Earnings call transcript: Calix Q3 2025 results exceed expectations, stock surges

Calix Inc. (CALX) delivered strong financial results for the third quarter of 2025, surpassing both earnings and revenue forecasts. The company reported earnings per share (EPS) of $0.44, significantly exceeding the forecasted $0.34, marking a 29.41% surprise. Revenue reached $265.4 million, also surpassing the anticipated $246.21 million, with a 7.79% surprise. Following the announcement, Calix’s stock price experienced a notable increase, rising 11.78% to $66.19 in premarket trading.

Key Takeaways

• Calix reported record quarterly revenue of $265 million, a 10% sequential growth.
• The company achieved a non-GAAP gross margin of 57.7%, improving by 90 basis points.
• Stock surged 11.78% following the earnings report.
• Calix’s diversified customer base contributed to its strong performance.

Company Performance

Calix demonstrated robust performance in Q3 2025, achieving record revenue and significant profitability improvements. This marks the tenth consecutive quarter of eight-figure free cash flow, highlighting the company’s operational efficiency and successful integration of AI technologies. The firm’s diversified customer base of nearly 1,200 clients, with no single customer accounting for more than 10% of revenue, has bolstered its competitive position in the market.

Financial Highlights

• Revenue: $265 million, up 10% sequentially.
• Earnings per share: $0.44, beating the forecast by $0.10.
• Non-GAAP gross margin: 57.7%, a 90 basis point increase.
• Free cash flow: $27 million.
• Record cash investments: $340 million, up $41 million sequentially.

Earnings vs. Forecast

Calix exceeded analyst expectations with an EPS of $0.44, compared to the forecasted $0.34, resulting in a 29.41% surprise. Revenue also surpassed expectations, coming in at $265.4 million against a forecast of $246.21 million, a 7.79% surprise. This performance indicates strong operational execution and effective cost management.

Market Reaction

Calix’s stock responded positively to the earnings announcement, increasing by 11.78% in premarket trading to $66.19. This surge places the stock closer to its 52-week high of $69.69, reflecting investor confidence in the company’s growth trajectory and strategic initiatives.

Outlook & Guidance

Looking ahead, Calix has provided Q4 revenue guidance between $267 million and $273 million. The company anticipates fiscal year revenue growth of 20% and expects to be at the lower end of its 10-15% growth target. Continued gross margin expansion and accelerated AI agent development into the first half of 2026 are also expected.

Executive Commentary

CEO Michael Weening highlighted the transformative impact of AI, stating, "The pace of change that AI is injecting into the market is like nothing we have ever seen in human history." He emphasized the company’s strategy to monetize AI, adding, "We are absolutely going to monetize AI in a significant way by helping our customers monetize their business at a significantly faster pace."

Risks and Challenges

• Potential supply chain disruptions could impact production timelines.
• Market saturation in key segments might limit growth opportunities.
• Macroeconomic pressures, such as interest rate hikes, could affect customer spending.
• Regulatory changes in international markets may pose compliance challenges.
• Competition from larger tech firms investing in similar AI technologies.

Q&A

During the earnings call, analysts focused on Calix’s AI monetization strategy and its potential to drive subscriber growth for customers. The company’s ability to capitalize on the BEAD program and expand its network was also discussed, alongside the strategic importance of workflow automation and customer success optimization.

Full transcript - Calix Inc (CALX) Q3 2025:

Conference Operator: Greetings everyone and welcome to the Calix third quarter 2025 earnings conference call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Nancy Fazioli, Vice President of Investor Relations. Thank you, Nancy. Please go ahead.

Nancy Fazioli, Vice President of Investor Relations, Calix: Thank you, Latonya, and good morning, everyone. Thank you for joining our third quarter 2025 earnings call today. On the call we have President and CEO Michael Weening and Chief Financial Officer Cory Sindelar. As a reminder, yesterday after the market closed, Calix issued a news release which was furnished on a Form 8-K along with our stockholder letter. It was also posted in the Investor Relations section of the Calix website. Today’s conference call will be available for webcast replay in the Investor Relations section of our website. Before I turn the call over to Michael for his opening remarks, I want to remind everyone that on this call we will refer to forward-looking statements including all statements the company will make about its future financial and operating performance, growth strategy, and market outlook, and that actual results may differ materially from those contemplated by these forward-looking statements.

Factors that could cause actual results and trends to differ materially are set forth in the third quarter 2025 letter to stockholders and in the annual and quarterly reports filed with the SEC. Calix assumes no obligation to update any forward-looking statements, which speak only as of their respective dates. Also, in this conference call we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in the third quarter 2025 letter to stockholders. Unless otherwise stated, all financial information referenced in this call will be non-GAAP. With that, Michael, please go ahead.

Michael Weening, President and CEO, Calix: Thank you, Nancy, and good morning. I just returned from the incredible experience of Calix Connections, where we celebrated customer-driven innovation on our unique platform and the success that the platform drives to our customers by enabling their teams to win new subscribers, grow revenue per subscriber, and reduce churn. To stand in front of that crowd and celebrate NPS scores as high as 94 is a testament to the partnership and trust we have built with our customers and they with their subscribers and the communities they serve. At Connections, we officially launched the Calix Agent workforce, our end-to-end integration of Magentic AI into everything that we do via our third-generation platform that will launch in partnership with Google Cloud this quarter.

