CALX
Earnings call · Jun 2026 (Q2 FY26)

CALIX Q2 FY26 earnings call CALX

Jul 21, 2026 Source

Executive summary

Calix Q2 FY26 — AI-Native Platform Drives Record RPOs and Software Revenue

Calix delivered a strong Q2 FY26, driven by the first full quarter of its AI-native platform, Calix One, which led to record RPOs and software revenue. The company is focused on leveraging AI for both customer value and internal operating efficiency, navigating memory cost headwinds with a gross-profit-neutral surcharge program. Management expressed confidence in continued demand and software growth acceleration, with a clear path to higher software margins.

Highlights

5

  • Record revenue of $293 million, representing 21% year-over-year growth and exceeding guidance.

  • Record software and service revenue of $50 million, up 16% year-over-year and 7% sequentially.

  • Record Remaining Performance Obligations (RPOs) of $386 million, an 11% increase year-over-year.

  • Non-GAAP software and service gross margin improved 810 basis points sequentially.

  • Tripled the number of customers signed up for Agent Workforce Cloud, including late majority adopters.

Concerns

2

  • Non-GAAP appliance gross margin decreased 460 basis points sequentially and 170 basis points year-over-year to 52.9% due to higher memory costs.

  • Memory surcharges are expected to be gross profit neutral over the long run but will remain a headwind to gross margin.

Guidance & targets

CategoryTargetConfidence
Revenue
$301 million to $307 million
high materiality
High
Annual Revenue Growth
higher end of the 15% to 20% growth range
high materiality
High
Non-GAAP Gross Margin
52%
high materiality
High
Non-GAAP Operating Expense
$124.5 million
medium materiality
High
Software and Service Gross Margin
new record
high materiality
High
Appliance Gross Margin
bottom
high materiality
High
Revenue Growth
15%
high materiality
High
Operating Expense Growth
lower rate than revenue growth
medium materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Software and Service
Achieved record revenue and strong sequential and year-over-year growth, driven by agentic workflows on Calix One. Significant gross margin improvement due to single cloud infrastructure and platform-driven demand.
Record RPOs: $386 millionCurrent RPOs: $162 millionAgent Workforce Cloud sign-ups: Tripled
$50 million16%7%810 bps sequential improvement in non-GAAP gross margin
Appliances
Achieved record revenue. Non-GAAP gross margin decreased sequentially by 460 bps and year-over-year by 170 bps due to higher memory costs, partially offset by memory surcharges.
$243 million23%4%52.9% non-GAAP gross margin

Operational metrics

Non-GAAP Net Income
$31 million
Q2 FY26

Above guidance range.

Non-GAAP EPS
$0.47
Q2 FY26

Per diluted share, above guidance range.

Cash and investments balance
$194 million
Q2 FY26

Balance after deploying $69 million for share repurchases.

Shares Repurchased
1.6 million
Q2 FY26

Part of capital deployment.

DSO
42
Q2 FY26

Days Sales Outstanding.

Inventory Turns
2.7
Q2 FY26

Reflecting deliberate investments in inventory to secure supply.

Non-GAAP Operating Expenses
$122 million down from 45% in prior quarter
Q2 FY26

Reflecting leverage in growth model and early productivity gains from human-centric AI investments.

Memory Cost Impact on EPS
$0.05 lost $0.05 in Q3, picked up $0.05 in Q2
Q3 FY26

Impact of not changing surcharges on backlog, making it EPS-neutral for the year.

Industry KPIs

MetricValueDetails
Capital return$69 million USD
Backlog order book$386 million (Total RPOs); $162 million (Current RPOs) USD
Orders backlog qualityRecord RPOs
Product orders order growth$386 million (Total RPOs) USD
Segment growth margin targetsNew record %
Ai cloud infrastructure ordersTripled contracts
Recurring software service revenue$50 million USD
Revenue mix by product customer typeSoftware and service: $50 million; Appliance: $243 million USD

Orderbook & backlog

Total RPOs $386 million Q2 FY26

up 3% sequentially and 11% year-over-year

Record RPOs, customers moved faster than anticipated.

Current RPOs $162 million Q2 FY26

up 3% sequentially and 21% year-over-year

Strong momentum exiting the second quarter.

