner for profitability. So to kind of finish the comment there, they make more money off us. And that's the intent and as our new partner program comes to light, and that's per transaction, not in totality. But as we get to that point, we start to displace project by project or program by program, we can do that because we know exactly how much they make. We benchmark that. We can do it against each of the accounts. We can -- and we've implemented our program to offset that as what the financial models that give you a bigger boost in terms of -- think of that as supercharging. I was going to say the program that we ran last week was [indiscernible] out there doing that. And our teams where our teams were actively recruiting the distant franchise. So it did work. I mean there's a handful of folks that are this franchise. You pull them out side, you have a conversation about, hey, if it's confusing, we'll make it simple to you. .

Well, I think we should be clear. We're not going to be going after all the partners. We're going to be very targeted in terms of who we go after, and the teams will be very targeted in terms of who we go after and will be prescriptive in terms of the solutions.

Insight. We have a very specific offer. We think this is a program that can scale up into the tens of millions of dollars, and that's why we went after them in a more strategic way.

However, our systems, our marketing campaigns, we will welcome other partners to come in. They'll just have a different level of touch. They'll be touching the platform, but they won't be touching humans. So from a cost perspective, we're not going to scale up for the lower-end partners, but we're going to make it easy for them to transact. So we're going to be open.

And I would say for all partners, it's going to be easier to transact with Extreme. It will be easier for them to onboard, to come on. And if a smaller partner wants to become a bigger partner, they can graduate at some point, but we segment the partners very closely and will be very targeted in terms of where we invest time and money for these kinds of programs.

Kevin, I have to ask a long-term gross margin question and cash flow. So, I appreciate all the detail. How much of the model from a gross margin perspective is predicated on revenue mix versus underlying improvement in gross margin per revenue category in the model, right? So you've got price increase, you've got component relief, some tariff relief. But is it just mix that's driving gross margin? Or is there an improvement in the underlying product?

And then I'll give you the second one on working capital. Obviously, a shift to MSP and ESPO should help working capital from your perspective. How should we think about that incremental cash flow? I know you said buybacks, but if it is that less working capital-intensive going forward from a CapEx cycle perspective. If someone's buying aggregated products from a distributor or a reseller, obviously, that's positive for your working capital conversion? How should we think about kind of the benefits of that going forward?

Yes, sure. So one thing that maybe Q4 will be at 63%, right? I said the shift from 36% of our revenue going to 41% should be 100 basis points of margin improvement with just that shift alone. So kind of like the 63% becomes 64% just by virtue of time in subscription and support being a higher growth rate than the product growth rate, right? So that's the answer to your first question, the 100 basis point improvement there with just the revenue shift.

On the latter question around working capital and just improvement there in cash flow in general, yes, you're right. Stock buybacks is absolutely something that we think we've been doing, and we will consider to continue to do. And then, obviously, we could pay down debt. We've got a lot of opportunities. There's potential for M&A at some point in the future or something were to show up that was attractive to us. All of those are potential opportunities for us to drive value drivers for shareholders.

I think at the end of the day, what we are looking to do is drive, like we talked about profitability, it's a double the rate of revenue growth, and that will continue to scale our overall profitability and drive that cash flow.

Can I ask a follow-up. How much of that 20% growth is from buyback, if you thought about it that way? How much of that incremental?

I'm just thinking purely operationally, P&L-wise, we won't be -- in other words, what we do is we tend to buy back as many shares as get released. So we [ keep ]

Yes, that's the policy that we have at the Board level where we -- capital allocation, we're allocating capital to sop up the dilution from our equity programs.

Yes. So we're trying to neutralize that.

Tomer Zilberman, BofA. As I think about your 14% of subscription bookings coming from the new commercial model, you talked about how that's going to increase over time. What's your long-term vision as to where that goes to? And is that coming more from refresh and competitive displacements? Or is that coming more from modernization for campus infrastructure as it relates to AI?

I think it will be higher than the 14%. I've not guided to that today. And honestly, we're not sure. It's -- I mean MSP is the one thing that I could say from 2 years ago, we were on track for that. These other commercial models that we have are contributing. I think there's a big opportunity for us to continue to see improvement there over time. That will be best effectively in the $650 million that we've called out there as the SaaS ARR target for us. So it's embedded in there. We didn't call that out as a separate number. I would say it's at least 14%. It should be higher.

But I think the answer is a combination of both.

It's a combination of both.

Right. So maybe as a follow-up, one of your competitors have talked about right now as we think about AI usage, the chatbot is very peaky in terms of traffic on the traffic demand on the network. But they said, as we scale up and go more towards agentic, there's going to be a higher level, a higher sustained level of interest demand on the network.

And they also talked about how they expect that sovereignty is going to play a more important role. So you showed the quadrant of the four different areas of four different deployment models that you have customer managed versus partner managed, do you expect that you would shift one way or the other as you move more -- as your customers move more towards AI?

The way we thought about it traditionally is not a cannibalization of the business we have today. We've thought about this as incremental. These new commercial models are designed, if you will, for us to go and attract new partners and new opportunities that we've never really had before. Larger MSPs like Insight. These are ones that we've never had access to before. And to us, that's really incremental upside for us as opposed to our business shifting from one model to another.

Thanks. So just to add the point that you're making in terms of like for that said competitor is moving from a chat bot traffic to an agentic. That's really -- how should I say very lightly. That's them presenting a bug as a feature, right? So that's because they have two different architectures, and they say like, hey, as we shift from one to another, there are cost structure changes behind the scene.

Going back to the unit economics. And by the way, their front-end licenses are different there as well. So that shift to them matters, right? To us, it doesn't really matter because it's the same platform, whether you use it from a public point of view or on-prem or private, it's the same platform, number one.

Number two, whether you interface with our AI through a chatbot or to an agent, it all goes to the same AI core anyways. So for us, zero impact either way. So the customer can buy whichever way they want from a commercial point of view, they can use whichever way they want and our unit economics is guarded against any transitions between them. yet again, it's difficult to build platforms.

And other companies, when they try to force fit their current technology in your platform, they run into problems like that, where their unit economics is directly tied to actually where the customer is coming from. For us, we don't have those problems.

Any other questions in the room?

Yes. And I'm not showing any questions on the webcast. So I think we have one more. just wait for the mic.

I thought I'd take the opportunity -- thank you. I noticed on your list of partners, you had Palo Alto. And it fed to a question that I had earlier about -- just generally, so the network security market, application security, firewall, it's like a different set of vendors. It's like not the same vendors. And a lot of the networking vendors are looking to this, security, networking convergence because they're like, "Oh, this is going to give us a chance to play in this market."

I'm interested from your perspective, what's the ideal -- like what's the agile situation when you go into an enterprise when you're looking at that application security that firewall market? Like -- is it a partnership? I'm just interested in how you're seeing that and whether you're actually seeing this IT securities like this network security convergence.

Yes. And I can give you a product lens from this and then you can -- there's a CIO sitting here, so you can ask how our CIOs are looking at it. From our point of view, we have no interest in going and building firewalls. I think we have been super clear about that, that, look, that's a different market. That's not the market that we are going into. The portion of the security market that we believe is legitimate to us is the access security.

Think about it from a hyper segmentation point of view. And for us, the need that we feel is that the security vendors, when they come towards hypersegment or segmentation, they kind of ride over the top, as you know, right? So it's just like, okay, you put a UZTNA, yes, you're segmenting at the user level, but your network is still all combinants all shared, and we believe that that's a flawed model, right?

So what we believe is that if you're going to segment your network, if you're going to segment access, it needs to be all the way from the network all the way to the user. And if you notice, that is exactly what we have done. We have sound like here is segmentation in our fabric. Here's your segmentation on-prem through NAC. Here is segmentation UZ in terms of your end user and stuff. And by the way, they're not separate things. They're all part of Platform 1. They're all under the same license, same policy. So our strategy on the security side is very clear.

We have no intentions of building firewalls or going into Uber or XDR and stuff we partner there. So that is 100% partner. That's why you saw Palo Alto out there. There are other security vendors that we partner. We have a very big partnership with Microsoft on the security portfolio as well. But this portion of the security is best done both across networking as well as over the top, and we see a huge gap in the market and we are out to fill that. So that's our clear kind of stance from a product point of view.

Yes. And I would just add as a buyer. I don't look to a networking vendor for a firewall solution. And at the same time, security is a multilayered thing. And especially from a lens of like containing lateral movement in the network, I want to be able to do that at the network way, right? So I need security solutions from my networking provider. But at the same time, I'm looking at firewalls, I'm not looking here. So I think they're complementary.

