Earnings call transcript: Extreme Networks Q4 2025 beats forecasts

Extreme Networks Inc. (EXTR) reported its fourth-quarter earnings for 2025, showcasing robust financial performance that surpassed Wall Street expectations. The company posted an earnings per share (EPS) of $0.25, outpacing the forecast of $0.23, marking an 8.7% surprise. Revenue reached $307 million, exceeding the anticipated $299.88 million. Following these results, the stock price experienced a 1.74% increase in pre-market trading, indicating positive investor sentiment. According to InvestingPro data, the company’s market capitalization stands at $2.62 billion, with two analysts recently revising their earnings estimates upward for the upcoming period.

Key Takeaways

• Extreme Networks reported a 20% year-over-year revenue growth for Q4.
• The company launched its AI-powered networking platform, Extreme Platform One.
• Strong performance in APAC and EMEA regions contributed significantly to revenue.
• The stock price rose by 1.74% in pre-market trading following the earnings announcement.
• The company provided optimistic guidance for FY2026, expecting accelerated growth.

Company Performance

Extreme Networks demonstrated strong performance in the fourth quarter, with a notable 20% increase in revenue compared to the same period last year. The company’s full-year revenue reached $1.14 billion, reflecting a modest 2% year-over-year growth. This growth was driven by significant gains in the APAC and EMEA regions, along with a notable contribution from government and education sectors, which accounted for 40% of total revenue. The company maintains a healthy gross profit margin of 62.2%, operating with a moderate level of debt, as revealed in the comprehensive InvestingPro Research Report, which offers detailed analysis of 1,400+ top stocks.

Financial Highlights

• Revenue: $307 million, up 2.37% from forecast
• Q4 Non-GAAP EPS: $0.25, up 32% year-over-year
• Free cash flow: $75 million, highest since 2023
• Total recurring revenue: 36% of total revenue

Earnings vs. Forecast

Extreme Networks exceeded market expectations with an EPS of $0.25 against a forecast of $0.23, resulting in an 8.7% surprise. Revenue also surpassed forecasts, coming in at $307 million compared to the expected $299.88 million. This positive performance is consistent with the company’s recent trend of beating forecasts, as evidenced by five consecutive quarters of sequential revenue growth.

Market Reaction

The stock of Extreme Networks saw a 1.74% increase in pre-market trading, rising to $20.5. This movement reflects investor confidence in the company’s ability to continue its growth trajectory. The stock’s performance is notable given its proximity to the 52-week high of $21.35, suggesting strong market sentiment. InvestingPro analysis indicates the stock has delivered impressive returns, with a 59.29% gain over the past year and a 14.1% surge in the last week alone. Technical indicators suggest the stock is currently in overbought territory, with 13 additional ProTips available for subscribers.

Outlook & Guidance

Looking ahead, Extreme Networks provided optimistic guidance for the first quarter of FY2026, with revenue expected to range between $292 million and $300 million. For the full fiscal year 2026, the company anticipates revenue between $1.228 billion and $1.238 billion. The introduction of Extreme Platform One is expected to drive significant momentum in the latter half of the year, supporting the company’s growth ambitions. Analyst consensus remains positive, with a target price range of $15-25, and InvestingPro data suggests net income is expected to grow this year, with the company projected to return to profitability.

Executive Commentary

CEO Ed Meyercord emphasized the company’s technological advancements, stating, "Platform One breaks down silos between networking and security." He also noted, "We are moving upmarket," highlighting the company’s strategic positioning to capture larger enterprise deals. A customer quote further underscored the company’s competitive edge: "What takes Cisco six hours takes Extreme six minutes."

Risks and Challenges

• Supply chain disruptions could impact product availability.
• Market saturation in key sectors may limit growth opportunities.
• Macroeconomic pressures, such as inflation, could affect costs.
• Intense competition from major players like Cisco and HP poses a challenge.
• The success of new product launches is crucial for maintaining growth momentum.

Q&A

During the earnings call, analysts inquired about the market response to the HP-Juniper merger, which Extreme Networks viewed positively. There was also interest in the increasing enterprise demand for AI networking solutions and potential collaborations with telecom carriers within the MSP program. The company’s strong pipeline of large enterprise opportunities was a focal point of discussion, highlighting future growth potential.

Full transcript - Extreme Networks Inc (EXTR) Q4 2025:

Conference Operator: Thank you for standing by, and welcome to the Extreme Networks Fourth Quarter Fiscal Year twenty twenty five Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. Thank you. I’d now like to turn the call over to Stan Kobler, Senior Vice President, Finance and Investor Relations.

You may begin.

