Q1 2026 Extreme Networks Inc Earnings Call
I would like to welcome everyone to Extreme Networks' first quarter FY 2631. Again, thank you. I will now turn the call over to Stan Kovler, Senior Vice President of Finance and Corporate Development. Please go ahead.
Thank you, operator. Good morning and welcome to the extreme Network's first quarter fiscal year 2026 earnings conference call.
I'm stack over um senior Vice President of Finance and corporate development with me today are extreme networks president and CEO at meyercord an Executive Vice President and CFO Kevin Rhodes.
We just distributed a press release and filed an 8-K detailing Extreme Networks' financial results for the quarter.
First quarter 2026, a copy of the press release, which includes our gaap to non-gaap. Reconciliations. And our earnings presentation is available in the IR section at
Today's call in Q&A may include certain forward-looking statements based on current expectations about extremes, future financial and operational results, growth expectations, new product introductions, and strategies.
all Financial disclosures made on this, call will be on a non-gaap basis unless stated otherwise
We caution you not to put undue Reliance on these forward-looking statements as they evolve risks that can cause actual results to differ materially from those anticipated. By these statements
These risks are described in our risk factors in our 10-K and 10-Q filings. Any forward-looking statements made on this call may reflect our analysis. As of today, we have no plans to update them, except as required by law. Following our prepared remarks, we will take your questions.
And now I will turn the call over to extremes president and CEO at my court.
Thank you, Stan, and thank you all for joining us this morning.
The first quarter marked, our 6 consecutive quarter of Revenue growth and third straight quarter of double digit year-over-year. Increases
Strong execution. And our differentiated Technology Solutions are fueling market share gains driving growth in the Americas and expansion across Nia and Asia Pacific.
Revenue reached $310 million, up 15% year-over-year, driven by competitive wins with large customers across all verticals.
Product Revenue, increased double digits year-over-year. For the third consecutive quarter sustained growth. In our Cloud subscription drove SAS are up 24% year-over-year to 216 million
1 of the important growth engines with large Enterprise customers continues to be extreme fabric which is uniquely designed for Enterprise campus environments. We deliver unmatched automation of Service delivery with zero touch provisioning unique, Security benefits and millisecond conversion convergence that supports greater resiliency that our competitors can't replicate.
Their strong interest in our new Extreme Platform 1, which uses agentic conversational and multimodal AI to transform networking, cutting routine tasks from hours to minutes. We're also seeing increased adoption of our Wi-Fi 7 solutions, which boost network efficiency, minimize downtime, and support the demands of modern business applications.
Given our momentum and Technology Innovation. IDC recently recognized Extreme as a leader and its 2025 marketscape. Highlighting our fabric extreme platform, 1 flexible deployment via Universal hardware and expertise in high density. Environments is key differentiators
We're also seeing strong growth across. Our commercial models, with our MSP program partners and bookings. Both nearly doubling year-over-year and bookings up. Nearly 30% sequentially.
Our consumption-based billing eliminates upfront costs while poolable licensing. Let's msps. Easily, allocate licenses across devices locations, and customers supporting scalable growth.
In the quarter, we expanded our footprint within a major government in the Asia-Pacific region, where we just placed the leading competitor. The project will create a network that connects all government offices nationwide with Extreme Fabric over SD-WAN.
Buying a new partner relationships.
And expanding Market opportunities including new Sovereign Cloud capabilities that enable highly regulated. Customers to leverage our AI powered networking Innovations,
This is a major factor in our ability to win larger deals and move up Market.
Other wins in the quarter included T-Mobile Center.
Premier multi-purpose Arena and Kansas City chose extreme for our proven expertise in deploying Next Generation, Wireless, and high-density venues
Last site, 5 billion Euro Global leader based in Germany. Specializing in, clean room. Technology and complex plant engineering is standardized. Exclusively on Extreme for land. Wireless land network. Access control, all managed by extreme Cloud IQ.
Burger zoo and the Netherlands at over 111 Acres recently deployed extreme wired and wireless Solutions managed by extreme platform. 1 to ensure, reliable connectivity, for security cameras, ticketing guest Wi-Fi mobile Point of Sales Systems and smart habitats.
