Netgear (NASDAQ: NTGR) shares soared 13.25% in pre-market trading on Thursday following the release of its better-than-expected Q1 2025 earnings report. The networking equipment manufacturer demonstrated resilience in a challenging market, outperforming its guidance for revenue and operating margin.

The company reported Q1 revenue of $162.1 million, down 1.5% year-over-year but showing strength in key areas. Notably, Netgear's NETGEAR for Business (NFB) segment saw a robust 15.4% year-over-year increase in revenue to $79.2 million, with a significant 78% rise in contribution profit. This strong performance in the B2B division was a primary driver of the company's overall results.

Investors were particularly encouraged by Netgear's improved profitability metrics. The company achieved a non-GAAP gross margin of 35%, up 550 basis points year-over-year, reflecting enhanced supply chain execution and a stronger product mix. Despite facing some challenges, including a sequential revenue decline due to seasonality in its Home Networking business, Netgear managed to narrow its non-GAAP operating loss to 1.6% of revenue, an improvement of 810 basis points compared to the previous year. The company also reported a non-GAAP net income of approximately $460,000, resulting in earnings of $0.02 per share.

Looking ahead, Netgear's management provided an optimistic outlook for the rest of 2025. CFO Bryan Murray indicated expectations of continued growth, particularly in the NFB segment, with anticipated easing of supply challenges in the second half of the year. The company also highlighted its recent acquisition of VAAG Systems, which is expected to enhance Netgear's software development capabilities and drive cost efficiencies. These factors, combined with the company's strong cash position of $391.9 million, have bolstered investor confidence in Netgear's ability to navigate market challenges and capitalize on growth opportunities in the networking equipment space.