Netgear Reports Q2 Revenue of $168.6 Million, Gives Q3 Guidance

Netgear (NASDAQ: NTGR ) reported second-quarter financial results on Thursday. The transcript from the company's second-quarter earnings call has been provided below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

7% year-over-year increase in Enterprise revenue, which now exceeds half of total revenue and 69% of gross profit. 9%. Strategic initiatives include transforming into a software-differentiated, enterprise-led business, with progress marked by the launch of the Align platform and enhancements to Insight, boosting recurring revenue. Netgear is addressing APAC growth challenges with new leadership and expects sequential growth in Q4, while continuing to optimize the Consumer segment for gross profit amidst supply chain and regulatory challenges.

Future guidance indicates Q3 revenue between $165 million and $175 million, with non-GAAP operating margin ranging from negative 3% to 0%, reflecting ongoing memory cost pressures. Full Transcript OPERATOR Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session.

At that time, if you have a question, you will need to press star one on your push-button phone. I would now like to turn the conference over to Eric Bylam. Please go ahead, sir. Eric Bylam, Investor Relations Thank you, operator.

Good afternoon and welcome to Netgear's second quarter of 2026 financial results conference call. Joining us from the company are Mr. J. Prober, CEO, and Mr.

Brian Murray, CFO. , followed by a review of the financials for the second quarter and guidance for the third quarter provided by Brian. We'll then have time for any questions. If you have not received a copy of today's release, please visit Netgear's investor relations website at Before we begin the formal remarks, we advise you that today's conference call contains forward-looking statements.

Forward-looking statements include statements regarding expected revenue, gross and operating margins, expenses, tax expense, and future business outlook. Actual results or trends could differ materially from those contemplated by these forward-looking statements. For more information, please refer to the risk factors discussed in Netgear's periodic filings with the SEC, including the most recent Form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today, and Netgear undertakes no obligation to update these statements as a result of new information or future events, except as required by law.

In addition, several non-GAAP financial measures will be mentioned on this call. A reconciliation of the non-GAAP to GAAP measures can be found in today's press release on our investor relations website. J. Charles (CJ) Prober, CEO Thanks, Eric, and thank you all for joining our call.

We're pleased to share that we delivered another solid quarter that demonstrates the continued momentum behind our transformation to being a software-differentiated, enterprise-led business that's delivering profitable growth and expanding long-term shareholder value. Today I'll cover two topics, a recap of our Q2 performance and an update on our transformation. Let's jump in. Q2 showed disciplined execution, strong profitability, and clear progress on the strategic priorities we outlined at the start of the year, as we delivered top- and bottom-line performance above the high end of our guidance range.

7% year over year, which was led by strong growth across the Americas and EMEA. Enterprise now represents more than half of Netgear's total revenue and approximately 69% of our gross profit, demonstrating the increasingly important role this business plays in our growth and financial performance. Just as important, enterprise continues to deliver significant profitability expansion. 9%, its highest level in more than seven years.

Although our ongoing go-to-market transformation in APAC moderated our growth during the quarter, we're addressing those headwinds and believe the changes underway can position APAC to become our fastest growing region. With enterprise now representing the majority of Netgear's revenue and even greater share of our gross profit, and with that contribution expected to continue growing, we've elected to change Netgear's Standard Industrial Classification code, or SIC code, to align with our competition in this enterprise segment.

This change takes effect today, and going forward we should screen better to potential investors by identifying Netgear as the company we are today: an enterprise solutions company. In consumer, we continue to harvest our service provider business and optimize the core consumer business for gross profit given the challenging supply environment. Despite these top-of-funnel constraints in consumer, we grew our overall annual recurring revenue to $42 million, representing a 15% year-over-year increase.

The stronger mix of business and margin expansion from enterprise, combined with the disciplined execution in our consumer business, allowed us to move from a non-GAAP operating loss last year to operating profit in Q2 of this year, while significantly expanding our EPS as well. Brian will cover the Q2 results in more detail, so I'll conclude my commentary on Q2 by thanking the Netgear enterprise and consumer teams for their relentless focus on delivering against our commitments. In addition to the quarterly results, we're thrilled with the tangible progress of our longer-term transformation.