This marks the next stage in our company’s ongoing evolution to help our customers simplify operations and go to market and innovate with our platform, enabling them to grow for their members, investors, and the communities they serve. The ability of our customers to dominate their markets when armed with our unique and highly differentiating platform and managed services model was on full display, and in our results in the third quarter, the Calix team achieved record revenue in our fifth quarter of sequential growth. While guiding higher in the fourth quarter, we set another gross margin record, our seventh consecutive quarter of margin improvement. We also had 20 new customers choose the Calix platform to dominate the markets they serve, and RPOs grew sequentially.

At the same time, the team maintained a rigorous focus on operational performance and the balance sheet, with OpEx investments returning to the target financial model while yielding our tenth consecutive quarter of eight-figure free cash flow, ending the quarter with record cash. It was another great quarter of performance by our customers and our teams who support them as we launched a culmination of our vision and where those with the Calix platform, managed services, and access to data are best placed to succeed through the power of Magentic AI. Cory, over to you to walk through the specifics of Q3.

Cory Sindelar, Chief Financial Officer, Calix: Thank you Michael. During the third quarter of 2025, we delivered record revenue of $265 million, reflecting sequential quarterly growth of 10%. Our overperformance relative to our guidance reflected continued robust, broad-based deployments from our BXP customers as they added new subscribers and footprint expansion as they continued to choose Calix for network upgrades, new builds, and competitive displacements. RPOs grew 2% sequentially to a record $355 million and increased 20% year over year. Our current RPOs were $141 million, up 5% sequentially and up 28% year over year. This metric is a strong indicator of the strength we are seeing from our platform, cloud, and managed services model. The combination of our BXP customers winning new subscribers and strength of Access Edge deployments led to another record of non-GAAP gross margin of 57.7%, representing a 90 basis point sequential quarterly increase. Our balance sheet metrics were strong.

DSO was 30, inventory turns were 3.8, and free cash flow was $27 million. We have produced quarterly free cash flow for over five years, including 10 straight quarters with amounts in the eight digits. We ended the third quarter with record cash investments of $340 million, an increase of $41 million sequentially. Moving to guidance.

Michael Weening, President and CEO, Calix: Given the broad-based demand picture.

Cory Sindelar, Chief Financial Officer, Calix: The rates at which our customers are deploying products.

Michael Weening, President and CEO, Calix: We believe we can continue to grow.

Cory Sindelar, Chief Financial Officer, Calix: Revenue sequentially even with the significant overperformance achieved in the third quarter of 2025. Our revenue outlook for the fourth quarter is between $267 million and $273 million, which at the midpoint would represent a 2% sequential increase in revenue and reflect revenue growth of 20% for the fiscal year as compared to 2024. Our non-GAAP gross margin guidance for the fourth quarter at the midpoint would represent a slight increase from the third quarter and reflects our expectations regarding customer and product mix. This guidance for the fourth quarter means our gross margin improvement for fiscal 2025 will exceed the higher end of our target financial model of 100 to 200 basis points. Regarding non-GAAP operating expenses, we expect OpEx will increase sequentially, primarily related to investments in Connections and to accelerate the development of AI agents and functionality to our platform into the first half of 2026.

Michael Weening, President and CEO, Calix: That said, we expect to be back.

Cory Sindelar, Chief Financial Officer, Calix: Within our target financial model by the end of 2026. Michael, back to you.

Michael Weening, President and CEO, Calix: Thanks Cory. This is an exciting time for Calix and our customers. The pace of change that AI is injecting into the market is like nothing we have ever seen in human history. As I shared at Connections on stage and with the 350 general managers and CEOs who attended our leadership track, where Netflix took 10 years to get to 100 million subscribers, OpenAI took two months. The pace of change is mind boggling and for many it’s overwhelming. For Calix, that pace of change is our advantage and an advantage for the customers who leverage our platform and managed services. We’ve invested 15 years and $2 billion to put in place the foundational building blocks in the form of Access Edge, Experience Edge, and Calix Cloud to make the most of the agentic AI opportunity that is ahead.

Our migration to our third-generation platform in partnership with Google Cloud allows us to support the success of our existing customers while expanding internationally into new geographies with local sovereign data centers and support large Tier 1 customers with a dedicated instance of our entire platform. We are already well into the fourth quarter and while Connections is complete, thousands of attendees will be educated on the AI-enabled opportunity ahead as Connections On Demand, our virtual program, launched yesterday. This is in addition to the On Demand replays on Calix.com. At the same time, our Customer Success team is revamping how they support customers with the Calix Agent workforce to speed transformation and expand our impact on our customers’ ability to add new subscribers, grow revenue, and reduce churn. In addition, our internal enterprise teams are focused on improving how Calix operates and improves with artificial intelligence.

With the insights that our product teams have gained through two years of learning as they built AI capabilities into Calix Cloud, our enterprise teams are uniquely advantaged to aggressively embrace AI in everything that we do internally to improve our operational performance and help us scale at the fastest pace possible. As I shared in the Fast Company article, the four AI questions that every CEO needs to ask to succeed, over the last six months we have seen employees create 725 exploratory agents, with 40 of those agents being selected by our AI steering committee to be scaled across our internal enterprise to drive operational gains across Calix. The next step in Calix’s journey is here and I am excited to lead the team as we speed our ability to transform the broadband industry and enable the success of our customers and partners.

