Allot Q2 Earnings Call Highlights
Key Points
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- Revenue rose 15% year over year to $27.7 million, marking Allot’s fourth consecutive quarter of double-digit growth. SECaaS revenue increased 47% to $9.4 million, while recurring revenue represented 67% of total quarterly revenue.
- Profitability and cash generation improved significantly: non-GAAP operating margin reached 9.9%, non-GAAP net income rose to $4.6 million, and operating cash flow increased to $8.5 million. Allot ended the quarter with $107 million in cash and no debt.
- Management raised its 2026 revenue outlook to $115 million–$118 million and expects SECaaS growth of at least 40%. The board also approved a share repurchase program of up to $40 million.
Allot (NASDAQ:ALLT) reported second-quarter 2026 revenue growth, improved profitability and stronger operating cash flow, supported by continued expansion of its Security-as-a-Service, or SECaaS, business and a sharp increase in North American sales.
Revenue for the quarter totaled $27.7 million, up 15% from a year earlier. CEO Eyal Harari said the company recorded its fourth consecutive quarter of double-digit year-over-year growth and that growth had accelerated in recent quarters.
“Our business is executing well and performing ahead of our expectations,” Harari said, pointing to order momentum in North America, backlog and growth in SECaaS.
SECaaS Drives Recurring Revenue Growth
SECaaS revenue rose 47% year over year to $9.4 million, representing 34% of total quarterly revenue. SECaaS annual recurring revenue was $36.1 million as of June 30, up 44% from the prior year.
CFO Liat Nahum said 67% of Allot’s total revenue in the quarter was recurring in nature. Deferred revenue also increased both sequentially and year over year, adding visibility into revenue for the remainder of 2026 and into 2027, she said.
During the quarter, Allot secured four SECaaS deals, all in the Europe, Middle East and Africa region. The wins included an upsell involving the company’s first sale of an identity monitoring service to an existing European customer, an expansion into the small- and medium-sized business segment with another European customer, a HomeSecure deployment in an additional country for a global telecommunications group, and a new African SECaaS customer that already used Allot Smart products.
Harari said the identity monitoring offering is intended to complement Allot’s network-security products by monitoring for compromised credentials and other digital identity information. He characterized the service as an addition to the company’s broader cybersecurity platform rather than a standalone “game changer.”
The company expects the newly announced SECaaS wins to contribute to revenue growth in 2027.
North America Sales and Tera III Demand Increase
North America accounted for 31% of quarterly revenue, compared with 17% in the second quarter of 2025 and 14% in the prior quarter. Harari attributed the increase to strong product sales, including demand for the company’s Tera III platform, as well as continued SECaaS demand from a major U.S. customer.
Allot Smart product sales provided the additional strength in North America during the quarter, management said. Tera III is the company’s high-capacity multiservice gateway platform, designed to support network visibility, traffic management and cybersecurity services.
Harari said Tera III opportunities are generally seven-digit deals and are typically pursued by larger carriers. He said Allot had announced about half a dozen Tera III deals over the past 12 months, which have contributed to backlog and revenue recognition. The company also reported an additional Tera III upgrade win for a new customer site expansion, which it said is helping build its 2027 backlog.
Management said the platform’s ability to support network intelligence and cybersecurity workloads on the same infrastructure is a key part of its value proposition for communications service providers. Allot also cited a case study with a Tier 1 operator in which its zero-rating fraud detection and mitigation service reduced fraudulent traffic by 87%.
Harari said the fraud-prevention capability is primarily another use case for the Allot Smart and Tera III platform rather than a separate market. It is particularly relevant in regions where consumers pay per gigabyte and may seek to exploit zero-rated application offers, he said.
Profitability and Cash Flow Improve
On a non-GAAP basis, Allot reported gross margin of 71.8%, compared with 73.4% a year earlier. Nahum said the decline reflected product mix, while the company maintained its expectation for approximately 70% gross margin for the full year.
- Non-GAAP operating income was $2.7 million, compared with $1.2 million a year earlier.
- Non-GAAP operating margin rose to 9.9% from 5%.
- Non-GAAP net income was $4.6 million, or $0.09 per diluted share, compared with $1.5 million, or $0.03 per diluted share.
- GAAP net income was $2.6 million, or $0.05 per diluted share, compared with a GAAP net loss of $1.7 million, or $0.04 per diluted share.
- Operating cash flow was $8.5 million, compared with $4 million in the prior-year quarter.
GAAP net income included a one-time $1.2 million financial gain related to the modification of an office lease agreement, which Nahum said is not expected to recur. Non-GAAP operating expenses increased to $17.2 million from $16.4 million, reflecting sales and marketing investment and one-time general and administrative costs associated with the lease modification. Operating expenses as a percentage of revenue declined to 62% from 68%.
Allot ended the quarter with $107 million in cash, cash equivalents, deposits and investments, up from $88 million at the end of 2025, and no debt. The company had 501 full-time employees as of June 30.
Guidance Raised, Repurchase Program Approved
Management raised and narrowed its 2026 revenue outlook to a range of $115 million to $118 million, from a previous range of $113 million to $117 million. The company expects SECaaS revenue to grow by 40% or more during 2026 and said it expects continued profitability improvement through the year.
Allot’s board also approved a share repurchase program of up to $40 million on June 23. Nahum said the required 30-day creditor-objection period under Israeli regulations had passed without objections. Repurchases may be made in the open market at management’s discretion, depending on market conditions, share price, liquidity and other factors.
About Allot (NASDAQ:ALLT)
Allot Ltd. is a provider of network intelligence and security solutions designed for service providers and enterprises worldwide. The company delivers software and cloud-based services that enable customers to gain real-time visibility into network traffic, enforce security policies and optimize bandwidth usage. Its platforms support a wide range of applications, from DDoS protection and threat prevention to subscriber experience management and network analytics.
Allot's product portfolio includes managed solutions for mobile and fixed-line operators, as well as cloud-native services that can be deployed across private, public and hybrid environments.
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