Global Healthcare organizations, like University Hospital, Birmingham NHS, Foundation, trust and Henry. Ford Health are employing extremes Wi-Fi, 7 to enhance bedside patient access, keep critical medical devices online with real-time data, transmission, and support Advanced applications, such as real-time Imaging, and secure, clinician Mobility.
Gateshead Council in England deployed Extreme Fabric to modernize and secure its network. Across roughly 200 sites, it created a unified, secure, and agile digital foundation, managed through Extreme Platform 1.
In September, we announced an extension of our relationship with the NFL through 2028.
Now and our 13th season as a partner Gary Brantley the CIO of the NFL said partnering with extreme networks has been transformative for the NFL elevating. Both our Stadium operations and the wave fans experience the game.
We're the only vendor in our space offering true Cloud. Choice and deployment flexibility.
Customers can choose our Cloud Solutions across public private or hybrid environments and we include AWS gcp and Microsoft Azure and our public Cloud menu.
In contrast, many of our competitors are locked into public Cloud, only and expensive. Purpose-built architectures creating major hurdles is they attempt to build a flexible deployment models. That customers demand.
These capabilities are driving growing interest in extreme and competitive wins.
Extreme Platform 1, which became generally available in the first quarter, is earning positive customer feedback for its AI-powered automation that cuts routine IT tasks from hours to minutes, improving efficiency and accelerating issue resolution, especially with the addition of our innovative service agent.
Previously it teams had to manually, gather logs, from multiple devices, correlate, alerts, run Diagnostics, and then create support, cases, often taking hours, or even days for issue.
Our service agent. Assigns automated tasks to sub agents with complete visibility to which reasoning at each step with an emphasis on human in the loop. It diagnoses problems. Collects necessary, evidence and generates support cases in minutes allowing, it teams to resolve issues, far more quickly and efficiently.
Extremes, agentic. AI architecture goes well, beyond our competitors. Older. First generation and limited AI features.
Extreme platform 1. Simple interface, our AI canvas that is truly unique. In the industry, removes the complexity of navigating multiple applications, copying data between systems and manually tracking device life cycles subscriptions and compliance.
Now, all this can be customized with a composable single interface with automated tracking and real-time alerts delivering unmatched, visibility efficiency and faster more. Reliable it operations.
On November 13th, we'll host an AI Summit in New York City to share trends, strategy, expert insights, and our vision for the next wave of AI-driven innovations. You should tune in to this event to better understand the future of enterprise networking.
Support for fiscal 25.
Since 2021, we've reduced our emissions by 34% and cut our office footprint in half, lowering electricity, natural gas, and water usage. Looking ahead, we aim to source 50% of our electricity from renewables and cut emissions by 50%. Given this success, Newsweek recently recognized Extreme as one of America's greenest companies.
For the remainder of fiscal 26, we expect Revenue growth to accelerate to 10%, given the growing volume of large opportunities and our increasing winning percentage. We believe this fiscal year, will mark an inflection point and our company's growth trajectory. Now, let me turn the call over to Kevin to discuss Financial results and guidance.
Thanks Ed.
I'm very pleased to report, strong first quarter execution, and financial results with Revenue exceeding. The high end of our guidance range
We achieved earnings per share of 22 cents exceeding, the midpoint of our guidance range and consensus of 21 cents per share.
Earnings per share was up, 29% from 17, cents, per share, and a year ago, period.
Total revenue in the quarter was 310 million, and that grew 15% year-over-year.
Growth and the third consecutive quarter of double digit year-over-year, Revenue growth as well.
South are once again, grew 24% year-over-year.
By recent large wins. Adoption of our new platform 1 and from expansion of our new commercial models. The adoption of extreme platform. 1 was well ahead of our expectations in the quarter.
And the sales pipeline is looking very strong.
Grew 21%, year-over-year.
And across our portfolio.
Our year-over-year bookings growth across all regions as a testament to the success of our new commercial models. Large customer wins and Asia Pacific and Amia this quarter.
Our new commercial models are contributing about 14% of our total new subscription bookings. And we expect this to grow over time,
Product. Bookings were comfortably ahead of our product Revenue in the quarter as book to Bill. Ratios were strong.
Product revenue of 194 million grew 20% year-over-year. It was up, 1% sequentially in a traditionally, seasonal slower quarter
Driven by strong demand for extreme Solutions, we continue to move up market and grab market share.