It's not really -- well, I guess it's kind of company. But Jensen has said repeatedly that the IT department or the HR department is the future, right? And so I'm curious, do you want to be that? Like do you want to be picking the right Gen AI tool for finance and and marketing and things like that. And then -- and I guess this might be a combination of you and Norman. When you think about the infusion of Gen AI into the company, have you adjusted people's goals internally to assume that, yes, they are more productive, so you can sell more and you can -- things like that.

Yes. No, I think it's a great -- I've heard that quote before. And I'll tell you, I've talked to Kimberly, our Chief People Officer, about -- I think CIOs and Chief People Officers are thinking deeply about workforce skilling in that capacity for sure. So we definitely talked about like how do we put something together to just up-level AI literacy within our workforce because I think that is something we need to partner on.

I think from a CIO perspective, governance, security, guardrails is super important. So I'm not one of those CIOs I believe that every Agentic AI decision is like fully -- has to decide only in IT or we only deployed in IT. I mean I think some of the most innovative ideas come from our employees.

But the question is, how do you progress around that, right? So I do think we have a role to play. I think securing our data during our content securing our users, understanding what agents are doing in your environment, they're not deployed by IT. I think kind of having observability, security controls around that is absolutely a role for IT to play.

But we partner very, very closely with leaders, right? What Monica wants to do in marketing. I see my role is -- how do I enable that? What community wants to do in HR, how do I enable that, right? So I think it's all about partnering there, but we do need a strong observability security governance layer that is centrally managed. In a new agentic world where you're deploying agents all over the place, how do you make sure what's their scope? What's their control? What is they're doing? How do you have auditability on decisions and actions they're taking. Those are all things that we need to think about as CIOs.

And as your second part was about raising quotas, higher productivity, things like that. So the answer is yes. So how that manifests itself is we have AI tools that support our sales and our partners we put specific targets on their funnels and then their conversion tied to that. I can give you specifics in how we respond to e-rate as an example, leveraging these tools to be able to respond broader, faster and to more. That's one of the ways that you see it manifest itself. The result is higher funnel, better conversion, higher productivity.

So that almost makes the AI agent a mandatory part of the job, right? You're not going to do it soon or that?

Absolutely. It's embedded in these tools. In fact, we rolled that out at our Extreme Academy live last year, you had to use our sales agent. You had to use these tools to be able to support the responses and participation in the events, that continues to build and now we've rolled that out to our partners. So it's the same thing. I mean, the objective is faster, better productivity is the objective.

Last one from Bob. Throughout the day, you've talked about how you're selling bigger deals, more deals, platform deals that encompass more of the portfolio I'm wondering what kind of impact that's having on the sales team and how you're upscaling the sales force because I'm sure these conversations are now reaching C levels or higher-level executives and how you're handling that. and making sure that they're able to have those conversations.

Yes. So the question of how do we upscale the sales force as we go? How do we take them on the journey or not as we go upmarket. What we found is, first off, just standardizing on the same methodology, delivering on the same methodology throughout the forecasting process throughout the qualification process. Having funnel measurement, having consistent funnel measurement, how the conversions work, all that kind of stuff, making it very simple, but making it very consistent across the board regardless of your role, your geography or insert name. So that's part 1.

Part 2 is also training our teams on how to go upmarket and have those more complicated conversations. Now not everybody is going to make it. And as we've seen, we've been reading people through that process because we want to be able to convert on these projects and move forward. It's not 100%. It's not 100% one way or the other. We're pragmatic about it. We're working through that. A lot of folks are really moving and following that train. A lot of our partners are moving and following that train, but not all will be able to.

And Norman, if I can add to it, we are also rolling out persona-based training pop. So while we are very good at talking to the user community, we've done that for years. Like I mentioned, we are embarking -- we have been embarking on CFO programs, but also bringing sales up to speed and how to target what the pin points side's going to be different for a CXO, CIO network administrator. So that's the part of building the content and the playbooks too.

And then with the CXO events, we are actually getting a lot more prospects coming to our CXO events as well, which is getting sales more engaged with the dialogue initially and creating that engagement and hopefully converting. So working very closely with Norman and team on enabling the sales team like we said, to have that conversation, that's going to be different than the network team.

One thing that's helping us to executive engagement. You can't get executive engagement at the other two or three competitors out there like you would a extreme. So we care a lot about our customer success. And if you're a larger customer, you should be here because you know you're going to get the top team looking out and making sure that your deployment is going well.

All right. Thank you, everybody, for joining us. I think we have one final comment, closing remarks from Ed, and then we'll let you all go.

Yes, I just want to thank everybody for making the time to be with Extreme. We had a full day here and I think as I opened up, hopefully, you're getting a flavor for the extreme leadership team and the breadth and the talent that we've got here. I would say the team is -- we're very confident and very confident in our outlook, both short term and long term. and our ability to execute. So we're pretty pleased with where we are and the climate and stay tuned. Thank you.

Thank you.

Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Extreme Networks First Quarter FY '26 Financial Results Conference Call. [Operator Instructions] I will now turn the call over to Stan Kovler, Senior Vice President of Finance and Corporate Development. Please go ahead.

Thank you, operator. Good morning, and welcome to the Extreme Networks First Quarter Fiscal Year 2026 Earnings Conference Call. I'm Stan Kovler, Senior Vice President of Finance and Corporate Development. With me today are Extreme Networks' President and CEO, Ed Meyercord; and Executive Vice President and CFO, Kevin Rhodes. We just distributed a press release and filed an 8-K detailing Extreme Networks' financial results for the quarter, first quarter 2026.

A copy of the press release, which includes our GAAP to non-GAAP reconciliations in our earnings presentation is available in the IR section at extremetworks.com.

Today's call and Q&A may include certain forward-looking statements based on current expectations about Extreme's future financial and operational results, growth expectations, new product introductions and strategies. All financial disclosures made on this call will be on a non-GAAP basis unless stated otherwise.

We caution you not to put undue reliance on these forward-looking statements as they involve risks that can cause actual results to differ materially from those anticipated by these statements. These risks are described in our risk factors in our 10-K and 10-Q filings.

Any forward-looking statements made on this call may reflect our analysis as of today. We have no plans to update them except as required by law. And following our prepared remarks, we will take your questions. And now I will turn the call over to Extreme's President and CEO, Ed Meyercord.

Thank you, Stan, and thank you all for joining us this morning. The first quarter marked our sixth consecutive quarter of revenue growth and third straight quarter of double-digit year-over-year increases. Strong execution and our differentiated technology solutions are fueling market share gains, driving growth in the Americas and expansion across EMEA and Asia Pacific.

Revenue reached $310 million, up 15% year-over-year, driven by competitive wins with large customers across all verticals.

Product revenue increased double digits year-over-year for the third consecutive quarter. Sustained growth in our cloud subscription drove SaaS ARR up 24% year-over-year to $216 million.

One of the important growth engines with large enterprise customers continues to be Extreme Fabric, which is uniquely designed for enterprise campus environments.

We deliver unmatched automation of service delivery with zero-touch provisioning, unique security benefits and millisecond conversion -- convergence that supports greater resiliency that our competitors can't replicate.

There's strong interest in our new Extreme Platform ONE, which uses agentic conversational and multimodal AI to transform networking, cutting routine tasks from hours to minutes.

We're also seeing increased adoption of our WiFi 7 solutions, which boosts network efficiency, minimizes downtime and supports the demand of modern business applications.

Given our momentum in technology innovation, IDC recently recognized Extreme as a leader in its 2025 market scape, highlighting our fabric, Extreme Platform ONE, flexible deployment by universal hardware and expertise in high-density environments were key differentiators.

We're also seeing strong growth across our commercial models with our MSP program partners and bookings, both nearly doubling year-over-year and bookings up nearly 30% sequentially.

Our consumption-based billing eliminates upfront costs, while poolable licensing lets MSPs easily allocate licenses across devices, locations and customers supporting scalable growth.

In the quarter, we expanded our footprint within a major government in Asia Pacific, where we displaced a leading competitor. The project will create a network that connects all government offices nationwide with extreme fabric over SD-WAN.

Our proven execution with government agencies in the region is opening very large and valuable new partner relationships and expanding market opportunities, including new sovereign cloud capabilities that enable highly regulated customers to leverage our AI-powered networking innovations. This is a major factor in our ability to win larger deals and move up market.

Other wins in the quarter included T-Mobile Center, a premier multipurpose arena in Kansas City, chose Extreme for our proven expertise in deploying next-generation wireless and high-density venues.

X-Sight, a EUR 5 billion global leader based in Germany, specializing in clean room technology and complex plant engineering has standardized exclusively on Extreme for LAN, wireless LAN, network access control, all managed by ExtremeCloud IQ.

Burgers' Zoo in the Netherlands at over 111 acres recently deployed Extreme wired and wireless solutions managed by Extreme Platform ONE to ensure reliable connectivity for security cameras, ticketing, guest WiFi, mobile point-of-sale systems and smart habitats.

