Q2 2025 Radware Ltd Earnings Call
Operator: Welcome to the Radware Ltd. conference discussing second quarter 2025 results, and thank you all for holding. At this time, all participants are in listen-only mode. A brief question and answer session will follow the normal presentation. If anyone requires any operator assistance during the conference, please signal the operator by pressing star and zero on your telephone keypad. As a reminder, this conference is being recorded, July 30, 2025. I would now like to turn this call over to Yisca Erez, Director of Investor Relations at Radware Ltd. Please go ahead.
Welcome to the rideway conference discussing second quarter, 2025 results and thank you all for holding at this time. All participants are in listen-only mode. A brief question and answer session will follow the normal presentation.
If anyone requires any operator assistance, during the conference, please signal the operator by pressing star and zero on your telephone keypad.
As a reminder, this conference is being recorded.
July 30th 2025, I would now like to turn this. Call over to Jessica Eris director, investor relations at radway. Please go ahead.
Yisca Erez: Thank you, Operator. Good morning, everyone, and welcome to Radware Ltd.'s second quarter 2025 earnings conference call. Joining me today are Roy Zisapel, President and Chief Executive Officer, and Guy Avidan, Chief Financial Officer. A copy of today's press release and the financial statements, as well as the investor kit for the second quarter, are available in the Investor Relations section of our website. During today's call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. These forward-looking statements are subject to various risks and uncertainties, and actual results could differ materially from Radware Ltd.'s current forecast and estimates.
Thank you, operator. Good morning, everyone and welcome to AdWords. Second quarter 2025 earnings conference call.
Jenny MC today are always disappearing, president and chief executive officer and gave Dan Chief Financial Officer.
A copy of today's press release and the financial statements, as well as the investor kit for the second quarter, are available in the investor relations section of our website.
During today's call, we may make projections or other forward-looking statement regarding future events or the future financial performance of the company.
Before looking statements are subject to various risks and uncertainties and actual results could differ materially from world's current forecast, and estimates
Yisca Erez: Factors that could cause or contribute to such differences include, but are not limited to, impact from the changing or severe global economic conditions, general business conditions, and our ability to address changes in our industry, changes in demand for products, the timing in the amount of orders, and other risks detailed from time to time in Radware Ltd.'s filings. We refer you to the documents the company files and furnishes from time to time with the SEC, specifically the company's last annual report on Form 20-F as filed on March 28, 2025. We undertake no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date of such statement is made. I will now turn the call to Roy Zisapel.
General business conditions in our ability to address changes in our industry.
Changes in demand for products, the timing in the amount of orders and other risks differed from time to time in adverse filing.
We refer you to the documents, the company files and furnishes from time to time with the FCC. Specifically the company's last annual report on form 20f as filed on March 28th 2025.
we undertake no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date of such statement is made
I will now turn the call to voice. This is
Roy Zisapel: Thank you, Yisca, and thank you all for joining us today. I am pleased to report another strong quarter, marking our fourth consecutive quarter of double-digit revenue growth. In the second quarter, revenue increased 10% year-over-year to $74 million. Non-GAAP earnings per share rose 39% year-over-year to $0.28, highlighting the continued scalability and efficiency of our business model. We also generated $14.5 million in cash flow from operations, further underscoring the strength and resilience of our operations. These results reflect the successful and consistent execution of the strategy we have implemented over the past couple of years to become the best-of-breed provider in application and data center security. This strategy is driven by three pillars: gaining significant market share in cloud security, leading with algorithm and AI-driven innovation and automation, and expanding our go-to-market presence. Cloud security continues to be our primary growth engine.
Thank you, Isa, and thank you all for joining us today.
I'm pleased to report another storm, quarter marking, our fourth consecutive quarter of double digit Revenue growth.
In the second quarter Revenue, increased 10% year-over-year to 74 million.
Non-gaap earning per share or 39% year-over-year to 28 cents, highlighting the continued scalability and efficiency of our business model.
We also generated 14 and a half million dollars in cash flow from operations. Further underscoring, the strength and resilience of our operations.
This results, reflect the successful and consistent execution of the strategy. We've implemented over the past couple of years to become the best of breed provider in application and data center security.
This strategy is driven by 3 pillars, gaining significant market share in Cloud, security, leading with algorithm and AI driven Innovation and Automation, and expanding our go-to Market presence.
Roy Zisapel: In the second quarter, we accelerated cloud ARR growth from 19% to 21% year-over-year, reaching $85 million. With that, we surpassed our short-term target of 20% year-over-year growth rate. Total cloud booking and the number of cloud active customers also demonstrated impressive growth last quarter, further validating our strategy and execution. These achievements reflect our strengthened competitive position, higher win rates, and increased participation globally. One of the growth drivers for our cloud security business is the increased adoption of our cloud-based API protection solutions. The API security solution uses AI-driven capabilities to secure APIs and business logic in real time. What differentiates Radware from our competition is our ability to automatically and continuously map business logic, generate and optimize protection rules, and enforce them in real time. Ultimately, we are helping customers automate protection and respond faster to threats.
Cloud security continues to be our primary growth engine. In the second quarter, we accelerated cloud growth from 19% to 21%.
Reaching 85 million.
With that, we surpassed our short-term Target of 20% over a year growth rate.
Total Cloud booking and the number of cloud active customers also demonstrated impressive, growth last quarter.