We achieved our 6 sequential quarter of product Revenue growth which is driving subscription attached and our growth.
Geographically. We saw particularly strong performance in Asia pack in AIA as we continue to benefit from recent larger, new customer wins.
We continue to gain traction in the region as a strategic alternative to incumbents, particularly in the public sector and hospitality.
In the first quarter, 36 customers spent over $1 million, up from 34 last quarter and 27 in the prior year quarter.
Total subscription and support Revenue was 116 million up 9% year-over-year.
To recurring Revenue grew, 8% year-over-year, representing 36% of total revenue.
As a result of our growth and staff's our sass deferred revenue, jumped 16% year-over-year to 327 million and recurring Revenue growth.
Brought a total deferred revenue up to 618 million.
This growing base of contracted future. Revenue provides strong. Visibility into our recurring, revenue and healthy margins.
Non-GAAP gross margin was 61.3% in the quarter and was impacted by industry-wide increases in component costs such as memory metals, including copper and aluminum, and other semiconductor parts.
We do expect margins to recover over time as we recently implemented. Some price increases like others in our industry, to mitigate the higher costs and drive margin recovery over the course of fiscal 2026.
In addition, discount Trends have been stable across our business. We expect to exit with gross margins up to 100 to 200 basis points from current levels.
Operators for large deals. We've recently closed.
Operating margin was 13.3% up from 12.4%. And the prior year quarter, we expect to continue to achieve operating leverage throughout the rest of fiscal 2026.
I'm pleased to report that we generated 45 billion in ibida.
Up 21% year-over-year, as we continue to drive profitability ahead of revenue growth.
Free cash flow usage of $21 million was largely due to one-time payments associated with finalizing certain legal matters, which are now behind us.
Turning to capital management. During the first quarter, we repurchased 577,000 shares for a total of $12 million.
We ended the quarter with 209 million in cash.
And had a positive net cash position.
We continue to improve our cash conversion cycle, down to 60 days from the 81 days in the previous quarter, as we continue to improve and lower inventory balances.
We expect the recovery in cash flow during the rest of the fiscal year as we continue to grow revenue and improved profitability.
Now turning to guidance.
for the second quarter of fiscal 2026, we expect guidance as follows
Revenue to be in a range of 309 million to 315 million.
Gross margin to be in a range of 61.4% to 62%.
Operating margin to be in a range of 13.4% to 14.6%.
And earnings per share to begin a range of 23 to 25 cents.
Our fully diluted share, count is expected to be around 136 million shares.
With a full fiscal year 2026, we expect revenue to be in a range of $1,247 million.
to $1,264 million with some normal seasonality in Q3, followed by point-to-point growth in the fourth quarter.
The midpoint of this range suggests 10% growth year-over-year.
For SaaS, we continue to see year-over-year growth in the low 20% range.
Recurring revenue is expected to be about 35% of total revenue in fiscal 2026.
And with that, I'll now turn the call over to the operator to begin the question-and-answer session. Rebecca.
At this time, I would like to remind everyone in order to ask a question. Press star, then the number 1 on your telephone keypad will pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Mike genevese with Rosenbach securities.
Uh, thank you. Uh, thanks very much.
Uh, guys, um, can you talk more about these, um, component price increases hitting the gross margin? Sort of what's going on there? And then also touch on, you know, plans to kind of lift, you know, ASPs through, you know, Extreme Platform 1 or price increases? Um, so, so, so gross margins now and sort of the plan to improve them going forward.
And by, I can, I can jump in high level and then Kevin, why don't you come back? Um, and, and follow up, thanks for the question, Mike.
Uh, yeah. We we've seen, uh, prices and, and memory, and Optics. Uh, you know, shoot up in, in, in the near term and Kevin mentioned in his remarks that that we put in place a, uh, a a price increase to recover those expenses. Yeah, I'd say in addition to
Uh, you know, what would be a, a mid single digit price increase, where we would really feel those feel the impact there in Q3 and Q4 uh we've got a variety of other initiatives tax bill initiatives from the supply chain teams, you know to help us drive uh the gross margins back up over that, you know. 63% number Kevin, you want to, you want to add to that.