Global health care organizations like University Hospital, Birmingham NHS Foundation Trust and Henry Ford Health are deploying Extreme's WiFi 7 to enhance bedside patient access, keep critical medical devices online with real-time data transmission and support advanced applications such as real-time imaging and secure clinician mobility.

Gateshead Council in England deployed Extreme Fabric to modernize and secure its network across roughly 200 sites, creating a unified, secure and agile digital foundation managed through Extreme Platform ONE.

In September, we announced an extension of our relationship with the NFL through 2028. Now in our 13th season as a partner, Gary Brantley, the CIO of the NFL, said, partnering with Extreme Networks has been transformative for the NFL, elevating both our stadium operations and the way fans experience the game.

We're the only vendor in our space offering true cloud choice and deployment flexibility.

Customers can choose our cloud solutions across public, private or hybrid environments, and we include AWS, GCP and Microsoft Azure in our public cloud menu. In contrast, many of our competitors are locked into public cloud-only and expensive purpose-built architectures, creating major hurdles as they attempt to build the flexible deployment models that customers demand. These capabilities are driving growing interest in Extreme and competitive wins.

Extreme Platform ONE, which became generally available in the first quarter, is earning positive customer feedback for AI-powered automation that cuts routine IT tasks from hours to minutes, improving efficiency and accelerating issue resolution, especially with the addition of our innovative service agent.

Previously, IT teams had to manually gather logs for multiple devices, correlate alerts, run diagnostics and then create support cases, often taking hours or even days per issue.

Our service agent assigns automated tasks to subagents with complete visibility to its reasoning at each step with an emphasis on human in the loop. It diagnoses problems, collects the necessary evidence and generate support cases in minutes, allowing IT teams to resolve issues far more quickly and efficiently.

Extreme's Agentic AI architecture goes well beyond our competitors' older first generation and limited AI features.

Extreme Platform ONE simple interface, our AI Canvas that is truly unique in the industry, removes the complexity of navigating multiple applications, copying data between systems and manually tracking device life cycle, subscriptions and compliance. Now all this can be customized with a composable single interface with automated tracking and real-time alerts, delivering unmatched visibility, efficiency and faster, more reliable IT operations.

On November 13, we'll host an AI Summit in New York City to share trends, strategy, expert insights and our vision for the next wave of AI-driven innovations. You should tune into this event to better understand the future of enterprise networking.

Finally, we recently released our corporate responsibility report for fiscal '25. Since 2021, we've reduced our emissions by 34% and cut our office footprint in half, lowering electricity, natural gas and water usage.

Looking ahead, we aim to source 50% of electricity from renewables and cut emissions by 50%. Given this success, Newsweek recently recognized Extreme as one of America's greenest companies.

For the remainder of fiscal '26, we expect revenue growth to accelerate to 10%. Given the growing volume of large opportunities and our increasing winning percentage, we believe this fiscal year will mark an inflection point in our company's growth trajectory.

Now let me turn the call over to Kevin to discuss financial results and guidance.

Thanks, Ed. I'm very pleased to report strong first quarter execution and financial results with revenue exceeding the high end of our guidance range.

We achieved earnings per share of $0.22, exceeding the midpoint of our guidance range and consensus of $0.21 per share. Earnings per share was up 29% from $0.17 per share in the year ago period.

Total revenue in the quarter was $310 million, and that grew 15% year-over-year. This marks our sixth consecutive quarter of growth and the third consecutive quarter of double-digit year-over-year revenue growth as well.

SaaS ARR once again grew 24% year-over-year, driven by recent large wins, adoption of our new Platform ONE and from expansion of our new commercial models. The adoption of Extreme Platform ONE was well ahead of our expectations in the quarter, and the sales pipeline is looking very strong.

Bookings in the quarter grew 21% year-over-year, reflecting strong customer demand across our portfolio. Our year-over-year bookings growth across all regions is a testament to the success of our new commercial models, large customer wins in Asia Pacific and EMEA this quarter.

Our new commercial models are contributing about 14% of our total new subscription bookings, and we expect this to grow over time. Product bookings were comfortably ahead of our product revenue in the quarter as book-to-bill ratios were strong.

Product revenue of $194 million grew 20% year-over-year and was up 1% sequentially in a traditionally seasonal slower quarter. Driven by strong demand for Extreme solutions, we continue to move upmarket and grab market share.

We achieved our sixth sequential quarter of product revenue growth, which is driving subscription attach and ARR growth.

Geographically, we saw particularly strong performance in Asia Pac and EMEA as we continue to benefit from recent larger new customer wins. We continue to gain traction in the region as a strategic alternative to incumbents, particularly in the public sector and hospitality.

In the first quarter, 36 customers spent over $1 million with Extreme, up from 34 last quarter and 27 in the prior year quarter. Total subscription and support revenue was $116 million, up 9% year-over-year.

Total recurring revenue grew 8% year-over-year, representing 36% of total revenue. As a result of our growth in SaaS ARR, SaaS deferred revenue jumped 16% year-over-year to $327 million and recurring revenue growth brought the total deferred revenue up to $618 million. This growing base of contracted future revenue provides strong visibility into our recurring revenue and healthy margins.

Non-GAAP gross margin was 61.3% in the quarter and was impacted by industry-wide increases in component costs, such as memory, metals, including copper and aluminum and other semiconductor parts.

We do expect margins to recover over time as we recently implemented some price increases like others in our industry to mitigate the higher costs and drive margin recovery over the course of fiscal 2026.

In addition, discount trends have been stable across our business. We expect to exit with gross margins up 100 bps to 200 bps from current levels.

Our first quarter operating expenses were $149 million, which were primarily driven by higher onetime sales commission expense due to accelerators for large deals we recently closed.

Operating margin was 13.3%, up from 12.4% in the prior year quarter. We expect to continue to achieve operating leverage throughout the rest of fiscal 2026. I'm pleased to report that we generated $45 million in EBITDA, up 21% year-over-year as we continue to drive profitability ahead of revenue growth.

Free cash flow usage of $21 million was largely due to onetime payments associated with certain -- finalizing certain legal matters, which are now behind us.

Turning to capital management. During the first quarter, we repurchased 577,000 shares for a total of $12 million.

We ended the quarter with $209 million in cash and had a positive net cash position.

We continue to improve our cash conversion cycle down to 60 days from 81 days in the previous quarter as we continue to improve and lower inventory balances. We expect a recovery in cash flow during the rest of the fiscal year as we continue to grow revenue and improve profitability.

Now turning to guidance. For the second quarter of fiscal 2026, we expect guidance as follows: revenue to be in the range of $309 million to $315 million; gross margin to be in a range of 61.4% to 62%, operating margin to be in the range of 13.4% to 14.6% and earnings per share to be in the range of $0.23 to $0.25.

Our fully diluted share count is expected to be around 136 million shares. For the full fiscal year 2026, we expect revenue to be in the range of $1.247 billion to $1.264 billion with some normal seasonality in Q3, followed by sequential growth in the fourth quarter. The midpoint of this range suggests 10% growth year-over-year.

Our goal for SaaS ARR continues to be in the low 20% range for year-over-year growth.

Recurring revenue is expected to be about 35% of total revenue in fiscal 2026.

And with that, I'll now turn the call over to the operator to begin the question-and-answer session. Rebecca?

[Operator Instructions] Your first question comes from the line of Mike Genovese with Rosenblatt Securities.

Guys, can you talk about more about these component price increases hitting the gross margin, sort of what's going on there? And then also touch on plans to kind of lift ASPs through Extreme Platform ONE or price increases. So gross margins now and sort of the plan to improve them going forward?

I can jump in high level. And then, Kevin, why don't you come back and follow up. Mike, yes, we've seen prices in memory and optics shoot up in the near term. And Kevin mentioned in his remarks that we put in place a price increase to recover those expenses. I'd say in addition to what would be a mid-single-digit price increase where we would really feel those -- feel the impact there in Q3 and Q4, we've got a variety of other initiatives, tactical initiatives from the supply chain teams to help us drive the gross margins back up over that 63% number. Kevin, do you want to add to that?

I think you're right, Ed. I mean, we had talked about this pretty openly in Q4. We had about $1.5 million of incremental costs, right? We were waiting a little bit there, Mike, around what was the industry going to do from a price increase perspective. We saw industry price increases go into effect across Cisco and HPE and Juniper.

And so that gave us, if you will, the license to also raise price on our end as well to recover some of those costs that we saw. And naturally, we'll see those come into the business over the next couple of few quarters, and that's why we're guiding up to get to 63% by the end of the year with 100 bps to 200 bps improvement.