Further validating our strategy and execution.
This achievement reflects our strengths and competitive position.
Higher win rates and increased participation globally.
One of the growth drivers for our cloud security business is the increased adoption of our cloud-based API protection solutions.
The API security solution, use AI driven capabilities to secure apis and business logic in real time.
What differentiates rather for our competition is our ability to automatically and continuously.
Map business logic generate and optimize protection rules and enforce them in real time.
Roy Zisapel: The market demand for securing API traffic is translating into meaningful wins, including deals with the European government, a major Asian bank, and a global sporting event. Our leadership in this space was recognized in the GigaHome Radar for application and API security. In the report, we were named a leader and fast mover for our AI-driven capabilities in vulnerability detection, account takeover protection, and vault management. With AI becoming deeply embedded in enterprise workflows, our leadership in agentic infrastructure security continues to position us as a trusted partner. Defending against AI-powered threats demands AI-powered defense, and that's exactly what we continue to build with our Epic AI framework. Our AI-powered SOC is a cornerstone of our AI defense strategy, purpose-built to detect and mitigate DDoS attacks in real time.
Ultimately, we’re helping customers automate protection and respond faster to threats.
The market demand for securing API traffic is translating into meaningful wins including deals with the European government. A major Asian bank, and a global sporting event.
Our leadership in this space was recognized in the gig radar for application and API security.
In the report, we were named a leader in fast, mover for our AI driven capabilities in vulnerability detection.
Account takeover protection and Bot management.
With AI becoming deeply embedded in Enterprise workflows our leadership. In agentic infrastructure, security continues to position us as a trusted partner.
Defending against AI powered threats demands, AI Power Defense and that's exactly what we continue to build with our apki framework.
Our AI powered sock is a Cornerstone of our AI defense strategy.
Purpose built to detect and mitigate dos attacks in real time.
Roy Zisapel: It continuously analyzes global traffic patterns using behavioral baselines, anomaly detection, and machine learning to identify with high accuracy attacks that escaped the security controls. Once detected, SOCx automatically comes with the analysis and specific recommendations how to mitigate the attack in real time, dramatically reducing the mean time to resolve, thus providing significantly better business outcomes for our customers. This capability has earned us some major Q2 wins. For instance, we secured a seven-digit deal with a major global event organization. Based on our proven ability to address current and emerging threats, the organization selected Radware's full security stack, including our AI SOC expert, to protect their digital infrastructure and applications. Our AI SOC expert was also part of another major cloud deal last quarter. A leading U.S. financial technology company selected our solution as part of its data center consolidation and cloud migration strategy.
It continuously analyzes global traffic patterns using behavioral baselines, anomaly detection, and machine learning.
To identify with high accuracy.
Attacks that escaped. The security controls.
Once detected, socks automatically comes with the analysis and specific recommendations. How to mitigate the attack in real time dramatically reducing the mean time to resolve
Thus, providing significantly better business outcomes for our customers.
This capability has earned us some major second quarter wins.
For instance, we secured a 7-digit deal with a major global event organization.
Based on our proven ability to address current and emerging threats. The organization selected rather full security stack including our AI stock expert to protect their digital infrastructure and applications
our AI stock expert was also part of another major Cloud deal last call.
A leading U.S. financial technology company selected our solution as part of its data center consolidation and cloud migration strategy.
Roy Zisapel: This deal reflects the customer's need to offload manual tasks from its network and security teams, allowing them to focus on driving efficiency and innovation across their broader technology stack. Our cloud platform's ability to deliver better protection for core applications while enhancing operational agility was a key differentiator in securing this win. In the Q2, we continued to advance our go-to-market strategy by deepening and expanding our relationship across our partner and channel ecosystem. These efforts contributed to securing multiple major wins, including a seven-digit deal with one of Latin America's largest data center providers. To improve their security, resolve performance, and support issues, the customer replaced its existing solution with our hybrid cloud DDoS solution. Our technical edge and strong execution alignment were key to the win.
This deal reflects the customer need to offload. Manual tasks from its Network and security teams.
Allowing them to focus on driving efficiency and innovation.
Across the broader technology stack.
Our Cloud platform ability to deliver better protection for core applications. While enhancing operational. Agility was a key differentiator in securing this week.
In the second quarter, we continue to advance our go to market strategy by deepening and expanding our relationship across our partner and channel ecosystem.
These efforts contributed to securing multiple major wins including a 7-digit deal with 1 of Latin. America's largest largest data center providers,
to improve their security resolve performance and support issues. The customer replaced. Its existing solution with our hybrid cloud data solution.
Our Technical Edge and strong execution. Alignment were key to the win.
Roy Zisapel: We also closed another seven-digit deal with the European government, a partnership win that will strengthen our presence in the public sector in that country. The hybrid deal spanned multiple solutions and 250 applications. Our cloud platform's unified management, visibility, and protection for both cloud and on-prem applications, and our strong partner alignment were key contributors to this competitive takeout. In closing, our second quarter results underscore the strength of our strategy and disciplined execution across the business. Cloud security remains our primary growth engines, marked by strong cloud ARR momentum and accelerating growth rates. Our AI-driven innovation continues to enhance our platform capabilities and to drive meaningful differentiation in the market. At the same time, deeper engagement with our partners and channel ecosystems is enabling us to scale more efficiently and win new customers.