Product announcements

ProductTypeDetails
Calix One / Agent Workforce Cloudlaunch

Risks & headwinds

Higher memory costs Q2 FY26, Q3 FY26

Decreased non-GAAP appliance gross margin by 460 bps sequentially and 170 bps YoY; $0.05 EPS impact in Q3 FY26.

Mitigation:Implemented a surcharge program designed to be gross profit neutral over the long run; adjusting surcharges monthly for new orders; goal to recover incremental memory costs without adding profit.

Broadband commoditization

Discussed, not quantified.

Mitigation:Calix One platform enables service providers to offer differentiated experiences, win new subscribers, grow revenue, and improve retention.

AI cost predictability

Discussed, not quantified.

Mitigation:Calix's AI-native platform architecture allows use of hardened open service models, providing predictable AI costs and ROI for customers, addressing the biggest issue gaining AI adoption.

Customer concentration Q2 FY26

One customer was 12% of revenue in Q2 FY26.

Mitigation:Expected not to be a 10% customer for the full year; considered a 'blip' in the quarter.

What to watch in Q3 FY26

Software and Service Gross Margin

Q3 FY26
Current 810 bps sequential improvement in Q2
Target New record

Why it matters

This indicates the continued leverage and profitability of the AI-native platform and software offerings, crucial for the investment thesis.

I will break the precedent and say that we expect software and service gross margin to set a new record in the third quarter.

Q&A highlights

What drives confidence in Q3 appliance gross margin bottoming, specifically if it's due to cycling grandfathered backlog vs. surcharges or other levers?

Confidence stems from the shrinking percentage of grandfathered backlog. New orders are now assessed with surcharges monthly, aiming for gross profit neutrality. The company modified its program to provide customers with certainty of cost and supply, not adjusting backlog prices a second time.

“It is the fact that we have grandfather a certain portion of the backlog and as we go through the next few quarters, that backlog as a percentage of the total will shrink. And so new orders are being -- the surcharges are being assessed that kind of our current cost structure. And we're also adjusting those now on a monthly basis as opposed to a quarterly basis.”

asked by Joseph Cardoso · answered by Cory Sindelar

2 min read 6 chapters

Detailed narrative

AI-Native Platform Launch and Impact

Calix launched its AI-native platform, Calix One, in Q2 FY26, realizing value from 15 years of investment. This platform enables service providers to improve operations, marketing, support, and subscriber experiences, addressing broadband commoditization. The company saw an explosion of customer interest, tripling Agent Workforce Cloud sign-ups, including late majority adopters, signaling broad market acceptance for its secure, trusted, and predictable AI approach.

Software and Services Momentum

Software and service revenue reached a record $50 million, growing 16% YoY, driven by agentic workflows on Calix One. This momentum is expected to accelerate in H2 2026, with software and service gross margin projected to set a new record in Q3, demonstrating significant leverage. The company sees a clear pathway to 70%+ software gross margins, with potential for even higher depending on large customer private cloud instances.

Record RPOs and Demand Environment

Record Remaining Performance Obligations (RPOs) of $386 million (up 11% YoY) and current RPOs of $162 million (up 21% YoY) indicate strong underlying demand. Management attributes this to the immediate ROI for customers adding new subscribers and the predictable AI cost model offered by Calix One, which addresses a major industry challenge of unpredictable AI expenses.

Memory Cost Headwinds and Surcharge Program

Appliance revenue was a record $243 million, but non-GAAP appliance gross margin declined due to higher memory costs. Calix implemented a surcharge program designed to be gross profit neutral over the long run, providing customers with certainty of cost and supply. The company expects appliance gross margin to bottom in Q3 FY26 as new orders with adjusted surcharges increase.

Human-Centric AI and Operating Leverage

Calix is applying human-centric AI internally to gain operating leverage across its operations. Non-GAAP operating expenses were $122 million or 42% of revenue, down from 45% sequentially, reflecting early productivity gains from AI investments and lower incentive compensation. The company aims for OpEx growth at a lower rate than revenue growth in FY27-FY28 to drive continued operating leverage.

Competitive Landscape and Satellite Impact

Management asserts that fiber remains superior to satellite (Starlink) for most of the market, especially in towns, due to capacity and experience. Calix's platform helps customers differentiate and win subscribers by offering enhanced services like outdoor WiFi and security, enabling them to become dominant local brands. Satellite providers are seen as having a niche in super-rural areas or for specific use cases like maritime.

AI-generated summary of the company's earnings call. Not investment advice.