On the ASP question that you asked, I mean, we are expecting an increase in average selling price, especially on the cloud applications that we have, in particular with Platform ONE. And we're already seeing that already with the bookings that we're seeing. We've talked about 10% to 15% increase in what we're seeing there. And so that we're still on track for that.

Great. And I have 2 more questions. I'll just ask them at once, even though they're unrelated. One, I didn't hear anything about a federal government shutdown. -- certainly didn't see it in the revenues here. So just want to ask about federal exposure and anything you're seeing from the shutdown.

And then secondly, just on a sort of Cisco versus Juniper competitive environment right now? Are you seeing more traction against one versus the other?

Yes, I'll...

Maybe we'll take them in order, Kevin, and we'll cover the federal question first. Mike, given how small our market share is in the federal space and given that we've just recently certified our portfolio, and we're now in a position where we can bring fabric, we can bring cloud, we've really opened the door to the federal market. And I would say that the shutdown for us has had little to no impact on our business. If anything, we're seeing a much larger -- we're seeing much larger opportunities open up on the federal side with the growth and the expansion of our certifications.

As far as E-Rate business, we really see no impact to our E-Rate business, and we've got a very healthy E-Rate cycle. Kevin, I don't know if you want to add to that before we go competitive.

No, I think that makes sense. That's it.

Okay. Yes. On the competitive front, Mike, we've got 2 different things -- 2 very different things going on. Obviously, we have HPE acquiring Juniper. I'd say we're surprised at how long it's taken them for them to put their plans in action.

The first thing that we've been able to take advantage of is on the human talent front, we've been able to hire some great talent, which is going to help us when we talk about moving upmarket, we're bringing people on board that also have connections in the channel and directly with customers and with MSPs, for example, who are going to help us accelerate and move up market. So that is a positive. And we also -- we hear from the channel, and then we also hear from customers who are confused about the road map and exactly which way the technology is going to go. There are mixed signals that come from corporate versus what's being set out in the field, and that's always helpful for us.

As it relates to Cisco, it's a very different situation. Cisco is overhauling their partner program and is going to create a lot of disruption. That's going to play through not only for partners, but also for customers. And that's going to -- that's creating different opportunities. This is kicking off in the beginning of November. So there's been a lot of discussion. Now we've been privy to some of the changes that they're making in the plans. And net-net, the changes are going to favor the very top Cisco partners. These are partners that we do very little business with.

So we think it will leave the mid-tier and smaller partners somewhat disenfranchised looking for alternatives. And here, we feel like there's an opportunity now that, quite frankly, we haven't seen in a very long time.

So we're excited about the channel disruption there. And then as we look over at HPE, it's about people and it's about confusion as it relates to the road map. There are some issues with Mist being a public cloud as the only play there. And as we look at and what we highlight in some of our comments, the importance today of cloud choice and cloud flexibility as far as items, important items like data sovereignty, et cetera, et cetera. So as HPE and Juniper try to match together their portfolios and their clouds and their lakes, et cetera, this is going to open up some opportunities for Extreme.

And Kevin, feel free to jump in and add to that.

I think you nailed it all. Yes. And obviously, Cisco's publicly announced their refresh opportunity, which is our refresh opportunity as well to go after them. I think the competitive markets right now are very frothy for us in terms of being able to take some of the competitive dynamics and turn to our favor right now. So I think we're seeing that reflected in our financial results and our revenue growth as well.

Your next question comes from the line of Ryan Koontz with Needham & Company.

I want to ask about Platform ONE and where you are in terms of that commercial introduction. I know it's a new product. And can you share any kind of any metrics you have or any kind of qualitative feedback from customers on renewals and what kind of traction you're seeing there with Platform ONE, that would be great.

Sure. Ryan, and I will say we're going to -- on Investor Day, we'll dive into a lot more detail, and you can hear directly from our PLM and engineering teams. And then we have our AI Summit, which is really about the future and the vision of where we're going with our Agentic AI platform.

At this stage of the game, it's early for us to present metrics. If you'll recall, we went GA with Platform ONE at the very beginning of the first quarter. And with that, commercially, we're selling Platform ONE, but our customers still have the availability to use XIQ and Site Engine and all the applications they've had before.

So when they're buying a new license, it's backwards compatible. This is a decision that we made, and it's been very popular. Basically, what that means is that customers are able to buy the license and they're able to work within the platform. So they're getting to know Platform ONE as we complete the first wave releases of Platform ONE, which will be towards the end of this year, towards the end of November and December, that's when we expect to see customers start to make the full migration and move entirely over on to the new platform.

So what I would say is based on how we've measured it, -- we're obviously tracking this very closely. We've seen high adoption. We've seen a lot of excitement about the capabilities. As we mentioned, we've just released our service agent, which can provide a lot of benefits to customers. And I think there's a lot of excitement about that. And there's a lot of differentiation with what we're bringing to market and what's been out there as far as those Gen 1 AIOps solutions.

So it's early innings for us. And yes, what we've shared is that as we turn the corner on the calendar year, that's when we'll start opening up and creating metrics for the [ Street ].

And Ed, I would just add to that, that it was ahead of our expectations in the quarter, which is obviously a good thing.

Yes. Got it. And maybe another if I could follow up. Relative to your TAM of TAM growth, I assume is kind of mid-single digits. How should investors think about your long-term revenue growth prospects relative to your share gains and your strength of markets you're seeing?

Well, what we've talked about is repointing the year-over-year growth to 10%. And what we're also looking at is the growth of Extreme Platform ONE and the kind of services that we can bring to bear and the solutions that we can bring to bear. If you look at the traditional TAM for Extreme and we look at our largest win in the quarter, the largest win in the quarter was also our largest SD-WAN win ever, in which case, in a very innovative solution, we're bringing our fabric technology across the wide area network and creating a very unique solutions for government customers. This has also spawned a lot of other opportunities.

And I would argue that this is TAM expanding for us. I've also mentioned the fact that we've turned up certifications that are allowing us now to have hunting licenses to go play in the federal markets. And we're doing some things in terms of cloud ops and making investments in Europe that will also open up new government opportunities in those markets.

The last area to comment on are those commercial models where historically, we haven't played in the MSP space, and we're getting tractions. I think we would all say that the MSP evolution has taken a little longer than we thought to get rolling, but it seems to be hitting its stride and the growth metrics, obviously, for this quarter were very strong. So as we look at the overall market, we see Extreme taking share, and we look at ourselves longer term as a double-digit player with higher growth and more emphasis now on services and solutions that will evolve from Platform ONE and that subscription line. Kevin, do you want to add?

No, I think as we think about the new commercial models, like you talked about, we think about Platform ONE, that's all going to drive growth on the ARR, the SaaS ARR side, right? And we're seeing that now grow 24% year-over-year. So that's going to continue to -- we're going to continue to drive that part of the business. I think it's a solution, right? It's kind of hardware and software, but I think we're adding more and more software solutions, and there's a bit of transformational journey that the company is going on right now to create more recurring revenue helps our margins, helps our margin profile in terms of improvement better and helps our profitability as a business. So it is a full solution with everything. And I think people are realizing the benefits of all the different kind of product offerings that we have as a company, and that's helping us compete better and go upmarket.

Got it. Just a quick follow-up there on your MSPP or MSP traction there. you have new MSP count? I know you disclosed that in the past.

Yes, we're at 61 now.

Your next question comes from the line of Dave Kang with B. Riley.

My first question is regarding Cisco's recent partnership with NVIDIA. So just wondering what your countermeasure would be?

Yes. I think, Dave, I think if you think about what we're where we're focused, we're not playing in the market, which is building networks for AI systems. We're in the market for bringing AI to networking. And so we're leveraging AI tools, and we talked about this conversational multimodal Agentic platform. We have a true Agentic structure that we've built. We've released our service agent. You'll hear us talk about our AI Summit and on Investor Day, the evolution of the release of many agents and many new services that we'll bring to bear. This is where Extreme is leading. And I think it's important that we make that difference between building networks for AI systems versus leveraging AI technology for driving enhanced performance and visibility and capabilities for people delivering a networking experience. So that's where we're focused. This is where Extreme is a leader.

We have a -- we're in a very strong position. We actually, given our size, have some competitive advantages relative to some of these larger players. And this is where we're making a dent in the market.

Got it. And my second question is regarding gross margin. Kevin, I'm trying to understand -- so you talked about component prices going up. So that was roughly about 100 bps impact?

Yes. I mean probably about that somewhere in that range. I mean there's a combination of things here, right? Dave, around we expedited some of our deliveries for some of these larger customer wins. So there was more expedite fees there. We also have just component costs that are higher than we expected. The 100% China tariffs kicked in, in some of those component costs as well. And then also just the cost of copper and aluminum and some of these metals as well just went up throughout the quarter as well. So those are some of the costs that we had experienced, and we had talked about $1.5 million in Q4. We continue to see about roughly the same amount in Q1.