When I joined Netgear two and a half years ago, it was very apparent that we had an opportunity to unlock significant shareholder value by bringing a stronger focus to our enterprise business. That led to a substantial reorganization and a significant influx of enterprise talent, starting with a new business unit leader followed by new leaders for most functional disciplines. In transforming our team, a core part of our talent strategy has been to insource software development while leveraging.

This effort was accelerated for our enterprise business by three strategic acquisitions, BOG, XCM, and the source code that had previously been outsourced for our line of managed switches. I'm thrilled to report that this business unit now has over 200 badged software engineers, and we've almost completely reduced our reliance on outside contractors. This brings with it increased alignment, speed, and quality to our software delivery. AI has been a significant enabler for us, and our team is ahead of the curve on adoption because we're building this full-stack software development capability from scratch and we're not constrained by legacy development processes.

AI landed as an accelerant at the perfect time to help fuel our transformation, and today the team, organization, intellectual property, capabilities, roadmap, and delivery are strong and have little resemblance to where we were a few short years ago. I'm more confident than ever that this will enable us to better serve an even broader set of customers in the future. The impact of this transformation is evident in the products and services we're now delivering to our customers.

In Q2 we announced the launch of Align, a cloud-managed platform designed to consolidate AV infrastructure services, host applications such as our Network Management Platform Engagement, and serve as the open layer for third-party AV apps. Align was announced at InfoComm, the world's largest AV industry trade show, where it won Best of Show among its seven industry awards, while also receiving an incredibly positive reception from partners and end customers.

We're already working with several third parties to integrate their applications into our Align platform and, given that the cloud management capabilities will require an Insight license, Align will catalyze our recurring revenue business within the enterprise segment. Speaking of Insight, we also announced several significant improvements to this platform in the quarter.

Our newly designed experience dramatically simplifies the user interface workflows and onboarding, revamps our licensing model to drive higher recurring revenue, implements an initial integration of our XIEM security services, and establishes the framework for AI-powered network operations and AI-defined networking. This is a significant milestone in expanding the value we deliver to customers and a key driver of future recurring revenue growth opportunities. Align and Insight are excellent examples of the transformation underway at Netgear.

They demonstrate how we are expanding beyond networking hardware to deliver a broader software and services platform that increases customer value, differentiates our solutions, and supports our objective of building a faster-growing, higher-margin enterprise business. The transformation of our partner and customer ecosystems is gaining momentum as well. In Q2 we surpassed 600 pro AV manufacturing partners, including several new critical leading brands from the broadcast vertical. Our partner program is in full swing and we now have added over 125 certified Apex partners, our highest tier of partnership that requires a significant investment in Netgear.

Our support and services team landed big new customers like National Geographic, Shopify, and Salesforce. We also made great progress in the education vertical with wins in 86 school districts for the 2026 E-Rate season, more than half of which are new to Netgear. This year, as noted in my Q2 recap, all of these accomplishments are favorably impacting the financial results of our enterprise business. We're making high-ROI investments in the business while at the same time significantly increasing gross and contribution margin.

As we mentioned previously, we implemented a small price increase in Q2 and we're now evaluating more pricing actions in the second half of the year, given the pricing leverage we have and to ensure the margins for this business remain robust and reflect the value we're delivering to customers. In addition, we now have the foundation in place to grow our higher-margin non-device revenue and we look forward to scaling contributions from Insight, Security, Support, and professional services over the quarters to come.

We're just at the beginning of unlocking growth opportunities of this business and, as we shared in our investor day, the multibillion dollar addressable markets are huge and many of the incumbents are focused on the AI data center buildout, opening the door to additional share gains. For Netgear, we don't see this changing, and for Enterprise, the incremental cost of supply caused by the AI buildout is far outweighed by the benefits of this competitive dynamic. While we're very proud of our progress, I'm even more excited about our go-forward plans.

