Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• A10 Networks Inc (NYSE:ATEN) reported a 9% year-over-year revenue growth, indicating strong performance.
• Enterprise revenue grew by 18%, showcasing significant expansion in this segment.
• The company has a strong balance sheet with $355.8 million in cash equivalents and marketable securities.
• A10 Networks Inc (NYSE:ATEN) completed the acquisition of ThreadX Protect, enhancing its cybersecurity portfolio.
• The company is well-positioned to benefit from the rise of AI, providing efficient solutions for data center capacity and security.

Negative Points

• Service provider revenue only increased by 3%, indicating slower growth in this segment compared to enterprise.
• There is ongoing market volatility and uncertainty due to factors like tariffs and trade policy dynamics.
• The company faces challenges with order timing due to evolving market conditions and higher interest rates.
• A10 Networks Inc (NYSE:ATEN) experiences quarter-to-quarter volatility in the service provider sector.
• Sales and marketing expenses were down, which may indicate cost management challenges or reduced investment in these areas.

Q & A Highlights

• Warning! GuruFocus has detected 2 Warning Sign with ATEN.

Q: How is the uncertainty around tariffs impacting customer conversations, and is there a difference in response between service providers and enterprise customers? A: (CEO) Broadly, customers are cautious due to concerns about long-term macroeconomic impacts. Service providers, especially on larger projects, show more caution, while enterprise customers are less affected. Some customers are waiting for clarity on tariffs, while others are procuring ahead to mitigate potential impacts. Overall, the net impact is neutral, with spending caution rather than a freeze.

Q: What visibility do you have on large customer initiatives to build AI data centers, and how might this affect demand? A: (CEO) We have reasonable visibility into the first wave of AI data center buildouts by major companies. The real value will emerge in a year or two when enterprises, particularly outside the US, start building more inference models on-premises or in private clouds. We are engaged with these customers early in their planning stages.

Q: Are you comfortable with high single-digit revenue growth for the year in the current environment? A: (CEO) We are comfortable with the expectation of high single-digit revenue growth as it stands today. We don't anticipate significant changes unless there are unexpected macroeconomic shifts.

Q: Can you discuss the competitive landscape for your data center capacity and AI-driven product portfolio? A: (CEO) The competitive dynamic is similar to typical data center buildouts, varying by geography. We partner with existing large service providers in regions like Japan, Europe, and the US, evolving with them as they build AI data centers. We are not facing a new wave of competitors in terms of core technology.

Q: How are you addressing potential tariff impacts and the need to diversify contract manufacturing partners? A: (CEO) We are working with partners to build a more resilient and flexible global footprint, considering 50% of our business is outside the US. This involves requalifying lines and accelerating disaster recovery initiatives. We are also monitoring subcomponent supply chains, which are harder to quantify.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.