And now we've raised price to basically offset that into Q2 and beyond and then Q3, Q4 as well because it's obviously partially in Q2 and then with it becoming November 1 effective date, and then we'll see a full quarter effect in Q3 and Q4.

And I think you said you're going to raise prices by mid-single digits. Did I hear that correctly?

Yes. We looked at all the different SKUs. Some are in the low single digits, some in the mid-single digits, but we looked at the SKUs across some we didn't change at all. But I mean, at the end of the day, we kind of looked at it and then we kind of followed the industry pattern for what HPE, Juniper and Cisco did.

Got it. And my last question is, was there any FX impact?

Very little. We hedge our balance sheet, and so we don't have a lot of FX issues.

Your next question comes from the line of Chris Schwab with Craig-Hallum.

On the good quarter guys. Just a further clarity on the gross margin, given the increased prices of different commodities and raising prices to offset that and seeing an improvement in the second half of this fiscal year, which you've made clear. Can you just remind us what -- say, following that going into the next fiscal year, what you think the targeted gross margins will be given the increased Platform ONE and services and subscription growth? Are we targeting to be a 62% to 64% gross margin? Or are we still kind of thinking 62% plus or minus?

Yes. Maybe we can hold that for the Analyst Day here on November 10 because I think we will walk through what the long-term model looks like beyond this year as we think about the next 2 or 3 years. I don't think there's going to be a lot of change from the 64% to 66% range that we've talked about in the past. It's really these kind of more acute component costs that we've seen recently, where we've had to raise price against them that have caught us a little bit like unexpected from -- over the last year or so that we're just basically making the price changes to combat that. But I do believe that from a long-term perspective, the SaaS subscription revenue growth engine in the business is going to continue to help us drive those margins in the future. So we're still very optimistic about the financial model in the future.

I would just chime in, Kevin and Christian, I would just say we haven't changed our long-term outlook for gross margins. And mix will factor into the equation. We are expecting a very significant ramp in Extreme Platform ONE, and there will be margin benefits there. Keep in mind, there's a combination of that service element to our solution set along with the subscription and enhanced new services. So that really starts to come into play in fiscal '27 and fiscal '28. -- what we see happening with gross margin currently, these are sort of more near-term tacticals that will correct.

We've been in this movie before, and we know how to correct these things. So as Kevin mentioned earlier, we'll get ourselves back up to that 63-plus percent and then get back on track to the longer-term goal. I think we have a 64% to 66%.

That's right. That's right.

Great. And then my last question, and maybe give you a chance here. The 10% top line growth exceeding the TAM of the industry, as we talked about federal markets, Europe, Platform ONE, Services Solutions, -- but the bookings continue to be very strong. Is there anything else going on in the marketplace regarding total cost of ownership, just making a better product that is driving that? Or is it pretty much everything we've already discussed?

Christian, I think it's pretty much everything we discussed. There's -- look, if you just look at Extreme, we've continued to invest in our fabric technology. It's one of the quivers that we have from a competitive standpoint. But we're the only ones that have this, and we have unique capabilities for enterprise campus solutions. I think larger enterprise customers are surprised when we get into proof of concepts and all of a sudden, we're starting to demonstrate our capabilities that our competitors just can't match. And one of the very largest defense contractors in the world who's actively looking at Extreme said, wow, what you guys do in 6 minutes is taking Cisco 6 hours to do.

And we actually had this time lapse video where we show this. But when we talk about the automation and the capability, the delivery of services, the security benefits that we bring with this technology, how that produces a very different kind of wide area network, SD-WAN solution when we apply Fabric, when we look at the subsecond and millisecond convergence as far as resiliency of the network, the large players can't replicate it. So this is something where we're moving upmarket and we're winning and we go toe to toe. Now when you add on top of that Extreme Platform ONE and the fact that we'll be bringing these capabilities into the platform with enhanced visibility and having one single place to drive our multi-vendor capability, that's something that is -- that quite frankly, we bring choice and flexibility and new capabilities and we go toe to toe and we win against the larger competitors. So I think we have technology differentiation more so now than we've had.

Yes, we're out in front with WiFi 7. Yes, we have these new commercial models and ways to win and new certifications, et cetera, we're staying out in front of that. But we have real differentiation today, and our teams are executing well. Our sellers are executing well and the channel is picking up on it. We are -- we see this in our funnel. We see this with the close collaboration of our marketing teams and our sales teams as we look at these opportunities and we look at higher win rates.

And then the last factor is what was brought up earlier by Mike, where -- it's a bit of a mess at HPE-Juniper right now. And there's a lot of confusion. There's a lot of people changing. Now they're setting up overlay teams and who's covering the channel, who's covering the customer. There's just -- there's a lot of unknowns that create opportunities for us. And then the same thing is true with Cisco talking about their refresh, but then also talking about making it really difficult for partners below partner #50 to make money. And they have thousands and thousands of partners. So there's just -- there's a lot of disruption right now with the largest players that have 75% of the market that are causing people to take a look at Extreme.

And when they take a look at Extreme, they're kind of blown away by our technology, our differentiation. And keep in mind, we always win very high marks for the level of our customer support and how people work with Extreme and they feel like there's a different level of customer intimacy that we bring to the equation.

Your next question comes from the line of David Vogt with UBS.

Guys, I want to come back to the gross margin question. Again, I'm sorry to belabor the point, but obviously, we've had a pretty steep rise, as you guys called out in memory and optics. And Ed, I appreciate the potential cyclicality of those markets if history is any guide, but the severity of the increase is pretty daunting. And I want to get a better sense for how you're thinking about how you're pricing in that dynamic the balance of the year. I appreciate the price increases that you talked about, but is there a chance that you could come back and effectively take another bite at the apple if need be from a pricing perspective? Or do you think the price increases that you announced across the portfolio, low single digits to mid-single digits covers you for the balance of this year -- if things get potentially a little bit more challenging? And I'll give you my second question is, Kevin, maybe for you on the subscription side, obviously, SaaS has been a big driver. You've done a great job there. But I guess I'm trying to understand the gross margin dynamics on the subscription support side looked a little bit light relative to Q4, down sequentially. And kind of what's going on there? I would imagine that support services or installation is probably a bit lighter in revenue. So I would have imagined that subscription gross margins would have been up sequentially. Any kind of color there that you can share with us would be great.

Yes. I --... Kevin, do you want to...

Go ahead Ed. I'll follow up.

Yes. Upfront in terms of memory and optics. And David, you can imagine we're all over this, and we have teams and people with these are -- we're very actively engaged with our suppliers across the board, and there's kind of all hands on deck. There are secondary suppliers of both memory and optics for us that we look at that -- and we're very active is what I would say. And we feel very confident in one, in how we're calling the current market conditions; and two, our plans to recover where we are. And we have baked that into our price increase.

We do not expect to come back and revisit and have yet another increase, and we feel very confident in terms of how we planned it. Kevin, do you want to talk about the combination... The subscriptions...

Yes, yes. I'm happy to. So we are investing a little bit on the subscription side with Platform ONE on the Agentic AI. So there's some increased, I'll call it, cloud spend that we have on our end. Please don't take that as like that's going to be forever more. These are just upfront investments as we launch Platform ONE to have a more robust, right, Agentic AI agent experience for the customers. We fully expect all the pricing that we have and the bookings that we're getting from Platform ONE.

Remember, when we get a booking for Platform ONE, it gets recognized over time. So you're not even seeing today in our first quarter results, even the total bookings that we had in the quarter being reflected in the revenue so far. So we are optimistic about the subscription revenue, the subscription margins that we will have and that they will continue to play out to be very strong in the 80% range. So I'm feeling good about what our subscription revenues.

And then I would also add is, we are seeing continued positive momentum on these new commercial models like MSP and others, and those have a higher margin impact as well. And those will play out into the model over the next year or so. So I'm very bullish about the subscription margin story that we have as a company and our focus there for several quarters and even years out at this point. I feel like we were in a very good path there. And we'll recover these costs that we've seen these onetime costs, if you will, that have come in on the components over the next couple of quarters. But I do believe, as we said earlier, we'll get back to that 64% to 66% gross margin targeted [indiscernible].

Can I ask one follow-up, Ed? Have you shared with the market kind of the BOM that's related to either optics and/or memory? Is it like 5% to 10% of like a typical switch BOM that is impacted by these rising component costs?

We haven't shared that. I'm sure I can get it for you, Dave, and circle back separately on it. But we haven't shared what the percentage of the BOM is for memory for components, et cetera. I don't know if we'll share it, but we'll certainly look into it for you.

Your next question comes from the line of Eric Martinuzzi with Lake Street Capital Markets.