We also closed another $7 million deal with a European government.
Partnership win that will strengthen. Our presence in the public sector in that country.
The hybrid dealers, spend multiple Solutions and 250 applications.
Our Cloud platforms, unified management, visibility and protection for both cloud and on-prem applications.
And our strong partner alignment will key contributors to this competitive takeout.
In closing, our second quarter results underscore the strength of our strategy and disciplined execution across the business.
Cloud security remains our primary growth engines. Marked by strong, Cloud aerial momentum, and accelerating growth rates.
Our AI-driven innovation continues to enhance our platform capabilities and drive meaningful differentiation in the market.
Roy Zisapel: With a growing pipeline and expanding partner network and rising global demand for AI-based security solutions, we believe our current momentum and strategic focus position us to pursue long-term growth opportunities and deliver long-term value. With that, I will turn the call over to Guy. Thank you, Roy, and good day, everyone. I will provide an overview of our financial results and business performance for the second quarter, as well as our outlook for the third quarter of 2025. Before beginning the financial overview, I would like to remind you that unless otherwise indicated, all financial results are non-GAAP. A full reconciliation of our results on a GAAP to non-GAAP basis is available in the earnings press release issued earlier today and in the investor section of our website.
At the same time deeper engagement with our partners and channel ecosystems is enabling us to scale more efficiently and win new customers.
With a growing Pipeline and expanding partner Network.
and Rising Global demand for AI based Security Solutions, we believe our current momentum and strategic Focus position us to pursue long-term growth opportunities, and deliver long-term value,
With that, I'll turn the call over to guy.
Thank you, Roy, and good day, everyone.
I'll provide an overview of our financial results and business performance for the second quarter.
As well as our outlook for the third quarter of 2025.
Before beginning the financial overview, I would like to remind you that unless otherwise indicated, all Financial results are non-gaap.
A full reconciliation of our results. On a gaap to non-gaap basis is available in the earning press release issued earlier today.
and in the investor section of our website,
Roy Zisapel: We delivered solid financial results in the second quarter of 2025, with revenue growing 10% year-over-year to $74.2 million, driven primarily by continued strength in our cloud security business. Total ARR increased by 8% year-over-year to $235 million, with cloud ARR growth accelerating from 19% to 21% year-over-year, reaching $85 million. This momentum reflects the growing demand for our cloud solution and the increase in shifting towards recurring revenue, which now represents 84% of total revenue, up from 82% in Q2 of last year. Looking at regional performance, the Americas' revenue was stable year-over-year at $30.1 million, representing 41% of total revenue. On a trailing 12-month basis, the region grew 11%. We had delivered strong growth, with Q2 revenue up 22% year-over-year to $27.8 million, accounting for 37% of total revenue. Trailing 12-month growth was 17%, and APAC revenue increased 30% year-over-year to $16.3 million, contributing 22% of total revenue.
we delivered solid Financial results in the second quarter of 2025.
With Revenue growing 10% year-over-year to 74.2 million driven primarily. I continued strength in our Cloud security business.
Model are increased by 8% year-over-year.
To 235 million with Cloud, our growth accelerating from 19% to 21% year-over-year.
In 85 million.
This momentum. Reflect the growing demand for our Cloud solution and the increase in shifting towards recurring Revenue.
Which now represent 84% of total revenue up from 82% in Q2 of last year.
Looking at Regional performance.
Presenting 41% of total revenue.
On a trailing twelve-month basis, the region grew 11%.
May I delivered strong growth, with Q2 Revenue up 22% year-over-year to 27.8 million.
Accounting for 37% of total revenue.
Trailing 12 months growth was 17%.
And APAC Revenue, increased 30% year-over-year to 16.3 million.
Roy Zisapel: On a trailing 12-month basis, APAC grew 5%. Turning to profitability, gross margin remained strong at 82.2%, consistent with the prior year. Operating income grew more than 50% year-over-year, reaching $9.5 million, up from $6.3 million in Q2 2024. As we noted last quarter, we are following our plan and increasing investment in sales, marketing, and R&D, particularly in cloud and AI innovation, to capitalize on the robust demand for our leading security offering and the long-term market opportunities. Our recurring business model continues to demonstrate strong leverage, enabling us to fund those growth initiatives. Radware Ltd.'s adjusted EBITDA for the second quarter of 2025 increased by 37% to $11.4 million, compared to $8.3 million in the same period last year.
Contributing 22% of total revenue.
On a trailing 12 months basis, APA group 5%.
Earning to profitability.
Gross margin remained strong at 82.2%, consistent.
With the prior year.
Operating income grew more than 50% year-over-year, reaching $9.5 million.
From 6.3 million in Q2 202024.
As we know, the last quarter.
We are following our plan.
And increasing investment in sales.
Marketing.
And R&D, particularly in cloud and AI innovation, to capitalize on the robust demand for our leading security offering and the long-term market opportunities.
The recurring business model continues to demonstrate strong leverage, enabling us to fund those growth initiatives.
Rather, the DBA for the second quarter of 2025 increased by 37% to $11.4 million.
Compared to 8.3 million in the same period last year.