Guiding up, you know, to get to 63%, you know, by the end of the year, with that 100 to 200 basis points Improvement on the ASP. Question that you asked, I mean, we are expecting an increase in average selling price, especially on the cloud applications that we have, uh, in particular with, you know, platform 1. And we're already seeing that already with the bookings that we're seeing. Uh, we've talked about 10 to 15% increase in what we're seeing there, and so that we're still on track for that.
Great. Um and I have 2 more questions. I'll just ask them at once uh even though they're unrelated um 1. I didn't hear anything about a uh, a federal government shutdown. Um, certainly didn't see it in the revenues here. So just just want to ask about Federal exposure and and any uh, you know, anything you're seeing from the shutdown and then secondly, just on a sort of, um, you know, Cisco versus Juniper, you know, competitive environment right now. Are you seeing more traction uh, against 1 versus the other? Thank you.
Uh, yeah. I'll I'll and maybe, we'll, maybe we'll take him in an order of Kevin. And we'll, we'll cover the, uh, the federal question first, uh, you Mike given given how small our market share is in the federal space. And given that we've just recently,
Uh certified our portfolio and we're now in a position where we can bring fabric, we can bring Cloud. You know, we've really opened the door to the federal market and I would say that, you know, the shutdown for us uh has had little to no impact uh on on our business. If anything uh we're seeing a a a a much larger. Um opport. We're seeing much larger opportunities open up, uh, on on the federal side, um, with with the growth and the expansion of of our uh, certifications as far as e-rate business. Uh, we really see no impact to our e-rate business. And, and, and again we we we've got a very healthy e-rate cycle.
Kevin, I don't know if you want to add to that before we go competitive.
No, I think that makes sense, that's it, okay. Yeah, I'm a competitive front might be about 2 different things, 2 very different things going on. Um, obviously we have hpe acquiring Juniper. I'd say we're surprised at how long it's taken them for them to put their plans in action. The first thing that that we've been able to take advantage of, is on the, on the human Talent front. Uh, we've been able to, to hire some great talent, uh, which is going to help us. When we talk about moving up Market, we're bringing people on board that also have connections in the channel and directly with customers.
and and with msps, for example, who are going to help us accelerate and and and and move up Market,
Uh so that that that is a a a positive and we also hear from we hear from the channel and then we also hear from customers who are confused about the road map and exactly, you know, which way the technology is going to go. Um, there are mixed signals that that come from corporate versus what's being said out in the field and that's always helpful for us.
As as it relates to Cisco. It's a very different situation. Cisco is overhauling their partner program and is going to create a lot of disruption uh, that that's going to play through, not only for partners but also for customers and you know that that's going to that's creating, you know, different opportunities.
This is this is kicking off in the beginning of November. So there's been a lot of discussion. We've been privy to
Some of the changes that that they're making in the plans and, and net net. The changes are going to favor the very top Cisco Partners. Uh, these are, these are partners that we do very little business with. So we think it will leave the mid tier and and smaller Partners somewhat disenfranchised looking for Alternatives. And here, we feel like there's a, there's an opportunity now that um
Quite frankly, you know, we, we haven't seen in a in a very long time. So we're excited about the channel disruption there. And then as we look over at HP, it's it's about people and it's about confusion as it relates to the roadmap. Um, you know, there's some issues with miss being a public Cloud, uh, you know, as the only play there and you know, as we look at and what we highlighting some of our comments.
Together, their portfolios, and their clouds and their Lakes, Etc. Um,
This is going to, this is going to open up.
Some opportunities for extreme and Kevin, feel free to jump in and answer that.
I think you nailed it all head. Yeah. And obviously, Cisco's public way down to their refresh opportunity, which is our refresh opportunity as well, to go out to them. I think the competitive markets right now are very frothy for us in terms of being able to take some of the competitive dynamics and turn it into our favor right now. So, I think we're seeing that reflected in our financial results and our revenue growth as well.
Perfect. Thanks. I appreciate all the detail.
Thanks. Bye.
Your next question comes from the line of Ryan Coons with Needham and Company.
Right. Thanks guys. Um,
Good morning. I want to ask about Platform 1 and where you are in terms of that commercial introduction.
In, um, and, uh, can you share any kind of metrics you have, or any kind of qualitative feedback from...
From customers on renewals, and you know what kind of traction you're seeing there with Platform 1, that'll be great. Thank you.