I’d like to close by thanking our team, customers, partners, and shareholders whose passion, grit, trust, and partnership have brought us to this exciting next stage in the Calix journey. Nancy, let’s open the call for questions.

Nancy Fazioli, Vice President of Investor Relations, Calix: Thank you, operator. We’re ready to take questions.

Conference Operator: Thank you. At this time we will conduct a question and answer session. If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in a question queue. You may press Star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for the first question. Our first question comes from Samik Chatterjee with JP Morgan. Please proceed.

Hey, good morning everyone. This is Joe Cardoso. I’m for Soniq, maybe perhaps for my first one. Very strong revenue performance this quarter. I believe this marks three in a row now with results tracking $10 million to $20 million ahead of the high end of your range. Just wondering if you can help contextualize what has been driving this outperformance relative to your expectations at the start of the quarter. As we look ahead to next quarter, how are you thinking about the sustainability of those drivers and potentially implications to your outlook? I have a follow up. Thank you.

Michael Weening, President and CEO, Calix: Hey, thanks, Joe. Appreciate it.

Cory Sindelar, Chief Financial Officer, Calix: The over performance is driven by a couple things. One is just the broad-based demand that we’re seeing across our customer base, but it’s also a function of some.

Michael Weening, President and CEO, Calix: Of the.

Cory Sindelar, Chief Financial Officer, Calix: Competitive expansion of our footprint. We’re seeing some of these customers, I guess surprisingly, not only do cap and grow but some rip and replace as well. When you combine that with the broad base from our existing customer base, that’s driven the over performance.

Michael Weening, President and CEO, Calix: Let me contextualize a bit of that. Having just come off with Connections, what’s happening is that our customers are winning more. That’s what’s happening. When our customers win and they add subscribers, then we win because of the fact that, for example, if they build out a network and then they win a subscriber, that’s incremental revenue for us and opportunity to continue to expand. Because of the fact that we’re uniquely positioned in the fact that we have almost 1,200 customers on our platform and there’s not one single driver, all of them are doing better, that means that our revenue goes up, which is also why we guided higher in fourth quarter, because we feel very comfortable with the robust demand that we’re seeing, as Cory identified in the, or as we identified in the letter.

Conference Operator: Got it, guys.

I appreciate the color there. Maybe for my next one, we obviously saw the announcements coming out of Connections last week. Lots of innovations being unlocked there, particularly in the backdrop of AI. However, if we kind of take a step back here, just curious how you’re thinking about the implications of this innovation cycle for Calix and maybe more specifically on the investment side of things, particularly, it just sounds anecdotally like there’s greater appetite to scale more aggressively. I mean, even if I think about you guys mentioning international regions, it sounds a lot more aggressive than what you guys have talked about historically. Just curious how you’re thinking about the implications to the business model as it relates to more on the investment side, just given kind of this innovation cycle where we’re still in the very early innings of. Appreciate the questions.

Michael Weening, President and CEO, Calix: Yeah, so from an investment point of view, we have a target financial model, we continue to make the investments, but the broader one is that we’ve been investing for 15 years, so we’re $2 billion into this platform. If I think about those investments as we articulated in the letter, those create the foundations upon which we can grow. There are, first of all, in the existing markets, significant growth opportunity ahead because of the fact that we’re uniquely positioned. If you think about one of our existing customers, and I talked about this on stage, an existing customer who has the Access Edge in place, which is a consolidated network which has incredible intelligence in it, then you have everything that we do on Experience Edge, which includes two components, intelligence at the edge in every single Wi-Fi system that exists on a customer premise.

All of the solutions that sit on top of it, MDU, Smart Town, SmartBiz for small businesses and Smart Home, all of those come together into the cloud. We’ve now invested and put the AI layer on top of it, which means that those customers who have those three component foundational elements are best positioned to first of all take advantage of AI because it farms all the data, puts it into an AI engine, automates significant components of their business and allows them to scale at a significantly more rapid rate than in the past. The best example that I can give of that is that in the past our customer success teams would talk to a customer who has those things in place, make suggestions.

In the end it was the decision for the customer as to whether or not they had the capacity and capability to take that advice and turn it into action to grow their business. Now our customer success organization is going to sit down with the customer and say we’ve looked across all your business, we have all the data, we know what the insights are, we know how well you can perform. By the way, here are the AI workflows that go press the button and it’ll do it. You don’t have to add capacity, you don’t have to hire a bunch of new people. This is going to augment your existing capabilities and provide you a massive jump in capacity.

When I think about the growth opportunity in our existing markets, it is significant because of that capability to transition from advice giver and optionality to press the button and we’ll do it for you. That’s the first step on the expansions into international and where we go into large customers. This has always been planned, it’s been a timing opportunity and those represent significant growth opportunities in revenue and margin. The reason why we’re talking about those now is because we’ve always been a very conservative leadership team who actually talks about what we can see very carefully and what we see right there. With the third-generation platform turning on this quarter in a few weeks, we now actually see where that expansion goes.

If you took the time to watch the Connections event over Monday and Tuesday, on Tuesday we had the head of Google Telecom up on stage with me talking about how this partnership could flourish. There represents a significant opportunity because our platform will sit on top of Google Cloud regardless of geography and regardless of size of customer, which provides us a significant scale opportunity, frankly, without having to make significant investment other than sales and marketing, because it’s a cloud and if you have nothing running on the cloud, you don’t pay for anything. As it scales, we have a great opportunity not only for revenue, but also margin.

