Q2 2026 ADTRAN Holdings Inc Earnings Call Transcript
Key Points
- Optical networking revenue grew 22% year-over-year and 13% sequentially, driven by strong demand across service provider, enterprise, government, and cloud customers.
- Revenue from enterprise, government, and cloud customers increased 47% year-over-year and 19% sequentially, now representing 25% of total revenue, with hyperscaler revenue up 97% year-over-year.
- The company completed a refinancing of its credit facility, reducing borrowing costs by 200 basis points and extending maturity to 2031, enhancing financial flexibility.
- Gross margin has improved over the last three years, and the company remains committed to its long-term target of 42%-43% gross margin and 10% non-GAAP operating margin.
- The company is seeing strong demand for upcoming products like the Micromux Quattro and Lightwave 800 pluggable optics, with multiple hyperscalers interested, and is expanding into new markets like intra-data center connectivity.
- Q2 revenue of $281.1 million fell short of guidance due to a project delay from a single customer and unfavorable product/customer mix.
- Non-GAAP gross margin declined to 40.7% from 41.4% year-over-year and 43% sequentially, impacted by product mix, customer mix, and higher product costs.
- Supply chain constraints limited the company's ability to fulfill demand, particularly for higher-margin products, and are expected to persist in the near term.
- Access and aggregation solutions revenue declined 5% year-over-year and 4% sequentially, directly impacted by the customer timing delay.
- The company's Q3 outlook is cautious, with revenue expected between $275 million and $295 million and non-GAAP operating margin between 1.5% and 5.5%, reflecting ongoing supply and timing challenges.
Ladies and gentlemen, welcome to the ADTRAN Holdings Inc second quarter 2026 earnings conference call. Please note that this call is being recorded. After the speaker's remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.
Now I would like to turn the call over to Tom Stanton, German and CEO of ADTRAN Holdings Inc. Tom, you may begin.
Thank you, operator. Good morning, everyone. Although we are disappointed with the reported results of this past quarter, we believe they were driven by a specific set of factors.
As we communicated in our preliminary results press release, a project delay from a single customer, combined with unfavorable impacts from product and customer mix, caused our results to fall short of our guidance.
Despite these factors, demand across our markets, our end markets, remains healthy. Our strategic priorities remain on track and our customer base continues to diversify. We believe those
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