Sure. Thanks for the question. Ryan and, and, and I will, I will say we're going to our investor day. We'll we'll dive into a lot more detail. And you can hear directly from our our PLM and, and, and Engineering teams. And then we have our AI Summit, which is really about the, the future and the vision, uh, of of where we're going with our agentic, uh, AI platform, um, at this stage of the game. It's, it's early for us to to present metrics. If, if you'll recall, we we went GA with platform 1, uh, at at the very beginning of the first quarter. And and and with that commercially, we're selling platform 1, but our customers still have the availability to use xiq and site engine and and all the applications they've had before. So when they're buying a new license, uh, it's backwards compatible. Uh this is a decision that we made and it's been, it's been very popular. Basically, what that means is that customers
They are able to buy the license and they're able to work within the platform. So they're getting to know Platform 1. As we complete the first wave releases of Platform 1, which will be towards the end of this year, around the end of November and December, that's when we expect to see customers.
Start to make the full migration remove entirely over onto the new platform. So, what I would say is based on how we, how, how we've measured it. Uh, we're, we're, we're obviously tracking this very closely. We've seen High adoption. We've seen a lot of excitement about the capabilities. As we mentioned, we just we've just released our service agent, uh, which can provide a lot of benefits to customers. And I, I think there's a lot of excitement about that and there's a lot of differentiation with what we're bringing to Market. And, and what's been out there as far as those gen 1, AI, op Solutions. So, um, it's it's early innings for us and yeah, I what we've shared is that as we turn the corner on the calendar year, that's when we'll start opening up and, and, and creating metrics for the street,
and and and I, I would just add to that that that it was a a head of our expectations in the quarter, which is obviously the
Yeah.
Um, and maybe another, if I could follow up, you know, um the relative to, you know, your Tam of uh Tam growth. I assume it's kind of mid single digits. How should investors, think about, you know, your long term, you know, Revenue growth prospects relative to to to your share gains and your strengths that markets you're seeing
Well yeah, we we what we've talked about is is is repointing the, the year-over-year growth to 10%.
Unities. And I would argue that this is Tam expanding for us. I've also mentioned the fact that we've turned up certifications, uh, that are allowing us now to have hunting licenses to go play in the federal markets, and we're doing some things in terms of cloud Ops and making investments in Europe. That will also open up new government opportunities in in, in those markets. Um, the the last area to come out on it or or those commercial models, where historically we have played in in the MSP space and we're getting traction. I think we would all say that the MSP evolution is, is taken a little longer than we thought, uh, to get to get rolling, but it seems to be hitting its stride, and and the growth metrics, obviously, for this quarter, we're very strong. So I, yeah, yeah. As we look at the overall Market, you know, we see extreme taking share and, you know, we look at ourselves longer term as as a double digit player.
uh, with with higher growth and more emphasis now, on on services and solutions, uh, that will evolve from from platform 1 and and that subscription line,
Kevin, do you want to do? You want to add?
No, I I I think I, you know, as we think about the new commercial models like you talked about when we think about platform 1, that's all going to derive growth on the, are on the south, our side, right? And we're seeing that now growing 24% year-over-year, so that's going to continue to, uh, we're going to continue to drive that part of the business. I think it's a solution, right? It's kind of hardware and software but I think we're adding more and more software Solutions and there's a bit of transformational Journey that the company is going on right now to to to create more recurring, Revenue, helps our margins, helps our margin profile in terms of improve it better and helps our profitability as a business. So it is a full solution with everything and I think people are realizing the benefits of all the different you know kind of product offerings that we have as a company and that's helping us compete better and go up Market.
The traction there. Um, did you have a new MSP account? Um, I know you've got. You just close that in the past.
Yeah, we're we're at 61 now.
Okay, thanks guys.
All right, thanks. That's right.
Your next question comes from the line of Dave King with B Riley.
Thank you, good morning. Uh, my first question is regarding um, Cisco's recent partnership with um, Nvidia. Uh, so just wondering uh, what your uh, countermeasure would be.
yeah, I think David, I think if if you think about what we're
You know, where, where we're focused, uh, we we are not playing in the market, which is, you know, building networks for AI systems. We're in the market for bringing AI, uh, to networking. And so, we're leveraging AI tools. And, you know, we talked about this
Conversational multimodal, agentic platform. We have a true agentic structure that we built. Um, we've released our service agent, you'll hear us talk about our AI Summit and and on investor day, the evolution of um the release of of many agents uh and and and many new services that that will bring to bear. This is where extreme is leading. And I think it's important that we make that difference between
You know, building networks for AI systems versus um leveraging AI technology for driving enhanced performance and visibility and capabilities for people delivering their networking experience.