Cory Sindelar, Chief Financial Officer, Calix: Joe, I’ll add on some of the model questions to that. When you look at the AI investments that we’re doing from an OpEx perspective in the quarter, you saw us hit record revenue and at that time get ourselves back into model. We also see an opportunity here to accelerate some of the development work that we wanted to do from the latter part of 2026 into the first half. You saw in the OpEx guidance that we took up the level of OpEx. It’s for those investments in R&D related to AI functionality. We will be back in model by the time we exit 2026.

Michael Weening, President and CEO, Calix: Yeah, and to give you practically what Cory was talking about is that if you look at our clouds again, I talked about this on stage. Calix Cloud, which is Operations Cloud, Service Cloud, and Marketing or Engagement Cloud, which is the marketing capabilities and engaging the customers. All that Calix Cloud is, is a mapping of workflows on how to run a broadband business. This is why when it comes to artificial intelligence, we’re so uniquely positioned because we are going to, now that we have the infrastructure in place upon which to build AI, which is the data layer, the knowledge layer, trust, and orchestration, which then leads to trusted action. We built all that out. That was a $100 million investment since November of 2023. Now that that’s in place, the easy part and the candy, the ROI is right there.

We’re going to accelerate building out those agents. If you talk to our CPO, he basically states, you know, building an agent is easy. All the hard work was all the other work that we did. We did all the hard work. Now we’re going to do the easy work and we’re going to monetize this like crazy because of the fact that we can take a workflow in Operations Cloud again that I showed. I laid these out at Connections. We can take an operational workflow inside Operations Cloud and every single step is essentially an agentic agent because it’s a task-based entity. We can build all those agents and pop them out and then say to our customers, here’s your workflow for anomaly management, here’s your workflow.

While all the other industry people are going to be building out these complex custom workflows, we’re actually going to take all the insights that we built over the last six years in Calix Cloud and plow through all these agentic workflows. Which means that by, you know, as we come out to the latter half of 2026, the AI army that we’re going to have turned up inside our platform is going to be unmatched because we know how to run broadband companies. We have all the workflows, we have all the data, we have all the insights, and we have the trust of our customers to partner on building all that out. To not speed through this at an incredible pace would be foolhardy. In closing, I’ll say the last part of it is everybody’s talking about AI and around where to invest.

One of the interesting things I’ve been hearing a lot about lately on investment platforms in other areas is all the tangentials affiliated with it. You have the big guys who are building out their LLMs, which are in essence commodities. The ones who are actually going to provide the greatest value are the ones who understand the business well. That’s what Calix Cloud is, a complete map of how to run a broadband company. We are going to AI the whole thing top to bottom over the coming months.

Thank you, guys. Appreciate the insights.

Conference Operator: The next question comes from Scott Searle with Roth Capital Partners. Please proceed.

Scott Searle, Analyst, Roth Capital Partners: Good morning. Great job on the quarter and outlook and thanks for taking the questions. Mike, maybe just to dive in on the small customer front, it was broad based, it was strong. I’m wondering if you could provide some other commentary in terms of if there were any pull ins, the sustainability of that going into 2026, and kind of how you’re thinking about that visibility building at this point into 2026 and the sustainability of double dig.

Michael Weening, President and CEO, Calix: Thank you, Scott. That’s a great question, and I want to actually kill this right from the get-go. For everybody who has said that we are doing, we have a broad-based demand. There is not a single customer that had significantly more influence on anything that we generated in this quarter or next quarter. It is broad-based demand. The strength of our business model is that while things can go up by segment and down by segment, it is actually up to 1,200 customers that allow us to actually drive demand. With regards to visibility, I’ll turn it over to Cory to go through some specifics, but because we’re so closely partnered with our customers, we see, and the reason why we guided higher into Q4 and see the strength in the business is because of the fact that our customers are winning.

It can’t be affiliated with, and if anyone writes that, I’m going to kind of go mental on it. It cannot be written around a single customer. It is around our customers winning more, and as they win more, we win more, and our investors win more. It’s that simple. Broad demand across the base.

Cory Sindelar, Chief Financial Officer, Calix: Yes, Scott. I think the visibility we have into the demand profile, as Michael outlined, gives us that confidence that the sequential growth is durable. We had a large step up here in the third quarter, so I think the sequential increases may be more muted as we move into 2026. In terms of our target financial model of 10 to 15%, I think we’ll be at the lower end of that range.

Michael Weening, President and CEO, Calix: Ex bid.

Cory Sindelar, Chief Financial Officer, Calix: Right. I’m sure I’ll get a BEAD question. I’ll wait for that to preempt that. I’ll let that question be raised.

Scott Searle, Analyst, Roth Capital Partners: Okay, I’ll pass on the BEAD question, Cory. Just to clarify, the sequential growth, we’ll see sequential growth from the fourth quarter into the quarter. As my follow up, gen 3.

Michael Weening, President and CEO, Calix: Right.

Scott Searle, Analyst, Roth Capital Partners: We talked a lot about AI and agentic opportunities there. If we look at the current quarter, International was down due to one customer, I think in the European theater. The third-generation platform is supposed to deliver private cloud capabilities, sovereign data center capabilities. When do we start to see that accelerate? Mike, to follow up on your commentary on agentic AI in general, as you start to think about that driving the flywheel within your customer base, does this poise you guys for actual acceleration of RPO growth as we get into late 2026 and the ability to really drive that recurring revenue.