Roy Zisapel: Excluding the hawks business, adjusted EBITDA was $14.1 million, representing a 19% EBITDA margin, up from $11 million, and 16.4% EBITDA margin in Q2 2024, reflecting improved operational efficiency and scaling our core business. Financial income for the quarter was $5.4 million, up from $4.1 million in the same period last year. Our effective tax rate for the quarter was 15.4%, in line with Q2 2024. We expect the effective tax rate to remain approximately at this level in the coming quarter. Net income rose 43% year-over-year to $12.6 million, compared to $8.8 million in Q2 2024, and diluted earnings per share increased by 39% to $0.28, up from $0.20 in the same period last year. Turning to the cash flow and balance sheet, cash flow from operation in Q2 2025 was $14.5 million, compared to $23 million in the same quarter last year.
Excluding the Hawks business. Just a divida was 14.1 million representing. A 19% ibida margin up from 11 million and 16.4% ibida margin in Q2 2024 reflecting improved, operational, efficiency, and scale in our Core Business,
Financial income for the quarter, was 5.4 million up from 4.1 million in the same period last year.
Our effective tax rate for the quarter was 15.4%, in line with Q2 2024.
We expect the effective tax rate to remain approximately at this level in the coming quarter.
Net income, Rose 43% year-over-year to 12.6 million compared to 8.8 million in Q2 2024.
And diluted earning per share, increased by 39% to 28%.
Up from 20 cent in the same period last year.
Turning to the cash flow and balance sheet.
Cash flow from operation in, Q2, 2025 was 14.5 million compared to 23 million in the same quarter last year.
Roy Zisapel: We ended the quarter with a strong balance sheet, holding approximately $459 million in cash, cash equivalent, bank deposit, and marketable securities, providing us with the flexibility to continue to invest according to our plans in cloud security and AI innovation. Looking ahead, we remain focused on growing our cloud ARR and gradually accelerating it beyond the current 21% year-over-year growth. This goal is supported by continued investment in cloud security innovation, the integration of AI-driven capabilities in our solution, and the expansion of our go-to-market strategy. These initiatives are designed to unlock new growth opportunities and support a longer-term trajectory in cloud ARR performance. Now to the guidance. We expect total revenue for the third quarter of 2025 to be in the range of $74.5 million to $75.5 million.
We ended the quarter with a strong balance sheet holding approximately 459 million in cash.
Cash Cash. Equivalent bank deposit and marketable securities.
Providing us with the flexibility to continue invest, according to our clients.
In Cloud security, and AI innovation.
Looking ahead. We remain focused on growing. Our Cloud are and gradually accelerating it beyond the current 21% year-over-year growth.
This goal is supported by continued investment in Cloud security innovation.
The integration of AI driven capabilities in our solution.
And the expansion of our go to market strategy.
is initiative are designed to unlock new growth opportunities and support a longer-term trajectory
in Cloud our performance.
And out of the guidance.
we expect all revenue for the third quarter of 2025 to be in the range of
74.5 to 75.5 million.
Roy Zisapel: We expect Q3 2025 non-GAAP operating expenses to be between $51.5 million to $52.5 million, and we expect Q3 2025 non-GAAP diluted net earnings per share to be between $0.26 and $0.27. I will now turn the call over to the operator for questions. Operator, please.
We expect Q3 2025 non-gaap operating expenses to be between.
51.5 to 52.5 million.
And we expect Q3 2025 non-GAAP diluted net earnings per share to be between.
26 and 27 cents.
I'll now turn the call over to the operator for questions. Operator, please.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question comes from George Norton with Wolf Research. Please go ahead.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
Question: Please press star and 1 on your telephone keypad.
A confirmation tone. Will indicate your line is in the question queue?
you may press star and 2 if you would like to remove your question from the queue,
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Ladies and gentlemen, we will wait for a moment while we poll for questions.
The first question.
Comes from George n with wolf research. Please go ahead.
George Norton: Hi guys, thanks very much. I guess I was curious about what you're seeing in terms of early returns from the sales and marketing investments. I think you added 30 people in the North American selling organization. I'm just wondering if you're seeing signs of progress. Are you seeing improved pipeline? How are you feeling about your investment in sales and other three months along? Thanks.
Hi, guys, thanks very much. Um, I guess I was curious about, um, sort of what you're seeing in terms of early returns from the sales and marketing Investments. Uh, I think you added, um, 30 people in the North American selling organization, I'm just wondering if you're seeing signs of progress, are you seeing improved pipeline? Um, you know, how are you feeling about your investment in sales, you know, and other, you know, 3 months along, thanks.
Roy Zisapel: Okay. Hi George, welcome back. I think the investment we have done last year in North America is paying off for us. We are definitely seeing good traction in the market. We are starting to see a stronger pipeline, better engagement with existing and new customers. Nice wins starting to shape up. Our forecast for the coming quarters is becoming better. Overall, I think the first wave of investments that we have done and the alignment has shaped up pretty well. As we noted last quarter, we are increasing investments across the business and specifically in North America. We increased our executive bench there, and we are planning to further increase. We started it last quarter, and I think also some of what Guy Avidan mentioned in the OpEx is a result of that. We are going to further increase our investments in that market.
Okay. Hi George. Welcome back. Um yeah I think the investment we've done last year in North America is paying off for us. We're definitely seeing good Traction in the market. We're starting to see stronger pipeline better engagement with existing and new customers. You know. Nice say nice Wings starting to shape up our forecast for the
Come in quarters is becoming a better overall? I think the first wave of Investments that we've done, and the alignment has shaped up. Pretty well as we noted last quarter, we are increasing Investments.
