Summary of Allot's Q2 2026 Earnings Call

1Key Financial Results and Metrics

Revenue: $27.7 million, up 15% year-over-year.

SECaaS Revenue: $9.4 million, a 47% increase year-over-year, representing 34% of total revenue.

SECaaS ARR: $36.1 million, up 44% year-over-year.

Recurring Revenue: 67% of total revenue.

Non-GAAP Gross Margin: 71.8%, down from 73.4% year-over-year.

Operating Income: Non-GAAP operating income of $2.7 million (9.9% margin), compared to $1.2 million (5% margin) in Q2 2025.

Net Profit: Non-GAAP net profit of $4.6 million ($0.09 per diluted share), up from $1.5 million ($0.03 per diluted share) in Q2 2025.

Operating Cash Flow: Strong at $8.5 million, compared to $4 million in the same quarter last year.

Cash Position: $107 million in cash and equivalents, with no debt.

2Strategic Updates and Business Highlights

North America Performance: Revenue from North America increased to 31% of total revenue, up from 17% a year ago, driven by strong sales of the Tera III platform and smart product line.

Cybersecurity as a Service (SECaaS): Continued strong performance with notable wins in EMEA and Africa, expanding the service offerings to SMBs and enhancing existing customer relationships.

Tera III Platform: High demand for the next-generation platform, which consolidates network visibility and cybersecurity services, with excellent customer feedback.

Share Repurchase Program: Board approved a $40 million share buyback program, reflecting confidence in the company's strategy and financial strength.

3Forward Guidance and Outlook

Revenue Guidance: Raised to $115 million - $118 million for 2026, down from previous guidance of $130 million - $170 million.

SECaaS Growth: Expected to continue with a growth rate of 40% or more for the full year.

Profitability: Continued improvement in profitability is anticipated, with gross margins expected to remain around 70%.

4Bad News, Challenges, or Points of Concern

Revenue Decline in Other Regions: EMEA and APAC regions saw sequential revenue declines, attributed to the timing of product revenue recognition.

Gross Margin Pressure: Year-over-year decline in gross margin due to product mix, although still consistent with expectations.

Market Competition: The competitive landscape in cybersecurity and network services remains intense, requiring ongoing innovation and customer engagement.

5Notable Q&A Insights

Operating Cash Flow: Slight decline from the previous quarter attributed to one-time cash advancements; overall momentum remains positive.

Backlog and RPO: High levels of backlog and recurring revenue provide visibility into future performance, though specific metrics are not disclosed quarterly.

North America Strength: Both SECaaS and smart product lines contributed to growth, with strong demand for Tera III driving revenue from top customers.

Deferred Revenue: Significant increases in deferred revenue indicate strong future revenue visibility, driven by product deals and maintenance contracts.

Identity Services: Initial reception for new SECaaS offerings is positive, with existing customers looking to enhance their service packages in response to competitive pressures. Overall, Allot reported a solid quarter with strong growth in recurring revenue, particularly in North America, while also raising its revenue guidance for the year. However, challenges in other regions and gross margin pressures warrant attention as the company navigates a competitive landscape.