Thanks.

Cory Sindelar, Chief Financial Officer, Calix: Yes, Scott, great question. The way we think about the monetization of the AI agent is not so much a separate charge for it, but an acceleration of our business model.

Michael Weening, President and CEO, Calix: Right.

Cory Sindelar, Chief Financial Officer, Calix: Our customers will acquire subs faster, they’ll roll out more services more quickly. That’s how we’ll monetize it. Yes, it’ll increase RPOs because as they go faster and adopt more of the platforms and the solutions, that’ll ultimately translate into a contract value that’ll get reflected into RPO. Ultimately, yes, that’s how that’ll happen.

Michael Weening, President and CEO, Calix: The key word that you use was actually flywheel. In fact, we talk about that from a good great point of view on a regular basis. You have this. That is exactly what Calix is. When I go back to what I, you know, answering the previous question, the flywheel that we have is 15 years of investment that’s been going into our platform, allowing us to actually become stronger and better and stronger and better because we enable our customers to be stronger and better and stronger and better. Which is why I go back to the, you know, is it broad based demand? Absolutely. We are the enabler for our customers to actually go at a faster and faster pace to do the three things that drive growth, which is one, how do you actually add subscribers? Two, how do you increase revenue per subscriber?

And three, how do you eliminate churn? If you eliminate churn, then obviously your gross ads go up faster. That is the power that we see in our platform and those core components, Access Edge. If you’ve actually done the work, and I said this on stage, where if you consolidated your network with everything that we’ve done, which is collapsing the BNG access aggregation onto a single system, you have the most powerful network that exists with all the data and the insights to run it autonomously. Same with on the Experience Edge. Then you bring it all into the cloud, throw an AI engine on it and we can help our customers optimize their business. As they optimize their businesses, they add those subscribers and become more profitable, we become more profitable.

With regards to international, to your question on the, you know, the one again, you know, we keep getting these questions every single quarter. It’s just lumpy up and down, right? It’s lumpy up and down. We have broad based demand across all those customers. In no way, shape or form does it signify the strength or weakness of that customer. It’s just a timing thing. We go through this every single quarter. Is there any change? There is not. We have strong demand across small, medium and large customers. With the international markets, that’s really a later 2026 is where we see that we start to expand into the right markets.

We’re going to get our existing base over it because frankly, our existing base is all primed because they have those foundations in place and a huge opportunity for us to make them wildly successful at a very fast pace. Your statement of flywheel is 100% accurate.

Great.

Scott Searle, Analyst, Roth Capital Partners: Thanks so much, guys. Great quarter.

Michael Weening, President and CEO, Calix: Thank you.

Conference Operator: The next question comes from George Nader with Wilf Research. Please proceed.

Michael Weening, President and CEO, Calix: Hi everybody, can you guys hear me?

Cory Sindelar, Chief Financial Officer, Calix: Yes, good morning.

George Nader, Analyst, Wilf Research: Super.

Michael Weening, President and CEO, Calix: Good morning.

George Nader, Analyst, Wilf Research: All right, thanks. Hey, look, I was curious about your monetization strategy on the agentic AI workforce. Did you guys consider charging customers a la carte for this capability and maybe being a bit more aggressive on monetizing rather than just sort of giving it away? I guess I’m just curious why you guys didn’t take a more direct approach on monetizing it, kind of working towards hoping these guys are going to generate more success in the marketplace.

Michael Weening, President and CEO, Calix: We are taking a direct approach on monetizing it. It’s actually a matter of perspective. There will be some elements that we charge for, and then there’s others that we will monetize through by helping them drive gross hats. We are very clear on monetization strategy, and we’re very comfortable as a leadership team that it’s going to yield significant revenue and upside. Massive amount of upside.

Got it.

George Nader, Analyst, Wilf Research: If I look forward and just think about the growth in the company, I think you guys, Cory, I think you said 10 to 15% or maybe at the lower end of that range, but you know, is most of that.

Michael Weening, President and CEO, Calix: I’m sorry, right, okay.

George Nader, Analyst, Wilf Research: Of that growth, is most of that coming from, you know, same store sales in a sense, like existing customers growing faster?

Michael Weening, President and CEO, Calix: Or growing more with you, or is.

George Nader, Analyst, Wilf Research: If you have new customer wins that drive a big percentage of that 10 to 15%, how do you kind of parse out?

Michael Weening, President and CEO, Calix: Where the growth comes from? It’s again, broad based demand across all the different segments. First of all, existing customers have a bunch of unmonetized footprint. For example, if I only have, you know, we have some customers who are at the right market share levels who are at 65%, 70% market share. That’s kind of your, I would say, almost a theoretical maximum, and you’re in a competitive market. We have some customers who have only 20% market share. That represents significant uplift in those scenarios. At the same time, we’ve launched our MDU products. Those customers all have an MDU problem, and they’ve driven it pretty aggressively on stage. We actually had an MDU company who has something like 900 apartment buildings under management, and they did their first two and were ecstatic about transitioning to Calix for those scenarios. That’s a sign.