Roy Zisapel: We think it is a great opportunity for us.
You know across the business and specifically in North America and you know, we increased our executive bench there and we are planning to further increase. We started it last quarter and I I think also some of what guy mentioned in the Opex is a result of that. We are going to further increase our investments in that market. We we think it's a great opportunity for us.
George Norton: Got it. Okay. I know there was also a bifurcation of the selling organization. I think you moved folks from an overall model to a hunters and gatherers model. Are you seeing benefits there? What does that look like? Any insights would be great.
Roy Zisapel: When I said the alignment, I was actually referring to that. That splits to more acquisition-oriented teams and more account management and farming teams. I think it played pretty well. I actually already see much better coverage of the existing customers. I think we are seeing that in more upgrades and cross-selling activity in the existing customers and very successful hunting motion in new accounts. I am actually excited about the pipeline we have built that yearly wins we already saw in Q2, the first wins. I think there is much better news ahead of us, and I am looking forward to that. I am very excited of that organization.
Got it. Okay. And then um, I know there was also um a bifurcation of the selling organization. I think you move folks from a kind of overall, you know, model to to a hunters and gatherers model is is are you seeing benefits there? What does that look like? Any any incentives would be great.
Yeah, so when I said the alignment, I, I was actually referring to that. So that's played to a more acquisition oriented teams and more account management and farming teams. I think played pretty well. I actually already seeing much better coverage of the existing customers, and I think we're seeing that in more upgrades and and grow selling activity in the existing customers and very
Successful hunting Motion in a, in a new accounts I'm actually excited about the the pipeline we've built that the early wins. We already saw in Q2 the first wins but I think you know the there's much better news ahead of us and I'm looking forward to that. I'm I'm very excited of that of that organization.
George Norton: Great. That is terrific. I also want to just ask about the DefensePro X progress. I am curious if you could give us a sense for how much of your sales mix on hardware is now DPX. I know that business pulls along more subscription revenue. I am wondering what that looks like as well. That is my last question. Thank you.
Right, that's terrific. And then I also want to just ask about the defense proacts. Um progress.
um, just curious, if you could give us a sense for, you know, how much of your
Roy Zisapel: Right. So, I think on the on-premise DDoS mitigation, everything now 100% in Q3 will be a DefensePro X. As a matter of fact, we just announced end of sale for the last DefensePro 8 platform last quarter, which by the way brings us a whole additional layer of install base to refresh in the coming 24 months. So all our new sales are now DefensePro X. We believe it's by far the strongest DDoS mitigator. We put all our latest and greatest algorithms there. Customer feedback is very good. I think also this quarter, I was just told we won a large new SaaS provider competitive displacement with DPX, and based on the specific new attack mitigations it can mitigate. So I think here we have a strong refresh cycle.
Sales mix on hardware is now DPX. Um, and then I know that business pulls along more subscription within. I'm kind of wondering what that looks like as well. And that's my last question, thank you.
alright, so I think on the end on premise, do mitigation
everything. Now 100% is, uh, in Q3 will be a defense Pro X. As a matter of fact, we just announced the end of sale for the last
Defense, Pro 8 uh platform last quarter, which by the way, brings us a whole additional layer of install base to refresh in the coming 24 months. So all our new sales are now a defense Pro X and you know we believe it's by far the strongest dose mitigator. We put all
All our latest and greatest algorithms there, you know, customer feedback is very good. I think. Also this quarter.
Roy Zisapel: We're still early there, but both for existing customers and new customers, I think we have a very, very strong platform.
Strong refresh cycle. We're still early there but both for existing customers and new customers. I think we have a very, very strong platform.
George Norton: Very good. Thank you very much.
Very good. Thank you very much.
Operator: Thank you. Our next question comes from Chris Reimer with Barclays. Please go ahead.
Thank you.
Our next question comes from Chris Raymer with buckles. Please go ahead.
Chris Reimer: Hi, thanks for taking my question and congratulations on the strong results. I was wondering if you could comment maybe on the dynamics in the carrier segment, which showed an uptick this quarter. Can you give any color around the dynamics just in general in the U.S., not related to your investment or expansion? I was thinking more around customer behavior and any kind of increased spending environment, or could you characterize any behavior that has changed versus the last year?
Hi. Thanks for taking my question and congratulations on the strong results.
Roy Zisapel: Okay. Thanks, Chris Reimer. First, on the carrier segment, we are seeing several major applications we are selling to. One is selling them equipment that they can use to protect their own network. Second is them using our solutions, sometimes cloud, sometimes appliances, to build an MSSP business. Third is the more traditional ADC business. I think in general, I am not seeing carriers increasing their investment significantly. However, I think we are seeing more and more opportunities, and I think that is actually a good opportunity for the future to partner with carriers on their MSSP business and actually leveraging our cloud solutions to protect their customers better. We will track our progress in that area in the coming quarters, but that is a place that globally I think we are seeing good opportunities.
I was wondering if you could comment maybe on the Dynamics uh in the carrier segment which uh showed an uptick this quarter, and can you give any color around the Dynamics just in general, in the US, uh, not related to your, to, your investment or expansion? Um, I was thinking more around customer behavior and in any kind of, um, increased, uh, spending environment or or could you characterize any Behavior that's changed versus the last year?