Stan Kovler, Senior Vice President of Finance and Corporate Development, Extreme Networks: Thank you, Rob. Good morning, and welcome to Extreme Networks’ fourth quarter and fiscal year twenty twenty five 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 eight ks detailing Extreme Networks’ financial results for fiscal Q4 and full year fiscal twenty twenty five.

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 and 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 ks 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.

Ed Meyercord, President and CEO, Extreme Networks: 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 $3.00 $7,000,000 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 $2.00 $8,000,000 up 24% year over year.

Large deal momentum is picking up with product bookings at an eight 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 one 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 two multimillion dollar wins, displacing a major competitor and gaining large and important strategic partners in the process. The eight 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 quarter 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 hosts for the twenty twenty six World Cup finals, selected Extreme to deliver modern Wi Fi 6E infrastructure to power better fan experiences and streamline operations across the stadium.

We also added Pinnacle Bank Arena and Hendrik 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 six hours takes Extreme six 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. Anera, Europe’s fourth largest air navigation provider, deployed Extreme to ensure secure, scalable communication and managing airspace over Spain and over 2,000,000 flights annually. In The U. K, Surrey 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 had a major milestone with Extreme Platform One 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 UK migrated to Extreme platform one in just forty seven 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 pore through hours of documentation. Extreme Platform One 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 One. According to Enterprise Strategy Group, the solution is, quote, at the leading edge of the market in terms of completeness and sophistication of AI for networking. Enterprise management associates says, quote, 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 One brings AI, automation, simplicity together at one powerful 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 poolable 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 ’twenty six 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.

Kevin Rhodes, Executive Vice President and CFO, Extreme Networks: 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 $3.00 $7,000,000 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 seven adoption and early adoption of Extreme Platform One. Overall, we achieved our best bookings quarter in the past two years, reflecting strong customer demand across our portfolio, which gives us confidence in our growth trajectory heading into fiscal twenty twenty six. 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 $192,000,000 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.

WiFi seven 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 twenty twenty four 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 twenty twenty six. In the fourth quarter, 34 customers spent over $1,000,000 with Extreme bringing our fiscal twenty twenty five total to 168 customers. Total subscription and support revenue was $115,000,000 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 $3.00 $8,000,000 and recurring revenue growth pushed total deferred revenue above $600,000,000 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 $144,000,000 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 $75,000,000 in free cash flow in the quarter, our highest quarterly level since 2023 and $50,000,000 in EBITDA, our highest level in the last seven quarters. We returned value to shareholders through a repurchase of 1,500,000.0 shares for a total of $25,000,000 Cash flow was aided by a significant improvement in our cash conversion cycle to eighty one days, down from one hundred and twelve days in the third quarter driven primarily by lower days of inventory.

We ended the quarter with two thirty two million dollars in cash and achieved a net cash position of $52,000,000 up $49,000,000 from net cash at the end of the third quarter. For the full fiscal year, revenue of $1,140,000,000 dollars 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 twenty twenty four. As we enter fiscal twenty twenty six, 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 2026, we expect guidance as follows: revenue to be in a range of $292,000,000 to $300,000,000 gross margin to be in a range of 61.9% to 62.3% 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 135,000,000 shares. For the fiscal year 2026, we expect revenue to be in a range of $1,228,000,000 to $1,238,000,000 And with that, I’ll now turn the call over to the operator to begin the question and answer session.

Conference Operator: Thank you. We will now begin the question and answer session. Your first question today comes from the line of Eric Martinuzzi from Lake Street Capital Markets. Your line is open.

Eric Martinuzzi, Analyst, 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

Ed Meyercord, President and CEO, Extreme Networks: 2026? Thanks for the question, Eric. And We’ve seen a gradual recovery in EMEA, it’s built up throughout the year. Quite frankly, it was a little slower than we expected. But now, I think with government stabilized and I think the political environment more stabilized, we’re expecting momentum to continue to ramp.

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 fiscal ’twenty six. So we’re excited about our market share there and what’s happening with the macro and then some specific new growth opportunities. Asia Asia Pacific, I’ll comment, you know, we have been this is where we saw significant growth in 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, 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.

Eric Martinuzzi, Analyst, Lake Street Capital 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?

Ed Meyercord, President and CEO, Extreme Networks: Yes. I mean, we saw very little, Eric, and that’s because our product categories were exempt. And then we were given a heads up that the expectation is that continue they to be exempt, although you don’t know until you know. 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 that to continue to be the case.

That could always change, but we’ve also messaged back to customers, and I I feel like that’s the mindset of the marketplace. So the answer to your customer is that your question is, I’m sure there are customers that that that that may have have have come in, but very minimal, not like what we’ve seen in not even close to what we may have seen in the past.

Kevin Rhodes, Executive Vice President and CFO, Extreme Networks: Got it. Thanks for taking my questions.