Um so that so that's what we're focused. This is where extreme is a leader. We have a we're in a very strong position. We actually given our size have some competitive advantages relative to some of these larger players and and and this is where we're making a dent in the market.
Got it and my second question is regarding um, gross margin. Kevin. I'm trying to understand, you know, so you talked about component prices uh going up. So that was roughly about about 100 bits impact.
Um yeah, I mean probably about that. Um,
Expected, 100% client, tariffs kicked in and some of those component costs as well and then also you know, just the the cost of copper and aluminum and some of these Metals as well just went up throughout the quarter as well. So those are some of the costs that we had experienced and we had talked about about 1.5 million dollars in Q4, we continue to see about roughly the same amount, you know, in in in q1 and and now we've raised price basically offset that um, you know, into into Q2 Beyond and and then Q3 Q4 as well.
because it's obviously partially in Q2 and then, you know, with with becoming November 1st effective date and then we'll see a full quarter affected in Q3 and Q4,
and I think you said you're going to raise prices by mid single digits. Uh, did I hear that correctly?
Yeah, we looked at all the different skus somewhere in the low, single digits, some of the mid single digits. But we looked at the skus across some we didn't change at all but any at the end of the day we kind of looked at it and then we kind of followed the industry you know pattern for what you know HP Juniper and Cisco did
Got it. My last question is, was there any um, FX impact?
A very little, we had um, our balance sheet and so we don't have a lot of, uh, FX issues.
Thank you.
Your next question comes from the line of Chris swab with Craig halum.
Hey, uh, congrats on a good quarter. And could you provide further clarity on the gross margin, given the increase in prices of different commodities and the recent price adjustments to offset that? It’s great to see that improvement in the second half of the fiscal year, which you've made clear.
Can you just remind us? You know what, you know say following that going into the next fiscal year. What you think um the targeted gross margins will be given the The increased platform 1 and services and uh subscription growth. You know, are we targeting to be a 62 to 64% gross margin or are we? We still kind of thinking, 62%, plus or minus?
Yeah. Maybe maybe we can hold that for, you know, the analyst today here on November 10th because I think we will walk through, you know what, the long term model looks like Beyond this year, you know, as we think about the next 2 or 3 years, I don't think there's going to be a lot of change from the 64 to 66% range that we've talked about, in the past. It's really these. These kind of
More acute component costs that we've seen recently but we've had to raise price against them that kind of have caught us a little bit like you know uh unexpected from uh you know, over the last year or so that were just basically making the price changes to to, to combat that. But I do believe that from a long-term perspective, the SAS subscription Revenue growth engine in the business is going to continue to help us drive those those margins in the future. So we're still very optimistic about the financial model in the future.
Great. And yeah, I I would just, I would, I would just chat with Kevin and Christian, I would just say we haven't, we haven't changed our long term, uh, outlook for gross margins. And, and, you know, you know, mix mix will factor into the equation. Uh, you know, we are expecting a a very significant ramp and extreme platform 1 and and there will be margin benefits there, you know, keep in mind, you know, there's the combination of that that service.
Uh, that service element to our solution set along with a subscription uh, and and enhance new services. So that that really starts to come into play in fiscal 27 and fiscal 28. We what we see happening with gross margin. Currently, these are sort of more near-term tacticals that will correct. Uh, we've been in this movie before and we know how to correct these things. So, as, as Kevin mentioned earlier, we'll we we'll get ourselves back up.
Up uh to that 63 plus percent and then get back, you know on on track to the longer term goal. I think we have of 64 to 66%. That's right, that's right.
Great. And and then my last question, you know, and maybe give you a chance here.
Pretty much everything we've already discussed.
