Netgear's Enterprise Growth Stalls on Factory Shortage

The Tip Desk · November 11, 2026 · 3 min read

Third-quarter net revenue was $167.3 million, down 9.3% from a year earlier, as manufacturing constraints at a key partner limited shipments.

Netgear, Inc. (NTGR), a global leader in intelligent networking solutions, reported third-quarter net revenue of $167.3 million, down 9.3% from a year earlier, after a 1.2% year-over-year decline in the second quarter. The networking company said manufacturing challenges at a key production partner constrained its ability to convert customer demand into revenue.

GAAP gross margin was 40.1%, up 100 basis points year over year, after a 270 basis-point year-over-year expansion in the second quarter. Non-GAAP gross margin was 41.3%, up 170 basis points year over year. GAAP operating loss widened to $(13.7) million from $(7.1) million a year earlier. GAAP earnings were $(0.45) a share versus $(0.17) a year earlier.

Non-GAAP operating income was $3.3 million, a 2.0% margin, exceeding the high end of the company’s guidance range, versus $4.0 million and a 2.4% margin in the second quarter. Non-GAAP earnings were $0.13 a share versus $0.12 a year earlier.

Enterprise revenue was $90.7 million, down 0.1% year over year, after 7.7% year-over-year growth in the second quarter. Enterprise non-GAAP gross margin was 53.2%, up 220 basis points year over year, after an all-time-high 54.1% in the second quarter. Enterprise non-GAAP contribution margin was 24.5%, down 40 basis points year over year. Enterprise accounted for over 54% of revenue and approximately 70% of non-GAAP gross profit.

Chief Executive Officer CJ Prober said end-customer sell-through increased approximately 6% year over year globally, led by double-digit growth in managed switches, with more positive trends in the Americas and Europe. He said Enterprise backlog exited the third quarter more than 2.5 times higher than the end of the second quarter, which was already elevated due to shortages. Prober said the company implemented an additional Enterprise price increase that will take effect in November.

Consumer revenue was $76.6 million, down 18.2% year over year. Consumer non-GAAP gross margin was 27.2%, down 120 basis points year over year. Consumer non-GAAP contribution margin was (1.9)%, down 390 basis points year over year. Prober said the company is harvesting consumer Service Provider products and optimizing the Consumer segment for gross profit, which is intentionally constraining topline revenue. Partner manufacturing challenges also affected availability of a portion of the Consumer router portfolio.

ARR from subscription and services increased approximately 12% year over year to $42.5 million, from approximately $42 million in the second quarter. In the third quarter the company implemented a restructuring in Consumer to drive efficiencies, with cost-reduction benefits expected beginning in 2027. Restructuring and other charges were $5.6 million in the third quarter, versus $0.8 million in the second quarter.

Cash and short-term investments ended the quarter above $242 million. Third-quarter share repurchases of $15 million brought cumulative repurchases since the beginning of 2024 to more than $131 million.

The company expects fourth-quarter net revenue of $160 million to $175 million, with service provider and related products of approximately $17 million, an approximate 28% year-over-year decline. It anticipates approximately 150 basis points of consolidated gross-margin pressure in the fourth quarter versus the prior quarter, primarily from rising memory and transportation costs. Non-GAAP operating margin is guided at 0% to 3% and GAAP operating margin at (8.7)% to (5.7)%. Prober said the company expects to be back to normal production levels by the first quarter of 2027.