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Allot (ALLT) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 12, 2026

Source: earnings call transcript

Executive summary

Allot Ltd. Q2 FY26 — Strong Growth in Revenue, Profitability, and Cash Flow

Allot delivered a strong Q2 FY26, marking its fourth consecutive quarter of double-digit growth, driven by robust SECaaS performance and significant North American sales. The company raised its full-year revenue guidance, reflecting increased order momentum and a healthy backlog, while maintaining a strong balance sheet and initiating a share repurchase program.

Highlights

5

  • Revenue grew 15% year-over-year to $27.7 million.

  • SECaaS revenue grew 47% year-over-year, comprising 34% of total revenue.

  • SECaaS ARR increased 44% year-over-year to $36.1 million.

  • Non-GAAP operating income increased to $2.7 million (9.9% margin) from $1.2 million (5% margin) year-over-year.

  • Operating cash flow was $8.5 million, up from $4 million year-over-year.

Concerns

2

  • Non-GAAP gross margin declined to 71.8% from 73.4% year-over-year, mainly reflecting product mix.

  • General and administrative expenses increased due to one-time costs associated with an office lease modification.

Guidance & targets

CategoryTargetConfidence
Full-year 2026 revenue
$115 million to $118 million
high materiality
High
Full-year 2026 Security-as-a-Service revenue growth
40% or more
high materiality
High
Full-year 2026 gross margin
in the range of 70%
medium materiality
Medium
Operating expense run rate
similar run rate to the current quarter, excluding the onetime expense
medium materiality
Medium
Profitability improvement
continue to expect profitability improvement
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
North America
Increased from 17% in Q2 last year and 14% last quarter, driven by strong product sales (Tera III, Smart product line) and SECaaS performance.
Revenue as % of total: 31%
————
EMEA
Revenue declined sequentially, attributed to normal fluctuations in product revenue recognition timing for large deals.
——declined sequentially—
APAC
Revenue declined sequentially, attributed to normal fluctuations in product revenue recognition timing for large deals.
——declined sequentially—

Orderbook & backlog

Backlog strong Q2 FY26

Entered the second half with a strong backlog and healthy demand, giving added confidence for the rest of the year. Building backlog for 2027 with additional Tera III upgrade projects.

RPO very high level end of March (yearly report)

Performance and booking remain strong, implying RPO continues to be very high.

Product announcements

ProductTypeDetails
Identity monitoring servicelaunch
HomeSecure serviceexpansion
Zero rating fraud detection and mitigation service (ACSP)launch

Deals & partnerships

Existing European SECaaS customer (telco) Upsell deal for a new service, the first sale of Allot's identity monitoring service to SMB customers.

This telco will offer the identity monitoring service to its SMB customers, expanding the SMB security suite beyond the network.

Existing European-based customer Expansion of SECaaS service to the SMB segment.

Secured an expansion within an existing customer to serve their SMB segment.

Large global telco group New win adding HomeSecure service in another country.

The HomeSecure solution enhances threat protection across the telco's mobile and broadband networks, integrating into existing home routers for zero-touch visibility, cybersecurity, and parental controls.

Telco in Africa (existing Smart customer) New SECaaS deal.

A new SECaaS deal with a telco that is already a Smart product customer.

Risks & headwinds

Product mix impacting gross margin Q2 FY26

Non-GAAP gross margin declined to 71.8% in Q2 FY26 from 73.4% in Q2 FY25.

Mitigation:Gross margin remained strong and consistent with full-year expectation of around 70% for 2026.

One-time general and administrative costs Q2 FY26

G&A expenses increased compared with Q2 FY25 due to one-time costs associated with office lease modification.

Mitigation:Not expected to reoccur.

Fluctuations in regional revenue due to timing of large product deals Q2 FY26

Revenue in EMEA and APAC declined sequentially.

Mitigation:This is normal for Allot and part of the plan; different regional balances are expected between quarters depending on the timing of larger deals.

What to watch in Q3 FY26

SECaaS ARR growth

Full year 2026
Current 44% YoY ($36.1M as of June 30, 2026)
Target >40% YoY

Why it matters

This is a key driver of recurring revenue and overall growth, central to the company's strategy and future visibility.

For the full year, we expect Security-as-a-Service revenue growth of 40% or more.

Find out whether ALLT delivers this. Inve re-checks your case every morning.

Q&A highlights

Are there any unusual items impacting operating cash flow this quarter, given it's strong but slightly below last quarter?

Liat Nahum clarified that Q1 had a one-time cash advancement related to a major deal, but Q2's strong $8.5 million operating cash flow reflects continued positive momentum from the SECaaS business model without major one-time events.

“Overall, no major onetime event this quarter around the operating cash flow, just continue the momentum around our business model of the Security-as-a-Service, which is generating a very good cash flow.”

asked by Shaul Eyal · answered by Liat Nahum

2 min read 5 chapters

Detailed narrative

North American Performance

North America significantly contributed to revenue, making up 31% of total revenue compared to 17% in Q2 last year and 14% last quarter. This growth was fueled by strong product sales, particularly for the new Tera III platform and Smart product line, alongside continued strong performance from a major U.S. SECaaS customer. The region is a strategic priority, with focus translating into revenue, backlog, and pipeline.

Cybersecurity as a Service (SECaaS) Momentum

SECaaS revenue grew 47% year-over-year, now accounting for over one-third of total revenues, with SECaaS ARR up 44%. The company secured four new SECaaS deals in EMEA, including an upsell for identity monitoring, an expansion in SMB, a HomeSecure addition in a new country for a global telco, and a new deal in Africa with an existing Smart customer. These wins reflect the breadth of SECaaS growth across new customers, geographies, and end-user segments.

Tera III Platform Adoption

Demand for the Tera III platform remains strong, with ongoing deployments and upgrades with Tier 1 operators. This ultra-high capacity multiservice gateway consolidates deep network visibility, traffic management, and cybersecurity services onto a single platform. Customer feedback has been excellent, valuing its carrier-grade stability, reliability, and cost-efficient scaling for 5G and fiber traffic growth. The company is building backlog for 2027 with additional Tera III upgrade projects.

Zero-Rating Fraud Detection

Allot demonstrated a new zero-rating fraud detection and mitigation service with a Tier 1 operator, showing an 87% reduction in fraud and traffic. This solution, ACSP, identifies fraud in zero-rated applications and app-based charging plans, helping operators recover lost revenue and protect the integrity of their zero-rating offers, particularly in regions where fraud is prevalent.

Capital Allocation and Financial Strength

The Board approved a $40 million share purchase program, reflecting confidence in the company's strategy and financial position. Allot maintains a robust balance sheet with $107 million in cash and no debt, positioning it to invest in long-term growth while returning value to shareholders. This move signifies the company's maturity and financial strength after four consecutive quarters of double-digit growth and positive cash flow.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.