Can you elaborate on the changes in APAC and what prompted them?

The changes in APAC are part of a broader go-to-market transformation, restructuring legacy channel models and implementing a playbook successful in other regions. This was necessary to address historical channel models and position APAC for long-term growth, with sequential growth expected in Q4. “I think it's a core part of our transformation is just how we go to market in enterprise. In NETGEAR, we just had our 30-year anniversary. So a lot of kind of legacy channel models, a lot of layered distribution partnerships and in order to address that, we needed to take a step back and make decisions for the long-term health of the region.”

Did recent acquisitions materially impact the quarter, and are there updates to the capital allocation strategy?

Non-device revenue, boosted by acquisitions like Exium and Insight improvements, is growing significantly off a small base, aligning with midterm targets. The capital allocation strategy remains consistent: funding internal enterprise investments, opportunistic M&A for adjacencies/capabilities, and returning capital to shareholders via buybacks ($13M in Q2, $75M remaining authorization). “So the non-device revenue tied to the Exium acquisition, all of the changes that the new software team is driving in Insight, we're seeing really good progress there. The non-device revenue for the quarter grew significantly. We're not going to throw out big growth numbers at this stage, because it's still off a small base.”

How do you view total gross margins for H2, and why is Q3 operating income sub-seasonal?

The memory situation is the primary driver of profitability. A 200 bps gross margin headwind is expected in H2, skewed to Q3 due to air freight for supply challenges. Q4 non-GAAP operating margin is projected to improve by 400 bps sequentially from Q3's midpoint, driven by sequential revenue increase and reduced air freight. “I will say, looking at the back half of the year, we feel good about the estimates that are out there for revenue for the whole second half. If I were to look out to Q4, so we did mention on the call that we are facing about a 200 basis point headwind to the second half for gross margins coming from the memory elevated costs.”

NTGR

NETGEAR (NTGR) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 6, 2026

Source: earnings call transcript

Executive summary

NETGEAR Q2 FY26 — Enterprise-Led Transformation Drives Profitability

NETGEAR's Q2 FY26 results demonstrate continued progress in its transformation to an enterprise-led, software-differentiated business, driving strong profitability expansion despite consumer segment headwinds. The company is making high ROI investments in enterprise, in-sourcing software development, and optimizing the consumer business for gross profit amidst supply chain challenges and regulatory shifts.

Highlights

Enterprise revenue increased 7.7% year-over-year, now representing 53% of total revenue and 69% of gross profit.
Non-GAAP gross margin reached an all-time high of 41.4% consolidated, with Enterprise non-GAAP gross margin at 54.1%.
Non-GAAP operating income was $4 million, resulting in a 2.4% operating margin, an improvement of 310 basis points year-over-year.
Annual Recurring Revenue (ARR) grew 15% year-over-year to $41.6 million, with 558,000 recurring subscribers.
The company repurchased $12.9 million in stock during the quarter, with $75 million remaining in authorization.

Concerns

Total revenue was $168.6 million, down 1.2% year-over-year.
Consumer business revenue declined 9.4% year-over-year to $79.6 million due to memory shortages and aggressive promotional activity.
APAC Enterprise revenue was down 16% year-over-year due to an intentional go-to-market transformation.
Memory cost headwinds are expected to cause approximately a 200 basis point headwind to combined gross margin in the second half of FY26, skewed to Q3.
Q3 FY26 non-GAAP operating margin is guided to be in the range of negative 3% to 0%.

Guidance & targets

Category	Target	Timeline	Confidence
Net Revenue	$165 million to $175 million high materiality	Q3 · FY26	High
GAAP Operating Margin	negative 12% to negative 9% high materiality	Q3 · FY26	High
Non-GAAP Operating Margin	negative 3% to 0% high materiality	Q3 · FY26	High
GAAP Tax Expense	$0.5 million to $1.5 million low materiality	Q3 · FY26	High
Non-GAAP Tax Expense	$1 million to $2 million low materiality	Q3 · FY26	High
Combined Gross Margin Headwind (Memory Impact)	approximately 200 basis point headwind high materiality	H2 FY26	High
Service Provider Revenue	around $22 million medium materiality	Q3 · FY26	High
Enterprise Revenue Growth vs. OpEx	outpace OpEx investment and growth high materiality	FY27	High
Enterprise Profitability	expanded profitability high materiality	FY27	High
Consumer Contribution Profit	keep contribution profit neutral medium materiality	FY27	High
Q4 FY26 Non-GAAP Operating Margin	about a 400 basis point improvement sequentially high materiality	Q4 · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Enterprise Driven by strong growth in Americas and EMEA, led by ProAV managed switch products. Achieved all-time high gross margin and highest contribution margin since Q1 2019. APAC revenue declined due to go-to-market transformation. Revenue mix: 53% of total revenueGross profit mix: 69% of total gross profitAmericas revenue growth: 15% YoYEMEA revenue growth: 9% YoYAPAC revenue growth: -16% YoYEnd-user demand for ProAV managed switch products: double-digit YoY growthNon-GAAP contribution margin: 25.9%	$89M	7.7%	6.1%	Non-GAAP gross margin 54.1%
Consumer Optimized for gross profit due to memory shortage and component cost increases. Aided by strong direct-to-consumer channel and Wi-Fi 7 lineup. Memory headwinds flowed through profitability. Gross margin YoY decline: 210 bpsUS direct-to-consumer channel growth: >20% YoY	$79.6M	-9.4%	6.1%	Gross margin 27.3%
Service Provider Harvesting this portion of the business. Buoyed by reduced retail focus by competitor and partner inventory buffering, but still declining.	down approximately 13% year-over-year	—	—	—

Product announcements

Product	Type	Timeline	Details
Align	launch	Q2 FY26
Insight Platform	update	Q2 FY26

Deals & partnerships

VAAG Strategic acquisition to in-source software development.