Christian. I think it's it's pretty much. Yeah. Everything we discussed there's we could be just look at extreme. You know, we've continued to invest in our our fabric technology, you know, it's it's 1 of the Quivers that we have uh, you know, from a competitive standpoint. But but we're the only ones that that that have this and we have unique capabilities, for Enterprise campus Solutions. Uh, I I think larger Enterprise customers are surprised when we get into proof of Concepts and all of a sudden we're starting to demonstrate our capabilities that
Yeah, our competitors can't match and and and what are the very largest, you know, defense contractors in the world, who's actively looking at extreme, you know, I said, wow, what you guys do in 6 minutes is taking Cisco's 6 hours to do. And we actually have this time-lapse video where we show this
Um, but when we talk about, you know, the Automation and the capability, the delivery of services, the security benefits that we bring uh, with this technology. Um, how that produces a very different kind of wide area network, sd-wan solution. When we apply fabric, uh, when we look at the sub-second uh and and millisecond convergence, as far as resiliency of the network, the the large players can't replicate it. So this is something
Something where we're moving up market and, and we're winning and we go toe-to-toe. Now, when you add on top of that extreme platform 1 and the fact that we'll be bringing these capabilities into the platform with enhanced visibility and having, you know, 1 single place to drive, you know, our multi vendor capability. Uh that's something that is um, that quite frankly, you know, we
We, we, we bring choice and flexibility and new capabilities, and we go toe-to-toe and we win against the larger competitors. So I think we have technology differentiation more so now than we've had.
Um, yes, we're out in front with Wi-Fi 7. Uh, yes. We have these new you know, commercial models and and and ways to win and new certifications, Etc. We're staying on Friday. I'm staying out in front of that.
Uh, but, you know, we, we, we have real, you know, we have real differentiation today, and our teams are executing well, our sellers are executed well, and the channels picking picking up on it.
Um we are we we see this in our funnel. Um, we see this with with the closed collaboration of our marketing teams and our sales teams. As we look at these opportunities. I mean, look at higher win rates
And then the last factor is is is what was brought up earlier by Mike where it it's a bit of a mess at hp's. Juniper right now and um, there's a lot of confusion, there's a lot of people changing. Um, now they're setting up overlay teams and who's covering the channel, who's covering the customer. There's just, there's a lot of unknowns that, that, that create opportunities for us and then the same thing is true with Cisco.
Talking about their refresh but that also talking about making it really difficult for, you know, Partners below partner number 50 to make money and they have thousands and thousands of Partners. So there's there's just there's a lot of disruption right now with the largest players that have 75% of the market that are, they're causing people to take a look at extreme. And when they take a look at extreme, they're kind of Blown Away by our technology, our differentiation and, you know, keep in mind, we always win very high marks for the level of our customer support and and how people work with extreme and they feel like there's a, there's a different level of customer intimacy that we bring to the equation.
Great. Thank you for that. No other questions.
Your next question comes from the line of David vote with UBS.
Submit single digit covers you for the balance of this year, if things get, you know, potentially a little bit more challenging and I'll give you my second question is, you know, Kevin maybe for you on the subscription side? Obviously SAS has been a big driver, you've done a great job there, but I guess I'm trying to understand the gross margin Dynamics on the subscription support side. You know, looked a little bit light relative to Q4, down sequentially and kind of what's going on there. I would imagine that support services. You know, or installation is, is, uh, probably a bit lighter in Revenue. So I I would imagine that support, you know, subscription goes margins would have been up, sequentially, can any kind of color there that you can share with us? Would be great. Thanks.
Yeah, yes, what I can I can I can. Yeah, yeah. Up up front in terms of memory and Optics and I, you know, Dave, you can imagine we're all over this. And we have teams of people that, you know, these are um, we we are very actively engaged with our, with our suppliers, uh, across the board and and there's kind of a all hands on deck. There are secondary suppliers of um,
Uh, of both memory and and optics for us, uh, that, that we look at that, that, you know, and and we're very, uh, we're very active is what I would say. And and, you know, we feel very confident and 1 and, and, and how we're calling, you know, the current market conditions and 2, uh, you know, our our, our plans to recover where we are, um, and, and we have
Baked that into our price increase. We, we, we do not expect to come back and revisit and have yet another increase, and we feel very confident in terms of how we planned it.
Kevin, do you want to talk about the combination of the subscriptions?