We will continue to enhance our team and the corporate governance overseeing the company; in that regard, today we welcome Douglas Murray to our Board of Directors. Douglas has spent over 30 years in enterprise networking and security at companies like Juniper Networks and Extreme Networks. More recently he was CEO of Big Switch Networks that sold to Arista in 2020 and VaultX that sold to Cisco in 2023. He's currently CEO of Auvik, which is an AI-driven IT management software company that serves many of the same customers and partners that we target, so we're excited to see Douglas's impacts in the years to come.

As I noted earlier, APAC has been a headwind to growth in the first half of this year. While this region has the potential to be our fastest-growing market for our enterprise business, I'm thrilled to report we've hired Surajit Sen to lead the transformation of this region for Netgear. Surajit is a seasoned APAC go-to-market leader who has spent over three decades in the region, most recently in long-tenured executive roles for Zscaler, Dell, and NetApp. The opportunities in this region are significant and we are now well positioned to take advantage of them.

Big welcome to both Douglas and Surajit. Shifting to our Consumer business, I am very proud of the delivery and execution of this team. Similar to our enterprise business, we have a world-class leadership team. We have insourced software development up and down the stack and shifted away from reliance on outside partners, enabling us to drive a step change in innovation for this product portfolio.

The consumer market is obviously dynamic given the regulatory changes and supply chain challenges. We believe these regulatory changes have the potential to create a significant tailwind for us in the medium term given our primary competitors in this category, or Eero continues to be the only other one to have received conditional approval from the Department of War to launch future consumer networking products. Additionally, we've done a great job managing the supply chain nuances in a difficult environment and we will continue to pull levers to protect the margin profile of this business going forward.

Given the mid to long term potential of this market and our leadership position, we're making prudent decisions to preserve the value creation option associated with our core consumer business and we expect to remain well positioned to capture the expanded market potential should the opportunity arise. In closing, transforming the culture and products of a company is not easy, but the team and I are now seeing the fruit of our efforts and it's most notably showing itself in the pipeline of future opportunities. We're doubling down on the profitable growth driving the enterprise business while preserving optionality for value creation associated with the consumer business.

The first half of 2026 reinforced that the transformation is delivering on our goal to execute on near-term imperatives while building a lean, scalable organization. We remain fully committed to the mid and long term targets we shared at our investor day and we'll continue to make decisions that prioritize long-term shareholder value creation while recognizing that achieving our short-term goals is an important part of creating value. We could not be more confident in the team or in the trajectory we're on and we look forward to sharing further progress with you in the quarters ahead. With that, I'll turn it over to Brian.

Brian Murray, CFO Thank you, CJ, and thank you everyone for joining today's call. Led once again by strength in our Pro AV managed switch products within our Enterprise segment and enabled by continued progress in the second phase of our transformation, we delivered both revenue and non-GAAP operating margin above the high end of our guidance range. This reflects our team's strong execution in the face of supply headwinds, some incremental benefit from service provider, and the outcomes of the memory cost mitigation efforts that are ongoing. 1% on a sequential basis.

The second quarter's performance was driven by continued strength in Enterprise where we saw year-over-year growth in end-user demand in the Americas and EMEA regions and double-digit year-over-year growth in end-user demand for our Pro AV managed switch products. 7% year over year. Encouragingly, the revenue mix of our products from the higher margin Enterprise segment improved over 400 basis points year over year to approximately 53% of total revenue and remained steady sequentially.

End-user demand for our managed switch products grew double digits both sequentially and year over year despite lower than expected production stemming from operational executional challenges from our manufacturing partner for these products. The strength of our leading higher margin Pro AV line of managed switch products in the second quarter, along with improvements from a license acquisition for the OS that powers these switches, was a driving force that led to record Enterprise gross margin and a strong consolidated gross margin in the quarter.

As a reminder, since Q4 we have been reporting two business segments with the reporting of our mobile products being included in our consumer business. We will continue to supplement reporting of service provider revenue which includes sales of our cable modem and gateway products sold in retail in addition to the mobile products sold to operators. This revenue callout will allow investors to isolate these declining businesses in their assessment of Netgear and our transformation. 1% sequentially.

As we shared last quarter, given the memory shortage and related cost increases of various components, we are optimizing this business for gross profit domestically. S. S. direct-to-consumer channel which grew over 20% year over year.