Ribbon Q3 Revenue Rises as IP Optical Sales Set Record

Ribbon Communications reported a sharp sequential improvement in third-quarter 2026 revenue and profitability, supported by record third-quarter sales in its IP Optical Networks business and stronger earnings from Cloud and Edge. The company nevertheless remained in a GAAP net loss, generated negative operating cash flow and reported lower consolidated margins than a year earlier.

Revenue rose to $219 million from $192 million in the second quarter and $215 million a year earlier. Non-GAAP adjusted EBITDA increased to $27 million from $12 million sequentially, but declined from $29 million in the prior-year quarter. The adjusted EBITDA margin was 12%.

Non-GAAP gross margin reached 50.3%, up 100 basis points from the second quarter but down 230 basis points year over year. Non-GAAP operating margin was 10.3%, compared with 3.7% in the preceding quarter and 11.4% a year earlier. Non-GAAP diluted earnings were $0.07 per share, versus a loss of $0.03 in the second quarter and earnings of $0.04 in the third quarter of 2025.

On a GAAP basis, gross margin was 48.2%, while operating expenses declined to $100 million from $103 million sequentially and $105 million a year earlier. Ribbon recorded operating income of $6 million, but other expenses contributed to a net loss of $9 million, or $0.05 per diluted share. That compared with a $27 million net loss in the second quarter and a $12 million loss a year earlier.

IP Optical Networks Posts Record Third-Quarter Revenue

IP Optical Networks revenue rose to $96 million, up $14 million sequentially and $5 million year over year. Ribbon described the result as a third-quarter record and said U.S. revenue increased 150% from the prior-year period. The segment also reported year-to-date bookings equal to 1.24 times revenue.

The company cited strategic U.S. customer additions, growth in energy-related critical infrastructure, data-center interconnect projects and market-share gains in Asia-Pacific. Ribbon is targeting regional data-center connectivity opportunities with its Apollo optical portfolio and Muse automation capabilities, including deployments serving rural data centers and edge AI infrastructure.

The segment’s non-GAAP gross margin was 35.5%, up 30 basis points sequentially but down 390 basis points year over year because of changes in geographic and product mix. Its adjusted EBITDA loss narrowed to $1 million from $6 million in the second quarter, though the result was below adjusted EBITDA of $1 million a year earlier. The adjusted EBITDA margin improved sequentially to negative 1% from negative 7%.

Cloud and Edge Drives Group Profitability

Cloud and Edge generated $123 million in revenue, up $12 million from the second quarter but down $2 million year over year. Non-GAAP gross margin increased to 61.9% from 59.8% sequentially and was slightly below 62.2% in the prior-year period.

Adjusted EBITDA reached $28 million, rising from $18 million in the second quarter and remaining flat year over year. The segment’s adjusted EBITDA margin was 23%, up 680 basis points sequentially and 30 basis points from a year earlier.

Ribbon pointed to U.S. service-provider voice modernization and a new project with a large U.S. government civilian agency among the quarter’s business developments. Verizon revenue increased 50% from the second quarter, while the company also reported wins with U.S. Tier 2 service providers and additional government and defense projects.

The company is also developing AI-related network and voice-security capabilities. Its Call Trust offering is designed to detect synthetic voice audio during calls and trigger alerts or disconnections, while its AIOps and agentic automation platform is intended to support functions including network operations, network changes, fraud analysis and field service.

Fourth-Quarter and Full-Year Outlook

For the fourth quarter, Ribbon expects revenue of $233 million to $247 million, non-GAAP gross margin of 53.5% to 54.5%, and non-GAAP adjusted EBITDA of $40 million to $47 million. In the fourth quarter of 2025, the company generated $227 million in revenue and $40 million in adjusted EBITDA, with a 55.4% non-GAAP gross margin.

For full-year 2026, management projects revenue of $807 million to $821 million, non-GAAP gross margin of 50.1% to 50.5%, and adjusted EBITDA of $70.5 million to $77.5 million. Ribbon reported 2025 revenue of $845 million, a 52.3% non-GAAP gross margin and adjusted EBITDA of $107 million.

The outlook reflects management’s current expectations regarding customer spending, bookings and project timing. Ribbon identified network modernization, fiber and data-center interconnect investment, government and critical-infrastructure communications, and AI-enabled voice and automation as key areas of focus.

Cash Flow and Risks

Ribbon used $14 million of cash in operations during the quarter and ended September with $42 million in cash. It reported $336 million of senior term-loan debt, $15 million drawn under its revolving credit facility and net debt leverage of 4.4 times trailing 12-month adjusted EBITDA. The company’s top 10 customers accounted for 46% of revenue, while service providers represented 69% of sales.

Risks highlighted by Ribbon include quarterly revenue volatility, customer purchasing and revenue-recognition timing, component shortages, tariffs and other trade restrictions, currency movements, geopolitical conflict, cybersecurity incidents and rapid technological change. The company also cited competitive pressure, customer concentration, international operating risks and obligations under its credit agreement, including compliance with its maximum net leverage ratio.