A10 Networks: Raised guidance, a Microsoft reshape, a new AI bet — and a falling stock
Double-digit growth and a widening Microsoft relationship collide with a market discounting the AI-infrastructure trade
ATEN · Earnings Call · 2026-08-05
A tone of confidence, and a guide-raise
A10 Networks opened its second-quarter call with a deliberate message: the company's two big announcements are not incremental. Revenue grew 15% year-over-year to $80.1M — a fourth quarter of double-digit growth in five — and management raised guidance for the second consecutive beat, now targeting 12–14% revenue growth and 14–16% EPS growth, up from 10–12% and 12–14%. “We now expect 2026 full-year revenue to increase by 12% to 14% on a year over year basis up from 10% to 12%.” — Dhrupad Trivedi, President and Chief Executive Officer · 2026-08-05 The confidence is anchored in product growth as the leading demand indicator: product revenue came in at $49M, 61% of the mix, ~25% higher than the year-ago quarter. Fundamentally the business model is as disciplined as ever — non-GAAP gross margin held at 80.3%, roughly inside the band it has sustained for nine years, and operating margin printed 25.5%. A gross margin that basically never moves is the quiet proof that A10 isn't buying growth with price.Microsoft rewrites the mix — without repainting history
The market-moving event landed two weeks after quarter-end: a "significant expansion" of the Microsoft partnership.The nuance that matters: some of the new Microsoft revenue now books into the Enterprise vertical, whereas Microsoft has historically been a service-provider-classified customer. When pressed on whether that was a recategorization of old dollars, management was explicit: “there is no historical revenue that has been recategorized... So then in the most recent quarter, is there Microsoft Business showing up that you do categorize as enterprise? Yes. Correct. based on a completely different product set.” — Dhrupad Trivedi, President and Chief Executive Officer · 2026-08-05 This is a genuinely new buyer-boundary crossing, not an accounting reshuffle — the analyst's colloquial relief (“that like, totally now things make so much more sense to me” — Analyst, Analyst · 2026-08-05) was telling. It also validates a thread management has been pulling for a year. On the August 2025 call, the Microsoft relationship was already flagged as strategically deep: “it's more reflective of the fact that our solution is highly relevant to a global leader in cloud networking” — Dhrupad Trivedi, President and CEO · 2025-08-05. And last quarter, the broadening was telegraphed: “many of our existing customers who are service providers or large enterprise are all beginning to allocate more spending and priority to AI.” — Dhrupad Trivedi, President and CEO · 2026-04-28 The expansion converts those hints into committed roadmaps. Concentration risk is the obvious counter-argument, and Hamed Khorsand raised it directly. Management shot it down cleanly: no pre-buys — “there is no prebuys or anything like that... it is very much aligned with their business needs, rollout forecast, and us being much more operationally intertwined than before” — Dhrupad Trivedi, President and Chief Executive Officer · 2026-08-05 — and the rest of the business, ex a couple of macro-challenged regions, grows close to double digits on its own.This agreement reflects a shared commitment to a long term partnership with mutual performance commitments on both sides. As a result, we are more firmly aligned with the long term road map of this industry leader.