Extreme Networks Stock Plunges Despite Strong Q1 Results Driven by AI Platform Success

Extreme Networks shares drop 15%+ after solid earnings report - SiliconANGLE

Shares of Extreme Networks Inc. plummeted 15.3% today after the network equipment and software provider released its latest quarterly report. The company's sales in the three months through September 30 topped expectations, while its adjusted earnings per share were in line with the consensus estimate. The reason the company's earnings didn't surpass analysts' projections is that its adjusted gross margin dropped by 2.4% year-over-year. That decline may have been the reason behind today's stock selloff. North Carolina-based Extreme Networks sells data center switches, access points for providing Wi-Fi coverage in offices and related hardware. It also offers a suite of network management applications. Those applications have emerged as one of the company's most important growth drivers. Extreme Networks generated $310.2 million in revenue during its fiscal first quarter, which represents a 15% increase from 12 months earlier. Analysts were expecting $305.6 million. Much of the sales growth was driven by Extreme Networks' software-as-a-service business, which saw its annualized recurring revenue rise 24.2% to $216.2 million. One of the biggest contributors to the company's SaaS momentum is Extreme Platform ONE, a networking platform it launched in July. The software uses artificial intelligence to identify the root cause of network issues and suggest fixes. The company claims that its AI can save administrators hours of work per incident. Extreme Platform ONE also eases certain related tasks. According to the company, the software can generate a visualization of the devices that make up a corporate network and the way they interact with one another. Enterprises can use the visualization to familiarize newly hired administrators with their infrastructure. "The adoption of Extreme Platform ONE was well ahead of our expectations in the quarter, and the sales pipeline is looking very strong," Extreme Networks Chief Financial Officer Kevin Rhodes told investors during an earnings call today. The company's sales numbers were also buoyed by a set of new deals with large customers and strong demand for its Wi-Fi 7 devices. Introduced last year, Wi-Fi 7 is significantly faster than earlier versions of the networking standard. Extreme Networks sells access points that use the technology to provide wireless connectivity in offices and factories. The company delivered adjusted earnings of $0.22 per share in the first quarter, in line with the Zacks consensus estimate. It met analyst expectations despite the fact that the cost of some optical components and memory chips rose sharply in recent months. According to Rhodes, Extreme Networks raised some product prices to offset the higher costs. The company expects to generate adjusted earnings of $0.23 to $0.25 per share in the current quarter, which is in line with the consensus estimate. Its revenue guidance of $309 million to $315 million topped expectations. Chief Executive Officer Ed Meyercord told investors that Extreme Networks' revenue growth plan places an emphasis on expanding the use of products in the federal government and Europe.

AI Networking Traction And Growth Overseas: What To Know About Extreme Networks' Fiscal Q1 2026

In its sixth consecutive quarter of revenue growth, Extreme Networks' first-quarter 2026 revenue climbed 15 percent, driven in part by the company's AI-powered Extreme Platform One offering, according to the networking specialist. Networking specialist Extreme Networks is seeing double-digit revenue growth that's being driven in part by its new AI networking platform and traction outside the Americas, according to Ed Meyercord, president and CEO of Extreme Networks. The small-but-mighty company comes to the market with a portfolio that ties together wired, wireless and SD-WAN into a single offering that's layered on top of a unified management platform available in the cloud or on-premises. That flexible approach to networking has helped the company, despite its relatively small size compared with market heavyweights such as Cisco Systems and HPE, stand out in its own right and attract enterprise customers, especially in the government, education and hospitality sectors. Extreme Networks Wednesday reported its fiscal first-quarter 2026 earnings, marking the company's sixth consecutive quarter of revenue growth with revenue up 15.2 percent year over year. The company's SaaS annual recurring revenue, which is increasingly making up more of its revenue, climbed about 24 percent year over year. The Morrisville, N.C.-based company plans to lead with its flagship Extreme Platform One offering that went GA in July. Extreme Platform One is an AI-powered networking and security management platform that can consolidate license, contract and asset management into a single place for end users, giving partners and customers real-time visibility into usage, renewals, support coverage and device inventory across all sites and product lines, according to Extreme Networks. Here are the results of Extreme Networks' fiscal first-quarter 2026 financial results. Extreme Networks in July announced the general availability of Extreme Platform One, the networking specialist's unified management platform that's instilled with agentic AI. First revealed in December, the platform boils down network and security management by bringing the tools into one platform for enterprises, including products from third-party networking and security vendors such as Microsoft. "Bookings for Extreme Platform One were solid in the quarter. Since its general availability in mid-July, customers have responded positively to the platform's simplicity and advanced AI capabilities, which combine conversational, multimodal and agentic technologies to automate a wide range of networking tasks. Our recently released service agent is designed to streamline network management, automate routine workflows and enable IT teams to deliver faster, smarter support, reducing manual effort by up to 95 percent. These innovations position us to drive growth, expand market share and capitalize on opportunities arising from shifts among competitors," Meyercord said in a statement on the quarter's results. The company said that adoption of Extreme Platform One is running ahead of its expectations. Extreme Networks over the last several years has been drastically growing subscriptions due to increased interest from customers, as well as the overall increased momentum around cloud adoption. Extreme Networks uses SaaS annual recurring revenue, known as SaaS ARR, to identify the annual recurring revenue of ExtremeCloud IQ and other subscription revenue. The company in its fiscal first-quarter 2026 posted SaaS ARR of $216.2 million, up 24.2 percent year over year. Extreme Networks' subscription and support revenue was $116.2 million, up about 9.3 percent compared with $106.9 million a year ago. The company's $111 million in recurring revenue during the quarter was up 8 percent year over year, and about 37 percent of the company's profits were generated by recurring revenue, Extreme Networks said. Extreme Networks said that its fiscal first-quarter results were driven by the momentum the company is seeing in subscriptions and AI networking, as well as increased customer engagement in EMEA and APAC. For its fiscal first-quarter 2026, which ended Sept. 30, Extreme Networks' revenue was up 15.2 percent year over year to $310.2 million. The company posted non-GAAP diluted earnings per share of 22 cents, compared with a non-GAAP diluted loss per share of 8 cents last year. Extreme Networks beat Wall Street's expectations of 21 cents. "The strength of our first-quarter results was driven by improved execution, increasing customer demand and expanding interest in our AI-powered networking platform and our high-performance solutions," Meyercord said. "This marked six consecutive quarters of revenue growth and three straight quarters of double-digit year-over-year gains, which is a positive sign that we are gaining share. ARR is up 24 percent year over year, as momentum grows with our subscription model." Extreme Networks, a company that has in the past struggled with market awareness, according to research firm Gartner, is making a push outside Noth America. While 48 percent of the company's revenue is still generated in the Americas, 39 percent of Extreme Networks' revenue was pulled in by the EMEA region in its fiscal first-quarter 2026. Another 13 percent of revenue was also generated by APAC during the quarter, according to the company. Meyercord attributed the company's positive quarter to growth outside the Americas. "Continuing share gains in the Americas along with increased customer engagement in EMEA and APAC underscores our global momentum, highlighted by significant wins this quarter," he said.