I wanted to revisit the guide for the second quarter and specifically that the low end would actually be sequentially down from the first quarter revenue. I was wondering if you got -- were there any pull forwards out of Q2 into Q1 as far as the large deals that you won?

Not on the revenue side, Eric. We had some bookings that came in at the end of the quarter ahead of the price increases. Those didn't make their way into the revenue actually. So it's kind of made its way more into backlog.

Okay. But I mean, historically, you would be up sequentially that September versus December quarter. I just -- was there just conservatism in the outlook and kind of handicapping...

Well, I mean, at the midpoint, you've got to increase, right? So at $312 million versus the $310 million, I think you're referring to the range of $309 million versus $315 million?

Yes.

I mean -- so at the low end of the range, yes, it would be $1 million lower. At the high end of the range would be higher. The reality is we are expecting to continue to grow for a seventh sequential quarter in Q2 at the midpoint at the $312 million.

So I wouldn't look at that necessarily as a message that we are expecting to go down in Q2 over Q1 from a range perspective. We're still optimistic about the business.

Yes. And I think it's fair to mention, Kevin, that Eric, we had a very strong quarter in Q1. We had a lot of large deals come in and land in the quarter. So -- and it started from the get-go. I would say linearity was very strong in Q1, starting with bookings in July. And I think we just had a very strong quarter there on the heels of our Q4.

Yes. Certainly, good numbers in Q1. I don't want to take anything away from a beat and guide up quarter.

Yes, no, it's good enough.

At this time, there are no further questions. I will now turn the call back over to Ed Meyercord for closing remarks.

Thank you, Rebecca, and thank you, everyone, for joining the call. As always, I know we have employees, customers and partners that also kind of join in here, and we appreciate the partnership and the continued growth in our relationships. We continue -- we're excited to continue to build on our success. We're really looking forward to updating everybody at our Investor Day on November 10. And we're going to be able to take a deeper dive into the markets where we're playing in our technology and our execution, and we'll be able to field all questions there. So we look forward to your participation there. Thanks, everybody, and have a great day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by, and welcome to the Extreme Networks Fourth Quarter Fiscal Year 2025 Conference Call. [Operator Instructions] I'd now like to turn the call over to Stan Kovler, Senior Vice President, Finance and Investor Relations. You may begin.

Thank you, Rob. Good morning, and welcome to Extreme Networks' Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. I'm Stan Kovler, Senior Vice President of Finance and Corporate Development. With me today are Extreme Networks' President and CEO, Ed Meyercord; and Executive Vice President and CFO, Kevin Rhodes. We just distributed a press release and filed an 8-K detailing Extreme Networks' financial results for fiscal Q4 and full year fiscal '25. A copy of the press release, which includes our GAAP to non-GAAP reconciliations and our earnings presentation is available in the Investor Relations section at extremenetworks.com.

Today's call and Q&A may include forward-looking statements based on current expectations about Extreme's future financial and operational results, growth expectations, new product introductions and strategies. All financial disclosures made on this call will be on a non-GAAP basis, unless stated otherwise. We caution you not to put undue reliance on these forward-looking statements as they involve risks and uncertainties that can cause actual results to differ materially from those anticipated by these statements. These risks are described in our risk factors in our 10-K and 10-Q filings, and any forward-looking statements made on this call reflect our analysis as of today. We have no plans to update them, except as required by law. Following our prepared remarks, we will take your questions. And now I will turn the call over to Extreme's President and CEO, Ed Meyercord.

Thank you, Stan, and thank you all for joining us this morning. I'm pleased to report that Q4 marked our fifth consecutive quarter of sequential revenue growth. Revenue reached $307 million, representing a 20% increase year-over-year with particularly strong performances in APAC and EMEA regions. We continue to move upmarket and see robust demand across both our wired and wireless network solutions in all our industry verticals. This helped drive an acceleration in SaaS ARR revenue to $208 million, up 24% year-over-year.

Large deal momentum is picking up with product bookings at an 8-quarter high. Our competitive win rates remain strong as we move upmarket and displace larger players due to our highly differentiated campus fabric, the flexibility and simplicity of our cloud management platform, the industry's most simple licensing and now the release of our innovative AI-powered Extreme Platform One solution.

Enterprise interest in Extreme has increased across all verticals. This momentum was clear at Extreme Connect in Paris in May, where nearly 1,000 customers, partners, analysts and press joined us for hands-on training, dynamic main-stage keynotes and networking with peers. Many of the attendees have seen PowerPoints and canned demos of future AI platforms from other vendors, but the fact that the entire event was run on a live version of Extreme Platform 1 generated a lot of excitement and momentum. The overwhelmingly positive feedback on the event and our technology highlights rising enthusiasm for Extreme.

In Q4, we expanded our footprint in the Japanese government with 2 multimillion dollar wins displacing a major competitor and gaining large and important strategic partners in the process. The 8-digit project win for the entire Japanese judiciary, including the Supreme Court, marked the largest win in the APAC region in company history. Both will deploy a unique Extreme Fabric solution from core to branch powered by our SD-WAN and managed through ExtremeCloud IQ, giving users secure, seamless access across the country with our flexible and highly secure private cloud option.

We continue to add to our leadership position in high-density public and entertainment venues in the quarter. MetLife Stadium, Home Field of the New York Giants and Jets as well as Host for the 2026 World Cup Finals selected Extreme to deliver modern WiFi 6E infrastructure to power better fan experiences and streamline operations across the stadium. We also added Pinnacle Bank Arena and Hendrick Motorsports, as highlighted in our press release.

Global hospitality and casino customers, including the very first high-end luxury resort casino in the Middle East are standardizing on our fabric. When customers see the impact of Fabric's unique features like subsecond convergence, the unmatched security benefits of micro segmentation, the ease of deployment with automated zero-touch provisioning, Extreme becomes the easy choice. One very large enterprise in the midst of several proof of concepts said, what takes Cisco 6 hours takes Extreme 6 minutes. In fact, we've challenged each of the large players in the networking industry head-to-head in enterprise customer environments and none come close to meeting our performance.

Extreme is also becoming the top choice for mission-critical environments, delivering unmatched reliability and performance. Bera, Europe's fourth largest air navigation provider, deployed Extreme to ensure secure, scalable communication and managing airspace over Spain and over 2 million flights annually. In the U.K., Sur and Sussex Healthcare NHS Trust, which provides health care services to over 740,000 people upgraded its WiFi network and will use ExtremeCloud IQ and Fabric for flexible, centralized and secure network management to help deliver best-in-class patient care. Finally, Qatar Energy, a leader in oil and gas production, chose Extreme wired solutions to enable secure high-performance connectivity across its complex and remote operations for its new liquefied petroleum gas bottling plant.

In Q4, we hit a major milestone with Extreme Platform 1, becoming the first and only networking vendor to offer a conversational multimodal, agentic AI-powered networking platform generally available to customers today. Early feedback has been positive. West Suffolk NHS in the U.K. migrated to Extreme Platform 1 in just 47 minutes. They said the platform gives them a helicopter view of the network, and they expect our AI agents to be new members of their IT staff. Bath and Northeast Somerset Council in the U.K. said they love how AI has helped them quickly resolve technical queries without having to pour through hours of documentation.

Extreme Platform 1 breaks down silos between networking and security, automates tasks through integrated AI agents and offers the industry's simplest licensing. It also provides the industry's only composable workspace where you can leverage our platform's multimodal capabilities and customized dashboards with the help of our AI agent. Customers can see everything from global networks down to individual devices, application performance and more. This helps simplify planning, procurement, deployment, management, troubleshooting and keeps downtime to a minimum. Industry analysts have recognized the significance of Extreme Platform 1. According to Enterprise Strategy Group, the solution is "at the leading edge of the market in terms of completeness and sophistication of AI for networking.” Enterprise Management Associates says, "There is a growing interest in AI-driven network management capabilities since IT teams are running leaner with heavier workloads”. And there is less skepticism today towards AI than there was a few years ago, especially considering Extreme's human-in-the-loop approach.

Extreme Platform 1 brings AI, automation and simplicity together at one power cloud. For our customers, it means faster outcomes, higher productivity and significant ROI. We believe we're in the right place at the right time with the highest quality platform and the most modern tools for all enterprise networking customers.

And finally, we continue to make progress with our diverse commercial models with our MSP program doubling to 53 partners year-over-year. We offer the industry's first consumption-based billing, eliminating upfront costs and ensuring predictable expenses. Our pool-able licensing allows our MSPs to flexibly allocate licenses across devices, locations and customers, making it simple to scale. Looking ahead, we have strong confidence in sustained customer demand based on our Q1 funnel generation and with continued strong growth in our overall pipeline.