Conference Operator: Your next question comes from the line of Ryan Koontz from Needham and Company. Your line is open.

Ryan Koontz, Analyst, Needham and Company: Great, thanks. Terrific quarter guys. I wonder how much Platform One contributed in the quarter. I know you had a limited availability in the June. Was it meaningful to your ARR bookings?

And then how should we think about the timing of the balance of the your customer base renewals phasing in over the second half of Platform One?

Ed Meyercord, President and CEO, Extreme Networks: Sure. Let me jump in and then Kevin, you can come in behind. At this stage, we literally just GA ed 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, we can see Platform One opportunities in our funnel. But what we’re expecting is for this to come into play in 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 One. Customers that want to trial Platform One today, 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 some serious migrations to happen as we turn the corner on the calendar year.

Kevin, do you want to add anything?

Kevin Rhodes, Executive Vice President and CFO, Extreme Networks: 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, it’s 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 continue to sustain. We’re expecting to sustain that 20% plus growth rate on the ARR side.

Ryan Koontz, Analyst, Needham and Company: That’s great to hear that. And just to follow-up on your comment there around MSPs and you’re up 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?

Ed Meyercord, President and CEO, Extreme Networks: Yes. I think I’d say we’re still in early stages, Ryan. We yep. Last year, we had fourteen fourteen or 15 MSP customers, and at that time, we were developing the platform. We we have since and and recently, in the last quarter, you know, completed, you know, 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 and we also now have, the benefit of Extreme platform one. And so, we we would expect to see I would still say it’s very early innings there. Kevin talks about having MSPs do a million to 2,000,000. We have certain MSPs that beyond that already. And so I think it’s it’s a function of from a channel perspective, how we’re reaching out to to new potential prospects and then how we’re gonna 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 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 multitenancy it’s really a cool platform. 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.

Kevin Rhodes, Executive Vice President and CFO, Extreme Networks: No, I think that’s all right.

Ryan Koontz, Analyst, Needham and Company: Great stuff. Thank you. Maybe one last one, if I could. As you look up market, we see HP Juniper deal done now. How are you thinking about your opportunities in Fortune 500 in the competitive environment, just kind of in this new landscape?

Ed Meyercord, President and CEO, Extreme Networks: Well, you hear us you’ve heard me in my comments say a couple of things. One is that we are moving upmarket. We talked about the Japanese government. We’ve talked about John Deere. We’ve 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, 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 other large customers. So that’s that’s very successful. And then the key to us is getting in the door, and I talked about our fabric technology.

You know, 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 most cases, a lot of 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 they see and they start playing around with the technology, they’re kinda blown away by what we can do. And, this is not hyperscale data center stuff. This is enterprise this is an enterprise fabric where we have a unique advantage.

And I mentioned, you know, we’ve gone up against everyone in the industry, and I gave that quote where this very large customer, the guy who’s head of this project, literally said, what takes Cisco six hours takes Extreme six minutes. And and and we welcome the chance to go head to head with any competitor to demonstrate the value of of of our fabric. And and what does it mean when you have, you know, sub second convergent? What does it mean, you know, when you have the capabilities, that we have in terms of, you know, zero touch provisioning and just the way that edge devices can call for services in a way that’s fundamentally different, you know, the the the resiliency of the platform, the segmentation capabilities, and what does that mean as far as securing valuable services that they wanna send and and manage across the network. So, you know, it’s really a function of us elevating the brand and getting into these opportunities.

And and I think you you’ll you’ll continue to see that the the the more opportunities we have, the more success we have. And that’s what we’re kind of doubling down on that. Great stuff, Ed. Thank you. Your

Conference Operator: next question comes from the line of Christian Schwab from Craig Hallum Capital. Your line is open.

Christian Schwab, Analyst, Craig Hallum Capital: Hey, great. Thanks for taking my question. 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 than taking market share or from, say, HP, Juniper, even Cisco. But or or would you say it’s a combination of both?

I guess that wasn’t clear to me.

Ed Meyercord, President and CEO, Extreme Networks: Yeah. Look. I mean, Christian, as you know, the the industry has moved from being point product based to solutions. And so, you know, what we’re selling is a solution where the product is is a piece. A lot of the the the product, meaning hardware in the industry, has become commoditized.

You know, 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, you know, I think, you know, you know, today, I’d say it’s it’s it’s more about the solutions and the features and the capabilities that we’re bringing to market that that are really differentiating us. I I I will say there’s a lot of buzz around Extreme platform one that just went GA, and the idea that we have this this truly, you know, conversational, multimodal, agentic AI platform that is is 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 and and play in the platform, and and begin to kind of experience kind of what what the new experience and networking could be, people are curious. And then because of 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 costs 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 their employees. And, look, we’ve already been the beneficiary in in terms of some of the key hires we’ve had, in terms of some of the opportunities that have cropped up. So, you know, this is something that, you know, from a competitive standpoint, is creating is creating some opportunities for us. I would say the same thing with Cisco kind of moving away from networking in general. Know, these are things that are that are that are helping Extreme.