There’s a great example of a significant unmonetized footprint both in our existing base because all of our customers, about a third of all tenants in the United States, are in MDUs. There’s a massive untapped market that we haven’t even started selling into that allows our sales teams to expand significantly. We’re very bullish on where MDU goes. As you noted in the quarter, George, we added 20 new customers. Those are essentially starting customers. I don’t know where we are year to date, but it’s got to be around probably 60ish, I guess I remember. We’re winning new customers and expanding there. Those growth numbers file into, and that’s what we’re specifically looking at with regards to where Cory’s talking about. We have new market expansion, which we haven’t caught. We have not incorporated into the 10% to 15% because it’s too early.

We have all the international markets and everything we’re going to do there. We have the Tier 1 customers through dedicated platform implementations, which are not in those numbers. The last part is we don’t have the BEAD things, but we got our first BEAD orders this quarter, and that’s not in the number either.

Got it.

George Nader, Analyst, Wilf Research: Okay. Just on BEAD, since you guys brought it up, how much? How incremental could that be in 2026 and 2027? Do you have any sense for magnitude or opportunity or timing there?

Cory Sindelar, Chief Financial Officer, Calix: That would be great. Thanks a lot. Yeah. I’ll just give you my thoughts on the BEAD. We are more constructive on BEAD than we were 91 days ago. The turnaround from the states on their preliminary awards was faster than we had expected. As such, a certain percentage of those customers have the ability to plan for a certain amount of the jobs next year. While we did receive our first order during the quarter, it’s still too early to determine the demand dynamics for next year, other than there will be some amount versus last quarter. I thought there would be like none.

Michael Weening, President and CEO, Calix: To provide a little bit more.

Cory Sindelar, Chief Financial Officer, Calix: Here’s what we know. Of the 49 of the 50 states reporting, California still hasn’t submitted their awards yet. The total amount of dollars has shrunk by about 50%.

Michael Weening, President and CEO, Calix: Right.

Cory Sindelar, Chief Financial Officer, Calix: The original program being $42 billion, it’s now going to be something like $20 billion. When you include the matching funds, now we’re talking about a $30 billion program. Fiber is still the dominant technology at 65% of locations and 85% of the dollars. Fixed wireless was 12% of locations and 8% of the dollars. Meanwhile, LEO was 21% of locations and 5% of the dollars. As we have said, historically we’ve done really well with government programs and we expect to do the same with BEAD.

Michael Weening, President and CEO, Calix: Great, thank you very much.

Conference Operator: The next question comes from Christian Schwab with Craig Hallum. Please proceed.

Christian Schwab, Analyst, Craig Hallum: Great, thanks for taking my question.

Cory Sindelar, Chief Financial Officer, Calix: It was kind of crystal clear.

Christian Schwab, Analyst, Craig Hallum: Sustainability of double digit growth that you’re seeing. As we look into next year, should we assume we, given the outperformance this year, Cory, that we should be at the low end of gross margin expansion year over year of 100 to 200% or is that not correct?

Cory Sindelar, Chief Financial Officer, Calix: You’ve got that right. Thank you. We haven’t talked about that yet, but yeah, given the over performance on.

Michael Weening, President and CEO, Calix: Gross margin this year, I think the.

Cory Sindelar, Chief Financial Officer, Calix: Increase next year will be more muted. It’ll be at the lower end of that 100 to 200 basis points. We’ll continue to expand it. Obviously, our software content grows every single day.

Michael Weening, President and CEO, Calix: I want to continue to guide to the $100 to $200 million, and we’re going to grind away at it, right?

Cory Sindelar, Chief Financial Officer, Calix: That’s right. It will likely be at the lower end of that 100 to 200 basis points next year.

Christian Schwab, Analyst, Craig Hallum: Great. Now that we found this newfound enthusiasm for BEAD, if you think about aggregate dollars that could come to you over a multi-year time frame, when do you think that peak spending would be?

Cory Sindelar, Chief Financial Officer, Calix: We still think it’ll likely be more of a lens shape deployment curve, and it’ll start ramp up to some level in 2026, then probably level off for a few years before it tails off. Like we said with all these government programs, they take a lot longer to get started than anybody thinks. The dollars that they pull through tend to be much larger than the program, and these programs then go on for a longer period of time. We do think it’s still a lens shape. It’s still too early on the awards to understand the buying dynamics of how much they buy, how much they buy ahead, what mix of products that they’re buying, and how much they’re actually going to actually start building next year because again, it’s very late in the cycle.

That’s all we can say at this point, that there’ll be some BEAD revenue next year. Just don’t have a good sizing of what that might be. Great, give us another 90 days.

Michael Weening, President and CEO, Calix: Yeah, we’ll give you another 90 days.

Christian Schwab, Analyst, Craig Hallum: Great, thank you.

Michael Weening, President and CEO, Calix: The other part I will say, I had a lot of these conversations with that connection to Cory’s point around this is going to be significantly larger than anticipated, which we have the exact same narrative that we’ve had, you know, where other people three years ago were saying BEAD money’s around the corner. We have been very clear. One of the things you should take away from it is the fact that we’re actually proactively talking about it now means that the money’s about to flow, right? In 2026 the money will flow. The bigger part of that that everyone needs, you know, and you kind of touched on it, is that the BEAD money, for example, when they go and they build out a BEAD network and they drive it to what was funded while they’re doing that.

In fact, I had this very specific conversation with a customer where while they’re actually building to the ones that they got funded for, they’re actually in essence passing a whole bunch of other ones that didn’t get funded and they’re going to go drop those customers in. All of the TAM affiliated with those is pretty significant. For example, if they got funded to do 10,000, in many cases there could be another 5,000 to 15,000 that they passed that they’re going to build as they go. That’s not really built into the BEAD TAM. That’s the first thing. The second thing is that once they get the networks in, that’s really just to go and build the connection to the subscriber.