We expect growth in fiscal '26 to accelerate. We have tremendous opportunities with large customers. Our competitive positioning has never been stronger, and we're accelerating investments in our business to drive automation, differentiation and commercial success. I look forward to sharing more of our plans and outlook with all of you at our recently announced Investor Day in November. With that, I'd like to turn the call over to our CFO, Kevin Rhodes, to walk us through the results and guidance.

Thanks, Ed. I'm very pleased to report strong fourth quarter results with revenue exceeding the high end of our guidance range. We also delivered strong operating margins and free cash flow. We achieved earnings per share of $0.25 at the high end of our guidance range and exceeding the consensus of $0.23, up 32% from $0.19 in the prior year quarter on an adjusted basis. Total revenue of $307 million in the quarter grew 20% year-over-year and 8% sequentially. This marks our fifth consecutive quarter of growth. We also accelerated SaaS ARR growth to 24% year-over-year, driven by recent wins, continued growth in our wireless business with strong Wi-Fi 7 adoption and early adoption of Extreme Platform 1. Overall, we achieved our best bookings quarter in the past 2 years, reflecting strong customer demand across our portfolio, which gives us confidence in our growth trajectory heading into fiscal 2026.

In the fourth quarter, new subscription bookings accelerated, which is a testament to the new large customer wins in Asia Pacific, our recent rollout at John Deere and the commercial models we launched over the past year. Product revenue of $192 million grew 26% year-over-year and 8% sequentially, driven by continued recovery and strong demand for Extreme's solutions as we continue to move upmarket. Wi-Fi 7 mix grew meaningfully, representing 30% of all wireless units and driving a second straight quarter of revenue growth in wireless products. Geographically, we saw a particularly strong performance in APAC with major new customer wins.

This was our largest bookings quarter ever in Asia Pac. We continue to gain traction in the region as a strategic alternative to the incumbents that are there, particularly in the public sector. EMEA, also a bright spot, revenue grew 21% year-over-year, the highest level of revenue in the region since the early 2024 era as strong execution in the market boosted our business there. Americas revenue grew 4% year-over-year, and we're encouraged by both the momentum and strong pipeline we're seeing in the Americas for both the first quarter and fiscal 2026.

In the fourth quarter, 34 customers spent over $1 million with Extreme, bringing our fiscal '25 total to 168 customers. Total subscription and support revenue was $115 million, up 11% year-over-year. Total recurring revenue grew 8% year-over-year and represented 36% of total revenue. As a result of our growth in SaaS ARR, SaaS deferred revenue jumped 15% year-over-year to $308 million and recurring revenue growth pushed total deferred revenue above $600 million. This growing base of contracted future revenue provides strong visibility into our recurring revenue and should continue to drive strong cash flow generation.

Non-GAAP gross margin was 62.3% in the fourth quarter and was in line with our guidance. Our fourth quarter operating expenses were $144 million, also in line with our guidance. Operating margin was 15.2% and up from 13.5% in the prior year on an adjusted basis, demonstrating the leverage we have in our model from top line growth and prudent expense management. We generated $75 million in free cash flow in the quarter, our highest quarterly level since 2023 and $50 million in EBITDA, our highest level in the last 7 quarters. We returned value to shareholders through a repurchase of 1.5 million shares for a total of $25 million. Cash flow was aided by significant improvement in our cash conversion cycle to 81 days, down from 112 days in the third quarter, driven primarily by lower days of inventory.

We ended the quarter with $232 million in cash, and achieved a net cash position of $52 million, up $49 million from net cash at the end of the third quarter. For the full fiscal year, revenue of $1.140 billion grew 2% year-over-year, with non-GAAP EPS of $0.84 compared to $0.70 on an adjusted basis from the prior year. We achieved significant margin expansion with non-GAAP operating margin of 14.2% compared to 11.9% on an adjusted basis in fiscal 2024.

As we enter fiscal 2026, we're well positioned to build on our success. Customer demand exceeded revenue in the fourth quarter, and we have strong visibility for growth based on our funnel, backlog and future customer demand. We expect a reacceleration of overall revenue on a full year basis that should translate to higher earnings and cash flow generation. For the first quarter of fiscal 2026, we expect guidance as follows: revenue to be in a range of $292 million to $300 million; gross margin to be in the range of 61.9% to 52.3%, operating margin to be in a range of 12.7% to 14.5% and earnings per share to be in a range of $0.20 to $0.23. Our fully diluted share count is expected to be around 135 million shares. For the fiscal year 2026, we expect revenue to be in a range of $1.228 billion to $1.238 billion. And with that, I'll now turn the call over to the operator to begin the question-and-answer session.

[Operator Instructions] Your first question today comes from the line of Eric Martinuzzi from Lake Street Capital Markets.

Congratulations on the terrific quarter and the solid outlook. I wanted to dive into the success that you were seeing in EMEA and APAC. Obviously, this was good for Q4. Just wondering on the follow-through here. Was this kind of -- just happened to be lumpy to the good for Q4? Or do you see this as something sustainable early here in the kind of first half of FY '26?

Thanks for the question, Eric. And we've seen a gradual recovery in EMEA and its build up throughout the year. Quite frankly, it was a little slower than we expected. But now I think with the government stabilized and I think the political environment more stabilized that we're expecting momentum to continue to ramp. So -- and we see that based on the funnel of opportunities. We also have a couple of unique opportunities with the German government and some of the new rules that are coming out around security that we've committed to invest in, in fiscal '26. So we're kind of -- we're excited about our market share there and what's happening with the macro and then some specific new growth opportunities.

Asia Pacific, I'll comment, which we have been this is where we saw significant growth in that market due to some very large wins and a unique solution set that we put together for the Japanese government. I mentioned in my quote, but really what's very important about this is not only one branch of the Japanese government, where we have -- we're very well positioned for other opportunities there, but it's also the impact that it's had on the partner community, both system integrators as well as partners. So we have now broken into some of the largest entities there, and they're really excited about, a, our solution set; and b, the opportunity to work with Extreme. So we're expecting continued momentum in both of those markets.

Ed, one of the things that you guys talked about on the Q4 outlook was you were going to be keeping pricing stable despite the uncertainty around tariff. Do you feel like there was any maybe a benefit to pull forward orders that happened in Q4 due to that, that maybe isn't there after Q4?

Yes. I mean we saw very little, Eric, and that's because our product categories were exempt. And then we were sort of given the heads up that the expectation is that they would continue to be exempt, although you don't know until you know. And when the new tariffs came out, that was the case. So as we look at the Commerce Department, they've been very firm in terms of the list of exemptions and that to continue to be the case. That could always change. But we've also messaged that to customers. And I feel like that's the mindset of the marketplace. So the answer to your customers is that your question is, I'm sure there are customers that may have come in, but very minimal, not like what we've seen -- not even close to what we may have seen in the past.

Your next question comes from the line of Ryan Koontz from Needham & Company.

Terrific quarter, guys. I wonder how much Platform One contributed in the quarter? I know you had a limited availability in the June quarter. Was it meaningful to your ARR bookings? And then how should we think about the timing of the balance of your customer base renewals phasing in over the second half for Platform One?

Sure. Let me jump in and then Kevin, you can come in behind. At this stage, we literally just GA the platform. As you know, we announced Platform One back in December. We had early availability. We opened up the books for E-Rate bidding. So we can see Platform One opportunities in our funnel. But what we're expecting is for this to come into play in the second half of the year before you see a meaningful impact to the business.

Right now, what we're guiding is that it's going to help fuel customers' decisions to go with Extreme, knowing that they can upgrade to Platform 1. Customers that want to trial Platform 1 today, it doesn't carry risk because they have access to -- they still have access to XIQ and all the applications as they go forward. So we're expecting customers to trial, test, play around with the platform. And then we're expecting kind of serious migrations to happen as we turn the corner on the calendar year. Kevin, do you want to add anything?

No, I think you're exactly right, Ed. And it was really related to new subscription bookings, right, that accelerated in the fourth quarter. That was led somewhat by some of these larger customer wins that we had in Asia Pac, plus the rollout at John Deere was another addition to that. And then the new commercial models on MSP, very limited around the Platform One, but that's the benefit of the future that sits in front of us is that we see a lot of excitement for Platform One, which continues to sustain. We're expecting to sustain that 20% plus growth rate on the ARR side.

Great. That's great to hear that. And just to follow up on your comment there around MSPs and you're up to 53 now. I mean, can you maybe characterize where those MSPs are in their growth cycle with you with customer wins? And any kind of details you can share on that rollout of this 50 wins you have now?