That along with, you know, true innovation in terms of this platform and people looking for a vendor in the enterprise space that has, you know, the highest quality solutions, with the with the most modern tools, to solve, you know, complex problems. And and we’re we just find ourselves in a in a in a better position getting more at bats.

Christian Schwab, Analyst, Craig Hallum Capital: Great. Thank you for that. No other questions. Thanks, Ed.

Ed Meyercord, President and CEO, Extreme Networks: Thanks, Christian.

Conference Operator: Your next question comes from the line of Timothy Horne from Oppenheimer. Your line is open.

Ed Meyercord, President and CEO, Extreme Networks: Thanks guys. So Ed, to

Timothy Horne, Analyst, Oppenheimer: be clear, mean, the pipeline improving, do you think, because of the HPE Juniper merger, you’re 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 mindshare or share there?

Ed Meyercord, President and CEO, Extreme Networks: 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, you know, this this, we think, could be, one of the ways that we can we can truly break out because of the the differentiation 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 with a lot of unique benefits, and it’s the most modern. So, you know, when we I’m not gonna say it.

When when we were able to attract one of these larger players, which we’re we’re we’re targeting and we’re gonna be going for it, we think it’ll be a real needle mover. So not today, but but but we’re working on that. As far as ACV, Juniper, yes. For us, it would be, you know, a a a net positive. We have seen opportunities.

We have seen some partners coming our way and and bringing opportunities. At this stage, I we yeah. I’m not in a position to talk about how meaningful that is or how do we how do we quantify that. Keep in mind that, you know, in the market every day, we compete with both of them anyway as well as we compete with Cisco in the market every day. 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, will incentivize the partner and and the channel away from traditional networking, which we think will be a net positive for us in the partner community.

Timothy Horne, Analyst, Oppenheimer: Well, related to all that, how much higher can your MSP partners’ margins be under your platform do you think than their legacy platform kind what are you hearing from a return from what they’ve done historically versus what you enabled?

Ed Meyercord, President and CEO, Extreme Networks: Yes. I think a 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 kinda gets very operational. And and that’s why we we spent so much time focusing on this platform. Once an MSP is established, it’s 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 and and get one of these larger players to 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. Thank you.

Conference Operator: Your next question comes from the line of David Voigt from UBS. Your line is open.

Brian, Analyst Representative, UBS: Hey guys, thanks for taking the question. This is Brian on for David. On gross margin, given the product gross margin of around 50% in the quarter with full year at a similar clip and the competitive landscape and product offerings. Do you think there’s a reasonable go forward product margin? And then I have a follow-up.

Thank you.

Ed Meyercord, President and CEO, Extreme Networks: Kevin, do you want

Kevin Rhodes, Executive Vice President and CFO, Extreme Networks: me to cover that? Yes, sure. Yes. We’ve been pretty consistent with our product margins back over the last four quarters at that 58% range. We do think that there will be an opportunity for instance, WiFi seven.

We have a higher margin profile WiFi seven. We just talked about that being 30% of our wireless units in the quarter. That’s going to create a better halo 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 also some costs that we’ve had over the last, I’d say, twelve months around shipping and going with air freight versus sea freight that we feel like we could take out some of those costs in the future as well. So we think on the product margin side, can continue to grow, that product margin.

I would say that 58% in the future, we could see that pushing up to 60%. That would be my target range, 58% to 60% there.

Brian, Analyst Representative, UBS: Got it. That’s helpful. And then just on the verticals, can you share underlying demand trends by vertical, specifically government given the importance?

Kevin Rhodes, Executive Vice President and CFO, Extreme Networks: Sure. I mean we categorize kind of SLAD by state, local and education broadly. It’s about 40% of our total revenue. We have another breakdown in the investor deck that you could see there where we’ve got other vertical markets that are in that 10% range. 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 five or six verticals, government and education being the largest around 40.

Brian, Analyst Representative, UBS: Got it. Thank you.

Conference Operator: And that concludes our question and answer session. I will now turn the call back over to Ed Meierkourt, President and CEO, for closing remarks.

Ed Meyercord, President and CEO, Extreme Networks: 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 obviously very excited about these big customer wins, technology differentiation, and then the launch and the GA of Extreme Platform One, which is generating a lot of interest in Extreme. I encourage everyone to see us in November. We’re having an investor conference, and 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.

Conference Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.

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