A10 Networks Q2 2026 Earnings: Revenue Rose 15.5% as GAAP Operating Margin Narrowed

A10 Networks (NYSE: ATEN) reported Q2 2026 revenue of $80.1 million, up 15.5% year over year, while GAAP diluted EPS fell to $0.12 from $0.14. Product sales generated most of the top-line increase, but faster operating-expense growth pushed GAAP operating profit and net income lower even as non-GAAP margins improved.

Core earnings data

Revenue and gross profit advanced at similar rates, leaving GAAP gross margin broadly stable. However, operating expenses increased 22.4%, faster than revenue, resulting in lower GAAP operating income and net income.

Adjusted results moved in the opposite direction. Non-GAAP operating income and adjusted EBITDA both grew by about 25%, with margins expanding from the prior-year quarter.

A10’s non-GAAP measures exclude items including stock-based compensation, acquisition-related expenses, acquired-intangible amortization, certain legal expenses, and related tax effects.

Business and segment performance

Product revenue increased about 25.1% to $49.0 million, while services revenue rose about 3.0% to $31.1 million. Of the company’s roughly $10.8 million total revenue increase, approximately $9.9 million came from products, making product demand the primary growth driver.

Management linked the broader momentum to execution in the Americas and demand for security-focused next-generation networking used in AI-related infrastructure. A10 also completed its acquisition of TrojAI in June and disclosed a new multi-year agreement with Microsoft tied to scaled deployment. The company did not provide the agreement’s financial value or quantify its Q2 revenue contribution.

Faster reported expense growth offset higher gross profit

A10 generated approximately $8.7 million more GAAP gross profit than in the prior-year quarter, but operating expenses increased by about $10.0 million. Research and development expense rose approximately 30.1% to $21.2 million, while general and administrative expense increased about 57.4% to $11.3 million. Sales and marketing expense grew a more moderate 4.5% to $21.9 million.

The widening difference between GAAP and non-GAAP results was also significant. Stock-based compensation and related payroll tax reached $9.3 million, compared with $4.6 million a year earlier, while acquisition-related expense was $1.3 million. Because these items were excluded from adjusted results, non-GAAP operating margin expanded even as GAAP operating margin contracted.

Cash flow and balance sheet

Cash-flow information was provided for the first six months of 2026 rather than Q2 alone. Six-month operating cash flow declined to $31.3 million from $39.4 million despite GAAP net income increasing to $20.9 million from $20.1 million. Approximate free cash flow, calculated as operating cash flow less capital expenditures, was $26.8 million, compared with $30.6 million in the prior-year period.

Working capital contributed to the weaker cash conversion. Accounts receivable used $10.1 million of cash after providing $24.0 million a year earlier, while inventory used $13.8 million compared with a $1.6 million source of cash. Increases in accounts payable and deferred revenue partially offset those uses.

At June 30, A10 held $357.3 million in cash, cash equivalents, and marketable securities. Inventory had increased to $31.7 million from $18.0 million at December 31, while accounts receivable rose to $72.2 million from $62.1 million. The presentation of debt shifted from $218.8 million of long-term debt at year-end to $219.5 million of short-term debt at June 30.

During Q2, A10 returned $6.7 million to shareholders through $2.4 million of share repurchases and $4.3 million of dividends. The board also approved a quarterly dividend of $0.06 per share, payable September 1, 2026, to shareholders of record on August 17.

Earnings guidance

Based on first-half performance and its demand outlook, management raised both full-year revenue growth and EPS growth guidance. Each range moved two percentage points higher, with the new low end matching the previous high end.

The release did not specify whether the EPS growth outlook refers to GAAP or non-GAAP EPS.

Recent insider transactions

The supplied six-month insider summary reported 474,794 shares purchased and 124,698 shares sold, resulting in net purchases of 350,096 shares. It also listed total insider holdings of 1.18 million shares, but did not separate open-market purchases from equity-compensation activity.

Among the latest records, four contained a defined transaction type and value. Other May filings were omitted because the supplied data did not identify an action or transaction amount.

The supplied itemized records did not provide share quantities for these four transactions, so none should be inferred from the disclosed values.

Risks investors should monitor

• GAAP expense pressure: Operating expenses grew faster than revenue, causing GAAP operating margin to fall even though gross margin remained stable.
• Large and rising non-GAAP adjustments: Stock-based compensation and acquisition-related costs widened the gap between reported and adjusted profitability.
• Working-capital demands: Higher receivables and inventory contributed to lower six-month operating cash flow and could continue to affect cash conversion.
• Dependence on product-led growth: Product revenue generated most of the quarter’s increase, while services growth remained comparatively limited.
• Execution on acquisitions and the raised outlook: TrojAI-related investment, the Microsoft agreement, and management’s higher full-year ranges make continued demand and operating execution important in the second half.

Summary

A10 Networks delivered double-digit Q2 revenue growth, led primarily by products and next-generation networking demand. Stable gross margin and stronger adjusted profitability were offset by faster reported expense growth, which reduced GAAP operating income and EPS, while working-capital investment weighed on first-half cash flow. The main questions ahead are whether product demand can sustain the raised outlook and whether A10 can convert that growth into stronger GAAP margins and cash generation.