Going back to George’s questions with regards to how do we actually monetize and where are we going, the most important thing for us is to add subscribers because if we were just back to old Calix where we were just a network company, then we wouldn’t be so fixated on how do you win the subscriber. As we talk about in our model, the monetization of $1 to $10 a month in software margins, which are massive, is where we’re focused because that’s the long term growth and what actually allows us to continue significant margin expansion. As they go and they build that network, BEAD gets them there and then we go help them.

Actually, how do I convert and get to 65% or 70% market share on the BEAD money that I put into it to actually build the network while at the same time expanding with the customers who are not funded on BEAD, but I’m passing them anyways. I’m going to drop a fiber in. In those scenarios we’re talking about it now because in 2026, it’s finally there. We don’t talk about things, you know, it goes back to the other question: why are you bullish on AI now? Because it’s right there, and we don’t talk about things that we can’t actually touch and see. That’s why we’re talking about it now, because we can touch and see it.

Christian Schwab, Analyst, Craig Hallum: Great. Thank you for that clarity.

Cory Sindelar, Chief Financial Officer, Calix: No other questions.

Conference Operator: The next question comes from Tim Savageaux with Northland Capital Markets. Please proceed.

Tim Savageaux, Analyst, Northland Capital Markets: Hey, good morning and congrats on the results. Just a couple quick ones here. On the BEAD front, I think historically we used to use maybe 10% of the award value or network cost to kind of get a sense of what the access infrastructure opportunity might be. I wonder if that’s still a good number or, you know, given your.

Michael Weening, President and CEO, Calix: No, we’re using more now. We’re using more, 5% to 10% depending on the, you know, it’s more. 5% to 10% is where the number is. We have to also do is extrapolate the incremental opportunity when you win subscribers, which is not part of that. To your point on it being the.

Cory Sindelar, Chief Financial Officer, Calix: Access network, you gotta think that these locations are harder to get to. They’ll be put more money into a lot more construction.

Michael Weening, President and CEO, Calix: Right, right.

Cory Sindelar, Chief Financial Officer, Calix: More construction dollars, Tim. 10’s too high. You are going to have to go less than that.

Michael Weening, President and CEO, Calix: Yeah, fair enough.

Tim Savageaux, Analyst, Northland Capital Markets: Speaking of the $1 to $10 per month, any update on the timing for that?

Michael Weening, President and CEO, Calix: A more.

Tim Savageaux, Analyst, Northland Capital Markets: Detailed breakout of the appliance business versus the software and platform business? I know your end of next year.

Michael Weening, President and CEO, Calix: Was at least what you were discussing.

Cory Sindelar, Chief Financial Officer, Calix: Yes, I mean that’s still the stated goal by the end of 2026.

Tim Savageaux, Analyst, Northland Capital Markets: Got it. No change there. If we look at the guidance for Q4 for sequential growth, various quarters this year you’ve had maybe small customers driving things in Q2, large and medium. Anything to call out in terms of customer segment movement into Q4 in terms of driving that sequential growth?

Cory Sindelar, Chief Financial Officer, Calix: Yes.

Michael Weening, President and CEO, Calix: Broad-based demand across all segments.

Cory Sindelar, Chief Financial Officer, Calix: Yeah, nothing to call out, Tim.

Michael Weening, President and CEO, Calix: No, I’m going to call that out.

Cory Sindelar, Chief Financial Officer, Calix: That is something to call out.

Michael Weening, President and CEO, Calix: Right. Broad based demand across all segments. You know, the value in our business model and the fact that we have almost 1,200 customers is the fact that we don’t have a 10% customer, correct?

Cory Sindelar, Chief Financial Officer, Calix: No. Right.

Michael Weening, President and CEO, Calix: We have no 10% customers, which means that from an investment point of view, because of the fact that you see the segments going up and down, that’s the value of our business because we have a diversified revenue stream. One might be up one quarter and down the next and up the next quarter, it’s actually allowing us to even out the whole thing broadly. When you have broad-based demand, which we do, that allows us also to plan the business very well. Great, thanks very much.

Cory Sindelar, Chief Financial Officer, Calix: Thanks, Tim.

Conference Operator: We will take our last question from Ryan Koontz with Needham and Company. Please proceed.

Ryan Koontz, Analyst, Needham and Company: Great, thanks. Maybe a couple topics, if I could. Maybe philosophically, you know, relative to your 10 to 15% growth model and thinking about your SAM and your current customer relationships, how do you think about growth limiters in the industry that can allow you to outperform that, whether it’s relative to, you know, the BEAD process, supply of fiber, supply of labor, supply of components, which doesn’t seem to be that big a deal anymore? How do you philosophically think about risks and upside relative to things that are out of your control?

Michael Weening, President and CEO, Calix: From a risk point of view, at this point in time we’ve actually been talking a lot about that, where do we see the risks? We really don’t see them with regards to limiters. There’s the BEAD, the BEAD stuff. The reason why we’re actually saying, hey, now we see it coming out is because of the fact that obviously because it’s a governmental process and as we said right from the get-go, these things are a bit complex and take longer to get here, but when it does get here, it starts flowing and it flows for longer. There’s some timing components affiliated with that. That’s the first one. From a systems and components point of view, we don’t see any issues other than there’s some memory prices going up, but we balance that out with some other areas.