Part of the effort to in-source software development and leverage AI for the enterprise business.

Exium Strategic acquisition to in-source software development, specifically for security services.

Part of the effort to in-source software development and leverage AI for the enterprise business, with initial integration into the Insight platform.

Managed Switches Source Code Acquisition of source code that had previously been outsourced for their line of managed switches.

Part of the effort to in-source software development and leverage AI for the enterprise business, improving ability to bring greater value to the AV ecosystem.

Douglas Murray Appointment to the Board of Directors.

Douglas Murray has over 30 years of experience in enterprise networking and security, including roles at Juniper Networks, Extreme Networks, and as CEO of Big Switch Networks and Valtix. Currently CEO of Auvik.

Surajit Sen Hired to lead the transformation of the APAC region for NETGEAR.

Surajit Sen is a seasoned APAC go-to-market leader with over three decades of experience in the region, most recently in executive roles for Zscaler, Dell, and NetApp.

Risks & headwinds

Consumer Market Challenges Q2 FY26 and ongoing

Consumer business revenue down 9.4% YoY to $79.6 million

Mitigation:Optimizing for gross profit, managing supply chain nuances, benefiting from direct-to-consumer channel and Wi-Fi 7 lineup.

Memory Cost Headwinds H2 FY26, skewed to Q3

Approximately 200 basis point headwind to combined gross margin in H2 FY26 compared to H1 FY26

Mitigation:Securing memory through H1 2027, pricing actions in Enterprise, working with consumer channel partners, ongoing memory cost mitigation efforts.

Production Delays Q3 FY26

Modest production delays

Mitigation:Supplementing with air freight, which impacts gross margin.

APAC Go-to-Market Transformation Impact Q2 FY26

APAC Enterprise revenue down 16% YoY

Mitigation:Hiring new leadership (Surajit Sen), restructuring channel models, implementing successful playbook from other regions, expecting sequential growth in Q4.

ProAV Supply Execution Issues Q2 FY26

Lower than expected production stemming from operational execution challenges

Mitigation:Issue addressed, driving volume back up to targeted levels, supplementing with air freight (impacting Q3 guidance).

What to watch in Q3 FY26

APAC Enterprise Revenue Growth

Q4 FY26

Current -16% YoY in Q2 FY26

Target Sequential growth in Q4 FY26

Why it matters

APAC is expected to become the fastest-growing region for Enterprise, and its recovery is key to overall segment growth.

we expect APAC to start growing sequentially in Q4.

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

Q&A highlights

What drove the strong performance in Enterprise, particularly ProAV, and were there any one-time benefits?

Enterprise strength was driven by regional growth, with Americas up 15% YoY and EMEA up 9% YoY, despite APAC being down 16% due to transformation. No one-time benefits like the World Cup were identified.

“So, enterprise continues to be our stable, profitable growth engine, as you saw. I think the one, maybe thing we can double click on is just the regional growth. So if you go to our Q, you'll see that in the Americas, we grew 15% year-over-year. I'm talking about revenue now. In EMEA, we're just shy of 10%, but 9%, and APAC was down 16%.”

asked by Logan Katzman · answered by Charles Prober

2 min read 6 chapters

Detailed narrative

Enterprise Transformation & Strategic Shift

NETGEAR is actively transforming into a software-differentiated, enterprise-led business, which now represents over half of total revenue and 69% of gross profit. This strategic shift led to a change in the company's SIC code to align with enterprise solutions companies.

The transformation includes in-sourcing software development, leveraging AI, and strategic acquisitions (VAAG, Exium, managed switches source code) to enhance software capabilities and reduce reliance on outside contractors.

Product Innovation & Recurring Revenue Growth

The company launched Align, a cloud-managed platform designed to consolidate AV infrastructure services, host applications, and serve as an open layer for third-party AV apps. Align, which won 'best of show' at InfoComm, will catalyze recurring revenue as it requires an Insight license.

Significant improvements were also made to the Insight platform, including a redesigned user interface, revamped licensing model, initial integration of Exium security services, and a framework for AI-powered network operations, all aimed at driving future recurring revenue growth.

Partner Ecosystem Expansion & Customer Wins

NETGEAR has expanded its ProAV manufacturing partners to over 600 and certified more than 125 APEX partners, its highest tier of partnership. The company secured new customers including National Geographic, Shopify, and Salesforce, and made significant progress in the education vertical with wins in 86 school districts for the 2026 E-Rate season, more than half of which are new to NETGEAR this year.

Consumer Business Optimization Strategy

The consumer segment is being optimized for gross profit amidst a challenging supply environment, particularly due to memory shortages and aggressive promotional activity from competitors. The company is harvesting its service provider business and managing supply chain nuances, while also benefiting from strong performance in its U.S. direct-to-consumer channel (growing over 20% YoY) and the Wi-Fi 7 lineup.

APAC Go-to-Market Transformation

APAC experienced a 16% year-over-year decline in Enterprise revenue during Q2 due to an intentional go-to-market transformation. This includes the hiring of Surajit Sen as a new leader for the region and restructuring legacy channel models. Management expects these changes to position APAC as the fastest-growing region in the long term, with sequential growth anticipated in Q4.

Capital Allocation & Shareholder Returns

NETGEAR maintains a consistent capital allocation strategy focused on funding internal investments in the enterprise business, pursuing opportunistic M&A for product adjacencies and capabilities, and returning capital to shareholders. The company repurchased $12.9 million in stock during Q2, bringing total repurchases since early 2024 to over $116 million, with $75 million remaining in its authorization.

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