Okay. Thanks Chris. So first on the Cario segment and we're seeing several major applications we're selling to 1 is
Selling them equipment to that they can use to protect their own network.
Second is them using our solution sometimes clouds, sometimes appliances to build an mssp business and third is the more traditional ADC business. I think in general, I'm not seeing carriers as a increasing their investment significantly. However, I think we're seeing more and more opportunities
Roy Zisapel: As it relates to North America specifically, I think on the enterprise market, we are still seeing, especially on the large enterprise, long sales cycles, more budget concerns, long cycles, more attention to spend, et cetera. I think we were able to, or we are able now, and hopefully in the coming quarters even to do better than that, to accommodate that simply by increasing our pipelines and increasing our customer engagements and the investments that we have done together with the critical nature of our cloud security platform. I do not think the market is in an excellent situation, but not in a bad either. Somewhere in the middle, not a lot of change versus last quarter, budget constraints, but still investments in critical security, in AI security continues.
And and I think that's actually a, a good opportunity for the future to partner with carriers, on their mssp business and actually leveraging our Cloud solutions to protect their customers better. So you know, we will track it in the coming quarters uh our progress in in that area. But that's a place that globally. I think we're seeing a, a good opportunities as it relates to North America specifically. I think, on the Enterprise Market we are still seeing especially on the large Enterprise Long, Long sales Cycles, you know, more budget concerns long cycles and more attention to to spend Etc. I think we were able to or we are able now and hopefully in the coming quarters even to do better than that to accommodate that simply by increasing our pipelines and increasing our customer engagements and the and the Investments that we
Done together with the critical nature of our Cloud security platform. So I do I don't think the market is in a, in, in an excellent, uh, uh, situation, but not in a bad either. So somewhere in the middle, not a lot of change versus, you know, last quarter budget, constraints, but still investments in critical Security, in AI security continues.
Chris Reimer: Got it. Thanks. That's great color. That's it for me.
Got it. Thanks, that's that's great color. That's it for me.
Operator: Thank you. Our next question comes from Ryan Koontz with Needham & Company. Please go ahead.
Thank you.
Our next question comes from Ryan Coons with nidam and Company. Please go ahead.
Ryan Koontz: Great. Thanks for the question. Question on, you talk about AI as a tool for attackers, but I wondered if the implementation of agentic AI by your enterprise customers is changing their attack surface much on the APIs yet, or is it still too early to see that?
Great, thanks for the question. Um,
Question on on you know you talked about uh AI as a as a tool for attackers but I wondered if the implementation of agentic AI by your Enterprise customers is changing their attack service, much on the apis yet or is it still too early to to see that?
Roy Zisapel: It's a great question. I think it changes dramatically, the attack surface and the enablement of applications. I think we're starting to see early signs of that. I don't think it's yet centered to the enterprise applications, but we're definitely very focused on that. I think it's another possible wave of growth for our cloud security. We're highly investing in these directions, both for AI applications, for APIs, and so on. It's early, but it's going to be very critical because the nature of attacks, the sophistication of attacks is very different.
Uh, it's a great question. I think it changes dramatically
the attack surface and the enablement of applications. I think we're starting to see early signs of that. I don't think it's yet, uh, centered, do the Enterprise applications, but uh, uh, we're definitely very focused on that. I think it's another possible wave of growth for
Our Cloud security were highly investing.
In this direction, both for AI applications, for APIs, and so on, it's still very early. But it's going to be very critical because the nature of attacks and the sophistication of attacks are very different.
Ryan Koontz: is great. Really appreciate that. On your comment around MSSPs, it sounds like some increased activity there. Are you seeing any changes in the MSSP business models in terms of their product portfolios and offerings, or is that a pretty static environment today?
That's great, really appreciate that. And on your your comment around uh mssps sounds like some increased activity there, you know, are you seeing any changes in mssp business models? You know, in terms of their
You know, their their product portfolios and offerings uh or is that a pretty static environment today?
Roy Zisapel: I think it starts to change because there is a strong demand from customers. So I think the customer expectations from their providers are increasing, even from the basic need of compliance. We are seeing more and more compliance requirements that those customers must adhere to, and they are turning to their providers to fulfill them. So I think the more applications they put online, whether it is in private cloud or public cloud, the more AI tools they are using, the more APIs they are using, the more compliance and regulation is being developed by governments around the world. So the evolution of the MSSP portfolio must keep pace with. As a result, I think that, for example, cloud application security that in the past was not part in large of an MSSP portfolio, they were more focused on SIEM, managed SIEM, managed SOC, managed EDR, managed firewall.
I think it starts to change because there's, uh, there's a strong demand from customers, so I think the customer expectations from their providers are increasing, uh, even from the basic need of compliance, you know, we're seeing more and more compliance requirements that those customers must adhere to, and they are turning to the providers to, to fulfill them. So I think there's the more applications they put online whether it's in private cloud or public cloud. And the more AI tools, they're using, the more apis, they're using the more compliance and regulation is uh uh is being uh developed by governments around the world. Um, so the evolution of the mssp portfolio must keep Pace with
and as a result, I think that, for example, Cloud application security
Roy Zisapel: I would say the more fundamental network and end-user-centric security, with the rise of the criticality of the applications, I think there is a shift that starts. We are definitely seeing that again as an opportunity to leverage our cloud platform. It is very easy to partner with us in that regard and follow that trend.