These things all balance out because of the fact we have a broad-based business. There’s nothing specifically from a leadership point of view that we’re looking at as a risk. I will talk to upside, but are there any other risks that you see, Cory?

Cory Sindelar, Chief Financial Officer, Calix: No, I think as it relates to the practical limiters on the business as you go and build new networks, it’s permitting and labor. That puts a natural governor on just how fast they can go.

Michael Weening, President and CEO, Calix: By the way, in Washington, that’s probably one of the biggest topics that everybody’s talking about, which is how do you actually speed permitting and access and those different components. There’s so much focus on driving that. I would also think that the midterms coming up next November, that people want to get things done as they go into an election cycle. That’s definitely, I would say, going to speed the process to some extent. I would say that there’s nothing out of the ordinary that Cory and I are talking about and the leadership team is talking about that is a significant risk. In fact, the exact opposite. We feel very confident with regards to the broad-based demand, the running of the business, the talent that we have inside the company, and our relationship with customers. We see that as everything’s green.

Now, with regards to upside, I’ll go back to what I said around artificial intelligence. This is where we’re uniquely positioned because of the fact that we have deep insights on how to run a broadband company. We’ve mapped it all into our cloud. We have intelligence in the network and we have significant intelligence on the prem, and we bring all that together in the brain, which is the cloud, which is now AI capable, and we’re uniquely positioned to help our customers do more. I go back to the question I got asked about the monetization of AI. We are absolutely going to monetize AI in a significant way by helping our customers monetize their business at a significantly faster pace. You have to understand how sales cycles work, which is my background. I spent 30 years running Enterprise sales organizations.

Would you rather go and pursue a customer and get, I don’t know, 5% or 10% price uplift on a single cloud, or would you actually help that customer add 25% more subscribers, which takes your revenue per subscriber from $0 to significantly higher in the $1 to $10 range per month? My view is I want the $1 to $10 as high as I can, as fast as I can, instead of grabbing a 5% or 10% kicker. Makes no sense. Plus, this will also help us drive, if you look at our clouds, we have roughly a thousand people on our clouds or customers on the clouds, and then it drops off. We have three clouds. It drops off, it drops off. Therefore, how do we get all of our customers to every single customer having three clouds? That’s what AI can help us drive to.

That increases monetization. I would much rather have 1,000 customers on three clouds than, you know, a large port, you know, a thousand of them at xclouds in that way. We think there’s huge opportunity. Frankly, I’ve been here nine and a half years. This is what we work towards. We tested neural networks for the first time back in 2017. We saw the opportunity, but we couldn’t actually meet the privacy and security requirements that our customers needed to use artificial intelligence in a trusted way. Spent the last two years building all of that, and now we’re literally going to have our success teams go into a customer and say, hey Cory, remember how I was telling you that you really should do this? You said I don’t have the team members or the capacity to do it because I’m busy doing other things.

Now with AI, we’re going to be saying, hey Cory, here’s what you should do. Press the button and the AI engine will do it. When we talk about crossing the chasm, that is going to allow us to cross the chasm at a rapidly faster rate, which is why we are so bullish on AI.

Ryan Koontz, Analyst, Needham and Company: That’s great stuff. One more quick follow up if I could. Nice to see the rebound in the small customer cohort, best in like 10 quarters. Looking up market, the medium and large cohorts have grown over 50% year to date. Clearly great indicator there. How much of that gain upmarket is competitive displacement versus your customers investing more and being more successful with your help?

Michael Weening, President and CEO, Calix: You mean in small or in large? Medium, large, medium and large.

Ryan Koontz, Analyst, Needham and Company: Medium and large.

Michael Weening, President and CEO, Calix: Those are competitive displacements. A large percentage is us actually becoming the go to market engine for these customers. Right. Where they were with someone else and that’s who they were using for what I would call dumb Wi-Fi, now they’re looking at what we do across our clouds and everything we’re doing on the Experience Edge and saying, I want to radically improve my go to market strategy, and Calix is the best one to do that. We are absolutely displacing in the Fed because they had a previous partner and we’re now helping them drive their business.

One could argue that from a competitive displacement point of view, if we’re with a service provider and they’re competing with someone else who’s not using our product and they crush them as they do, that’s us actually displacing a competitor in a different way by helping our customers win and crush their competition. Who’s not using us is actually us helping us. That’s competitive displacement, just in a different way. That’s absolutely 100% how I think about it every single day.

Ryan Koontz, Analyst, Needham and Company: Great stuff, guys.

Cory Sindelar, Chief Financial Officer, Calix: Really appreciate it.

Michael Weening, President and CEO, Calix: Thanks for the questions.

Conference Operator: We have reached the end of the question and answer session, and now I’d like to turn the call over to Nancy Fazioli for closing remarks.

Nancy Fazioli, Vice President of Investor Relations, Calix: Thank you. Latonya, Calix will participate in several investor events during the fourth quarter. Information about these events, including dates and times and publicly available webcasts, will be posted on the Events and Presentations page of the Investor Relations section of calix.com. Once again, thank you to everyone on this call and webcast for your interest in Calix and for joining us. This concludes our conference call. Have a good day.

Conference Operator: Thank you. You may disconnect your lines at this time and have a great day.

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