Extreme Networks Expands Margins as Product Sales Lead Growth
Fourth-quarter revenue reached $338.6 million as sequential growth accelerated to 6.8%.
Extreme Networks (EXTR), the networking-equipment maker, swung to a fourth-quarter profit as product sales extended their sequential growth streak to nine quarters.
The quarter paired a stronger sequential recovery with moderating annual growth. Revenue rose 10.3% from a year earlier, slowing from 11% in the third quarter and 14% in the second, while sequential growth accelerated from roughly flat in the prior period.
Revenue totaled $338.6 million, and GAAP diluted earnings improved to $0.13 a share from $0.08 in the third quarter and a loss of $0.06 a year earlier. Adjusted earnings rose to $0.32 a share from $0.26 sequentially and $0.25 a year earlier.
Product revenue increased 13.9% to $218.5 million, accounting for most of the quarter’s growth. Subscription and support revenue rose 4.3% to $120.1 million. Extreme Platform ONE represented more than 30% of subscription bookings in its first year, and its bookings doubled from the third quarter.
SaaS annual recurring revenue reached $244.3 million, up 17.7% from a year earlier and 3.4% sequentially. That pace slowed from the third quarter’s 28.6% annual increase and 4.2% sequential gain.
GAAP gross margin improved for a third consecutive quarter, reaching 62.2% from 61.7% in the third quarter and 61.4% in the second. GAAP operating margin widened to 6.2% from 5.5% and 4.1% over the same periods, while adjusted operating margin reached 15.7%. Full-year gross margins remained below fiscal 2025 levels.
For fiscal 2027, Extreme expects revenue of $1.38 billion to $1.40 billion, adjusted operating margin of 16.7% to 17.1% and adjusted earnings of $1.28 to $1.33 a share. First-quarter guidance calls for revenue of $334 million to $339 million and adjusted earnings of $0.27 to $0.29 a share, signaling a roughly flat-to-lower sequential start to the year.
Extreme repurchased $25.0 million of shares during the quarter as full-year free cash flow declined to $95.3 million from $127.3 million. After quarter-end, the company entered a new $500 million revolving credit facility and repaid its existing term loan and credit facility.