That in the past was not part in large of an mssp portfolio. They were more focused on on scene, manage seen manage, so manage dbr, managed firewall. I would say, the more fundamental Network and end user Centric security with the rise of the criticality of the application. I think we there's a shift that starts and we are a, we are definitely seeing that again, as an opportunity to leverage our Cloud platform. It's very easy to partner with us in that regard.
And, and follow that trend.
Ryan Koontz: Super interesting. Maybe one last one, if I could squeeze it in. Just any commentary around the competitive environment globally?
Super interesting! Maybe one last one, if I could squeeze it in, Sydney. Hey, uh, commentary around the competitive environment.
Um globally.
Roy Zisapel: I don't have much to say about that. I don't see any big changes in the vendors. I can tell you that we are seeing an increase in our win ratio in our cloud platform. I think the innovation we're bringing, and I continue to report almost every call on another analyst firm that positioned us as a leader. This quarter I mentioned API security. I know a week ago we've published another analyst that positioned us as a leader in DDoS. The continuous innovation on one end, coupled that with more channel activity and more partner activity and OEM activity by Cisco and Check Point, I think all of that together is actually increasing our win probabilities. So we feel comfortable with the current competitive climate, and we plan to continue to push forward our differentiation.
Um I don't I don't have a lot much to say about that. I don't see any like big changes in the uh in the vendors. I can tell you that we are seeing an increase in our win ratio in our Cloud platform.
so uh, I think the Innovation we're bringing and and you know, I continue to report almost every call
Uh, on another analyst firm that positioned us as a leader. And, you know, this quarter, I mentioned API security. I know a week ago, we've published another analyst that positioned us as a leader indeed of. So the continuous innovation on 1 end and in the end couple of that with more Channel activity and more a partner activity and OEM activity by Cisco and checkpoint. I think all of that together is actually a increasing our win win. Win probabilities. So, we feel comfortable with the current competitive climate and we plan to to continue to push forward, our differentiation
Ryan Koontz: You're not seeing any new entrants on the competitive landscape?
You're not, you're not seeing any new entrance in on the competitive landscape.
Roy Zisapel: New entrants? Can you repeat, please? I didn't hear you well.
New entrance.
Ryan Koontz: Oh, sorry about that. Are you not seeing many new entrants in your DDoS and your various product areas?
New entrance. I can you repeat please. I didn't. I didn't hear you well.
Roy Zisapel: No, no, we don't. I think as the market will devolve to AI applications, for example, I am sure there will be a host of new startups there. But I think our position with a comprehensive platform that really covers your web applications, your mobile applications, your APIs, and your AI-based applications, and in each one of them, not only delivering an integrated solution, but really in each domain, providing best-of-breed, yet everything integrated and backed by AI, fully managed service. I think this market position is a very strong one, and I think we can compete very effectively. But I am sure that on the AI front, there would be some new entrants dedicated to that segment.
Oh, sorry about that. Yeah. Um, are you not, you're not seeing many new entrants in your, uh, dose? And then you're very, uh, doctors.
Ryan Koontz: Makes sense. Thanks so much for the insights. Appreciate it.
No, no. We we don't, you know, I think I think as as you know, the market would evolve to AI applications, for example, I'm sure there will be a host of new startups there, but I think our position with, uh, comprehensive platform that really covers your web applications, your mobile applications, your apis, and your AI based applications and in each 1 of them, not only delivering an integrated solution but really in each domain providing best of breed yet, everything integrated and backed by AI fully managed service. I think this Market position is is a very strong 1 and I think we can compete very effectively but I'm sure that on the AI front, there would be some new entrance dedicated to that segment.
Makes sense. Thanks so much for the insights; I appreciate it.
Roy Zisapel: Thank you.
Thank you.
Operator: Thank you. Our next question comes from Joseph Gallo with Jefferies. Please go ahead.
Thank you.
Our next question comes from Joseph Gallo with Jeff, please. Go ahead.
Anjali Papadopoulos: Hi, this is Anjali Papadopoulos on for Joseph Gallo at Jefferies. Thanks for taking the time and congrats on the strong results. It is really good to see your cloud ARR progressing along nicely. I guess speaking on that, how should we think about cloud ARR growth and its profile going forward?
Um, hi, this is, uh, Angelie Papadopoulos on for Joseph, Gallow at Jeffrey's. Um, thanks for taking the time and congrats on the strong results, it's really good to see, uh, your, uh, Cloud are our progressing along nicely. Um, and so, um, I guess speaking on that, um, how should we think about uh, Cloud Arrow growth um, and its profile going forward?
Roy Zisapel: Very good question. First, our short-term result was 20%, and we plan to continue to stay above that. In our long-term model, we were targeting 25%. I think that would be the next goal we will put to ourselves. I am not sure we will hit it immediately, but we are definitely seeing the potential to continue not only to grow ARR, but accelerate ARR. We are very focused on this opportunity, and that is what we are planning to achieve.
Yeah.
The next goal we will put ourselves. I'm not sure we'll hit it immediately, but we'll definitely see the potential to continue not only to grow our but accelerate our. We're very focused on this opportunity, and that's what we are planning to achieve.