Yeah, yeah yeah. I'm happy to. I mean so we are investing a little bit on the subscription side with platform. 1 on on the agentic AI. So there's there's some increased, I'll call it Cloud. Spend that we have on our end. Uh please don't take that as like that. You know, uh, going to be forever more. These are just upfront Investments as we launched platform 1 to have a more robust, right? Agentic AI, uh, agent experience for the customers. Um, we we, we fully expect all of the pricing that we have and the bookings that we're getting from platform 1. Remember when we get a booking for platform 1, you know, it gets recognized over time, so you're not even seeing today and our first quarter results, even the total bookings that we had in the quarter being reflected in the revenue so far. So we are optimistic about the subscription Revenue, the subscription margins that we will have. And, and that they will continue to play out to be very strong in the 80% range. Uh, so I'm I'm feeling good about, you know what our subscription revenues
And then I would also added we, we are seeing, you know, continued positive, momentum on these new commercial models, like MSP and others and those have a higher, you know, margin impact as well and and, and those will play out into the model over the next year or so. So I'm very bullish about the subscription margin story that we have as a company in our Focus there for, for several, you know, several quarters and even years out at this point. Um, I feel like we were in a very good path there. Um, and when we cover these costs, that we've seen these 1-time costs, if you will, that have come in on the components and, you know, over the next couple quarters. But I do believe as we said earlier, we'll get back to that, you know, 64 to 66 percent, you know, gross margin, you know,
Target. Can I just can I ask 1 file? Can I ask 1 follow-up that have you shared with the market kind of the bomb that's related to either Optics? Andor memory? Is it like 5 to 10% of like a typical switch bomb. That is impacted by these Rising component costs?
We haven't we haven't uh, shared that. I'm sure. Um, I can get it for you Dave, and, and circle back, you know, separately on it. But we haven't shared with the percentage of the bottom is for memory for, you know, components Etc.
Perfect. Thanks, guys. I, I don't know if we'll share it but we'll we'll certainly look into it for you, okay?
Great. Thank you.
Yeah, sure.
Your next question comes from the line of Eric matuni with Lake Street Capital markets.
I wanted to revisit the guide for the second quarter and specifically the the that the low end would actually be sequentially down from the first quarter Revenue. I was wondering if you get were, were there any pull, forwards out of Q2 into q1? As far as the the large deals that you won?
Make their way into the revenue actually. So it's kind of made its way more into backlog.
Okay, but I mean historically you would be up sequentially that September versus December quarter. I'm just was there. Uh just conservatism in in the Outlook and kind of hand. Well I mean at the midpoint you've got to increase right? So at 3:12 versus the 3:10? Yeah. I think you're referring to the range of 309 versus 315. Yeah.
I mean, so like a low end of the range, you actually would be 1 million dollars. Lower at the high end of the range would be higher. Uh, the reality is we are expecting to continue to grow for a 7 sequential quarter, uh, in Q2, uh, at the midpoint of the 312. So I I would I I wouldn't look at that necessarily as a message.
That we are expecting to go down in Q2 over q1. Uh I you know from a range perspective uh we're still
optimistic about the business.
yeah, and I think it's fair to mention Kevin that, you know, Eric we
Yeah, we we had a very strong quarter in q1. We had a lot of, we had a lot of large deals, come in and, and land in in the quarter. So and it, you know, it started from the get-go, I would say, linearity was very strong in q1, um, starting with with with bookings in in July. And I think we just had a very we just had a very strong quarter, uh, there on the heels of of our Q4.
Yeah, certainly a good number is in queue. I don't want to take anything away from a a beaten guy up quarter. So
Yeah. No thanks.
At this time, there are no further questions. I will now turn the call back over to Ed Meyercord for closing remarks.
Uh, thank. Thank you Rebecca and, and thank you. Uh, everyone for joining the call, you know, as always, I know we have employees customers, and partners that also kind of join in here and, and, um, you know, we appreciate the partnership and, um, and, and they continue, uh, growth and, and our relationships. We are, you know, we continue, we're excited to continue to build on our success. Um, we're, we're really looking forward to updating everybody at our uh, investor day on November 10th.
And uh you know their we're going to be able to take a a deeper dive into um you know, the markets, you know, where we're playing in our technology and our execution and and and we'll be able to feel all all questions there. So we look forward to your participation there. Thanks everybody. And and, and have a great day.
Ladies and gentlemen, that concludes today's call, thank you all for joining. You may now disconnect