Yes. I think I'd say we're still in early stages, Ryan. We -- last year, we had 14 or 15 MSP customers. And at that time, we were developing the platform. We have since and recently in the last quarter, completed full automation of the billing cycles, which is really important for MSPs. So now we have a fully automated platform that is really simple to use. And we also now have the benefit of Extreme Platform One. And so we would expect to see -- I would still say it's very early innings there. Kevin talks about having MSPs do $1 million to $2 million. We have certain MSPs that are beyond that already. And so I think it's a function of -- from a channel perspective, how we're reaching out to new potential prospects and then how we're going to nurture those that are already in the platform. But I can tell you the response to the automated -- the fully automated billing, the way that we have this consumption model, the way that you can pool licenses and then just the fact that we have a brand-new platform from a user interface perspective and then the multi-tenancy, it's really a cool platform. And so I think the economics are there. The platform is there, and I think we're expecting to see momentum build throughout the year. Kevin, feel free to jump in.

No, I think that's all right.

Great stuff. Maybe one last one, if I could. As you look upmarket, we see HP Juniper deal done now. How are you thinking about your opportunities in Fortune 500 and the competitive environment just kind of in this new landscape?

Well, you hear us -- you've heard me in my comments say a couple of things. One is that we are moving upmarket. And we talked about the Japanese government. We've talked about John Deere. We talked about a massive win out in the Middle East with a large hospitality player where there's a lot of business behind that. I can tell you in our funnel, we have more large opportunities than we've ever had. And a lot of this is success begets success. Once we win these customers, they become reference accounts. and then we use them to go market to other large customers. So that's very successful.

And then the key to us is getting in the door. And I talked about our fabric technology. When we go head-to-head with our customers, and right now, we're in the midst of competing for one of the largest opportunities that would be in company history. And in most cases, a lot of it, the engineers and the IT leaders are not as familiar with us and not as familiar with the technology. So People don't believe the PowerPoint slides, but when they actually get in and they see and they start playing around with the technology, they're kind of blown away by what we can do. And again, this is not hyperscale data center stuff. This is an enterprise fabric where we have a unique advantage. And I mentioned we've gone up against everyone in the industry.

And I gave that quote where this very large customer, the guy who is head of this project literally said, what takes Cisco 6 hours takes Extreme 6 minutes. And we welcome the chance to go head-to-head with any competitor to demonstrate the value of our fabric and what does it mean when you have subsecond convergent? What does it mean when you have the capabilities that we have in terms of zero-touch provisioning and just the way that edge devices can call for services in a way that's fundamentally different, the resiliency of the platform, the segmentation capabilities and what does that mean as far as securing valuable services that they want to send and manage across the network. So it's really a function of us elevating the brand and getting into these opportunities. And I think you'll continue to see that the more opportunities we have, the more success we have. And that's what we're kind of doubling down on that.

Your next question comes from the line of Christian Schwab from Craig-Hallum Capital.

Great quarter, great expectations. Ed, just to follow up on that, just to be clear, it sounds like the continued strong product bookings, you would say it has more to do with just having better products than taking market share or from, say, HP, Juniper or even Cisco. But -- or would you say it's a combination of both? I guess that wasn't clear to me.

Yes. Look, I mean, Christian, as you know, the industry has moved from being point product-based to solutions. And so what we're selling is a solution where the product is a piece. A lot of the product, meaning hardware in the industry has become commoditized. Most of us are buying from the same vendor, and it's a question of the software that we develop around it and how we develop our solutions and then the management platforms that we build around it. So I think today, I'd say it's more about the solutions and the features and the capabilities that we're bringing to market that are really differentiating us.

I will say there's a lot of buzz around Extreme Platform 1 that just went GA and the idea that we have this truly conversational, multimodal agentic AI platform that is more holistic than the predecessors that are in the industry and the fact that it's live and customers can actually go in and play in the platform and begin to kind of experience kind of what the new experience in networking could be. People are curious. And then because of where we are, people are wanting to find out more about Extreme. As it relates to HP Juniper, look, that's a deal that we wanted to see it happen.

We think that there's going to be a lot of disruption. Their synergy number went up by 50% in terms of what's required. They have to pull a lot of cost out of that business. And it means change, and it means change for existing projects for customers. It means changes to partner programs. It means changes to their employees. And look, we've already been the beneficiary in terms of some of the key hires we've had in terms of some of the opportunities that have cropped up. So this is something that from a competitive standpoint, is creating some opportunities for us. I would say the same thing with Cisco kind of moving away from networking in general. these are things that are helping Extreme. That, along with true innovation in terms of this platform and people looking for a vendor in the enterprise space that has the highest quality solutions with the most modern tools to solve complex problems. And we just find ourselves in a better position getting more at bats.

Your next question comes from the line of Timothy Horn from Oppenheimer.

So Ed, to be clear, I mean, is the pipeline improving, do you think because of the HPE Juniper merger? Are you getting more inbounds from customers because they're worried about all the things you're describing, one? And then secondly, on the MSP side, do you include large incumbent telecom carriers in that? I know they've been frustrated with Cisco over the years. Are you capturing any mind share or share there?

So if I start in reverse order, Tim, I'd say not today. We don't have any of the larger players today on the MSP front, but we think that's an opportunity. And what I could say is that we've got -- we've been investing in teams that have very good relationships. And this, we think, could be one of the ways that we can truly break out because of the differentiation of the product portfolio that I've been talking about and this platform and then this multi-tenant MSP platform that we built with a lot of unique benefits and it's the most modern. So when we -- I'm not going to say it, when we are able to attract one of these larger players, which we're targeting and we're going to be going for it, we think it will be a real needle mover. So not today, but we're working on that.

As far as APE, Juniper, yes, for us, it would be a net positive. We have seen opportunities. We have seen some partners coming our way and bringing opportunities. At this stage, I'm not in a position to talk about how meaningful that is or how do we quantify that. Keep in mind that in the market every day, we compete with both of them anyway as well as we compete with Cisco in the market every day. But I would say, overall, net-net, it'd be a net positive. They haven't really gone in and made the changes yet. When they go in and have to go pull the synergies out, we think that will be a catalyst. The other catalyst is Cisco is changing their partner program. And we are quite certain that the changes to the partner program will incentivize the partner and the channel away from traditional networking, which we think will be a net positive for us in the partner community.

Well, just related to all that, how much higher can your MSP partners margins be under your platform, do you think than their legacy platform, kind of what are you hearing from a return from what they've done historically versus what you enable?

Yes. I think a lot of the problem with MSP platforms is less about the solution and the margin of the solution, and it's more about the expense of trying to maintain customers and it kind of gets very operational. And that's why we spent so much time focusing on this platform. Once an MSP is established, it's hard to unlock because people have to invest a lot in setting it up. So that's the work that we have cut out for us is to get in there and unlock and get one of these larger players that give us a shot. And we're convinced that once we get that shot and they start working with our platform that will create some of the economics that you're talking about, Ted.

Your next question comes from the line of David Vogt from UBS.

This is Brian on for David. On gross margin, given the product gross margin of around 58% in the quarter with full year at a similar clip and the competitive landscape and product offerings, do you think this is a reasonable go-forward product margin? And then I have a follow-up.

Kevin, do you want to cover that?

Yes, yes, sure. We've been pretty consistent with our product margins if you look back over the last 4 quarters at that 58% range. We do think that there will be an opportunity for instance WiFi 7, we have a higher margin profile on Wi-Fi 7. We just talked about that being 30% of our wireless units in the quarter. That's going to create an effect around our product gross margins in the future as well as that switches more and becomes a larger percentage of our mix. There are some costs that we've had over the last, I'd say, 12 months around shipping and going with air freight versus sea freight that we feel like we can take out some of those costs in the future as well. So we think on the product margin side, we can continue to grow that product margin. I would say that 58% in the future, we could see that clipping up to 60%. That would be my target range, 58% to 60% there.

Got it. That's helpful. And then just on the verticals, can you share underlying demand trends by vertical specifically government given the importance?

Sure. I mean we categorize kind of flat by state, local and education broadly, it's about 40% of our total revenue. We have another breakdown in the investor deck that you can see there where we've got other vertical markets that are in that 10% range. And those vary between retail and manufacturing and health care. We also see hospitality and venues being 10% as well. Retail transportation is 10%. So that -- I would say that across 5 or 6 verticals, but government and education being the largest, around 40%.

And that concludes our question-and-answer session. I will now turn the call back over to Ed Meyercord, President and CEO, for closing remarks.

All right, Rob. Thanks for hosting us today. Thanks, everybody, for joining the call. Strong quarter for Extreme. We've got a good outlook. We're excited about -- obviously very excited about these big customer wins, the technology differentiation and then the launch and the GA of Extreme Platform 1, which is generating a lot of interest in Extreme. I encourage everyone to come see us in November. We're having an investor conference, and we'll be able -- we'll be in a position to dive into a lot more detail, and we'll be able to showcase all the technology and also give you a flavor of some of the comparisons for Extreme versus our competitors and why people are taking notice of Extreme. Thanks, everybody, and have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.