Anjali Papadopoulos: Sounds good. Thanks for that. Circling back to a prior question on your strength and win rates and competition, with your new API security solution, what existing competitors, if any, did you come across in the marketplace? Who currently competes in the space? Can you talk more about what you see those vendors are lacking and how RADWARE continues to win that space? Thanks.
That sounds good, thanks.
Roy Zisapel: Yeah. So I think in our prepared remarks this quarter and last quarter, I mentioned some areas that we are using AI as part of our complete solution, what we call the Epic AI framework. We are infusing AI to each and every layer of our solution. So already from the protection engines themselves, meaning the algorithms we use to detect and mitigate, I was talking about how we are detecting and mitigating business logic attacks. We are leveraging their AI. Our competition over here is very manual. You need to define a lot of rules. Your business logic, it changes as applications change. While we really built in real time an LLM dedicated to your application, dedicated to your traffic, it provides significantly different results in configuration, in onboarding, in detection, in mitigation. That is one example of how do we use AI in that protection engine to differentiate.
So with your new API security solution. What existing competitors? If any did you come across in the marketplace so who currently competes in the space? Um, and can you talk more about what you see, those vendors are lacking. Um, and how radware continues to win that space? Thanks.
Yeah, so um I think in in in in our prepared remarks this quarter and last quarter I I mentioned some areas that were using AI as part of our complete solution. What we call the apki framework and we're infusing AI to each and every layer of our solution. So, already from the protection engines themselves, meaning the algorithms we use to detect and mitigate, um, I was talking about how we are detecting and mitigating business logic attacks.
Roy Zisapel: Then I mentioned in today's comments another layer, which is the SOCx AI. We have built on top of our platforms AI agents, and as far as I know, the competition does not have it today, especially not in GA. Those AI agents are sitting on top of the platform and watching your traffic. If they detect a suspicion that an attack has passed the controls, we would automatically, the AI agent would do an analysis of your traffic, would come to a conclusion whether it is really the case that the attack is leaked or it is maybe a flash crowd coming to your website. If it is an attack, we will automatically come with your recommendations, what to change in order to mitigate the attack.
We're leveraging the AI our competition over here is very manual. You need to define a lot of rules. Your business logic, it it changes as application change while we really built in real time in llm dedicated to your application dedicated to your traffic, it provides significantly different results in configuration in on boarding in detection. In mitigation, that's 1 example of how do we use AI in that protection engine to differentiate? Then I mentioned the in, today's comments, another layer, which is the sock X AI.
We've built on top of our platforms, AI agents. And as far as I know, the competition does not have it today, especially not in GA and those, I AI agents are sitting on top of the platform and watching your traffic.
if they detect a suspicion that an attack has passed,
The controls.
Roy Zisapel: In our competition, all these, and also until I think six months ago for RADWARE, all these activities were done by soft people, by humans, and only collecting the information, analyzing that, getting into recommendations, testing them. This is a long cycle. It can take from, I do not know, half an hour to two days. We are shrinking that timeframe to seconds and minutes, delivering significantly better meantime to resolve for our customers, which means less downtime, less risks, less exposure, significantly better business outcomes. So this is, again, a big differentiator for us. As I have mentioned, it won us several customers of displacements. Last but not least, there is the whole area of protecting AI applications, which we started to discuss in this call, which is another area that is early.
We would automatically the AI agent would do an analysis of your traffic would come to and conclusion. Whether it's really the case that attack is leaked or it's maybe a flash crowd coming to your website and if it's an attack we'll automatically come with your recommendations. What to change in order to mitigate the attacks.
In our competition, all these and also until I think 6 months ago for adwell, all these activities were done by sock people by humans.
And only collecting the information analyzing that getting into recommendations, testing them. This is a long cycle it can take from, I don't know half an hour to
2 days.
We are shrinking that time frame to seconds and minutes delivering significantly. Better meantime to uh, to resolve for our customers which mean less downtime less risks. Less exposure significantly better business outcomes. So this is an again, a big differentiator for us. And as I've mentioned it, want to say several customers, both displacements and and and you,
Roy Zisapel: I cannot talk yet about competitive advantages. Let us see in the coming months who comes with what solution, but we feel very strong based on our heritage in algorithms, based on our experience in AI security for years that we will be very strong there as well. So that is in a nutshell how we use AI to differentiate in the market of application security and DDoS.
Anjali Papadopoulos: Thank you. That was very helpful.
And last but not least there is the the whole area of protecting AI applications which we started to to discuss in this call, which is another area that's early. I cannot talk yet about competitive advantages. Let's say uh, in the coming months who comes with what solution but we feel very strong based on our heritage in algorithms based on our experience in AI security for years that we will be very strong there as well. So that's in a nutshell the how you know we use AI to differentiate in the markets of application security and leaders
Thank you. That was very helpful.
Operator: Thank you. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Roy Zisapel, the CEO, for the closing comments.
Thank you.
Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Roy Zisapel, the CEO, for the closing comments.
Roy Zisapel: Thank you, everyone, and have a great day.
Thank you, everyone and have a great day.
Operator: Ladies and gentlemen, the conference of Radware Ltd. has now concluded. Thank you for your participation. You may now disconnect your lines.
Ladies and gentlemen, the conference of radway has now concluded.
Thank you for your participation. You may now disconnect your lines.