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    RBBN
    Earnings call· Jun 2026(Q2 FY26)

    Ribbon Communications Q2 FY26 earnings call RBBN

    Jul 28, 2026 Source

    Executive summary

    Ribbon Communications Q2 FY26 — Strong IP Optical Bookings and Salesforce Partnership

    Ribbon Communications delivered a solid Q2 FY26, driven by strong sequential revenue growth and record IP Optical bookings, which significantly boosted backlog. The company also secured a strategic partnership with Salesforce for AI-powered contact centers, validating a new market segment. While Cloud and Edge revenue faced tough YoY comparisons due to Verizon's prior-year record shipments and overall full-year guidance was moderated due to slower Tier 1 voice modernization, management remains confident in sequential improvement for the rest of the year and a stronger 2027, supported by diversified growth drivers.

    Highlights

    5

    • Revenue grew 18% sequentially to $192 million, exceeding the midpoint of guidance.

    • IP Optical product and service bookings reached an all-time high with a book-to-bill ratio of 1.6 times revenue.

    • Overall IP Optical backlog increased more than 60% year-to-date.

    • Adjusted EBITDA improved $20 million sequentially to $12 million, above the midpoint of guidance.

    • Secured a significant partnership with Salesforce to integrate Ribbon's secure voice capabilities into AgentForce Contact Center.

    Concerns

    5

    • Cloud and Edge segment revenue was down 19% year-over-year, primarily due to lower sales to Verizon.

    • Non-GAAP diluted loss per share was $0.03, a $0.08 decline compared to the prior year.

    • Cash flow from operations was a use of $12 million in the quarter.

    • Full-year 2026 revenue guidance was updated to a lower range of $810 million to $840 million.

    • Slower-than-expected voice network modernization deployments with US Tier 1 service providers moderated second-half growth rates.

    Guidance & targets

    8
    CategoryTargetConfidence
    Revenue
    $215M-$230M
    high materiality
    High
    Adjusted EBITDA
    $26M-$31M
    high materiality
    High
    Revenue
    $810M-$840M
    high materiality
    High
    Adjusted EBITDA
    $78M-$88M
    high materiality
    High
    Product Cost Increase
    ~$2M per quarter
    medium materiality
    High
    Supply Limitations
    Anticipated
    medium materiality
    High
    Voice Network Modernization Deployment Rates
    Higher deployment rates
    medium materiality
    Medium
    Overall Business Performance
    Stronger 2027
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    IP Optical Networks
    Revenue increased significantly sequentially, driven by strong North American growth. Year-over-year decline primarily due to lower sales in Europe following the end of a legacy maintenance contract in Q4 2025. Strong bookings position the segment for continued growth in H2. Sequential gross margin improvement driven by product and geographic mix and improved fixed cost absorption.
    Non-GAAP Gross Margin: 35.2%Adjusted EBITDA: -$6MBook-to-bill ratio: 1.6xOptical networking Apollo solutions revenue growth: >70% sequentiallyDefense-related revenue growth: nearly 60% sequentially and YoYNew data center interconnect projects: doubled QoQ
    		$82M-2%30%35.2%
    Cloud and Edge
    Revenue increased sequentially but was down year-over-year primarily due to lower sales to Verizon (tough comparison to prior year's record shipments). Non-GAAP gross margin improved sequentially, but was down YoY. Adjusted EBITDA improved sequentially but declined YoY. Expect improved services margin in H2 as resources are adjusted.
    Non-GAAP Gross Margin: 59.8%Adjusted EBITDA: $18MAdjusted EBITDA as % of revenue: 16%New customer wins with AWS deployment platform: 5
    		$111M-19%11%59.8%

    Operational metrics

    14
    Consolidated Non-GAAP Gross Margin
    49.3%up 350 bps sequentially, down 280 bps YoY
    Q2 FY26

    Primarily due to lower margins in Cloud and Edge segment and higher component/logistics costs.

    Non-GAAP Operating Expenses
    $88Mup $1M YoY
    Q2 FY26

    Offset most FX headwinds through targeted cost savings.

    Adjusted EBITDA
    $12Mup $20M sequentially, down $20M YoY
    Q2 FY26

    Above the midpoint of guidance.

    Net Interest Expense
    $11M
    Q2 FY26
    Non-GAAP Net Loss
    $5Mdown $15M YoY
    Q2 FY26
    Non-GAAP Diluted Loss Per Share
    $0.03down $0.08 YoY
    Q2 FY26
    Cash and investments balance
    $45M
    Q2 FY26

    Expect cash balance to improve in H2 as revenue and earnings grow.

    Net Debt Leverage Ratio
    4.0x
    Q2 FY26
    Capital Expenditures
    $5M
    Q2 FY26
    Total Enterprise Sales
    up 42%flat YoY
    Q2 FY26

    Includes large enterprise, critical infrastructure, and government and defense agencies.

    Total Service Provider Revenue
    up 9%sequentially
    Q2 FY26

    Verizon and Vardy remained 10%+ customers.

    Component Cost Inflation
    ~$5Mup from 'a few million' previously
    FY26

    Expected for the full year, with some recovery through pricing action.

    IP Optical Potential Incremental Business
    >$50M
    12-18 months

    Pipeline of opportunities with customers not currently working with Ribbon.

    BEAD Funding Adoption Rate
    very slow
    YTD FY26

    Despite approvals, not much flow into the market, not expecting much in H2 FY26.

    Industry KPIs

    11
    MetricValueDetails
    Capital return—
    Backlog order bookincreased >60%%
    Book to bill ratio1.6xx
    Orders backlog qualityAll-time high
    Product orders order growth36%%
    Segment growth margin targets—
    Ai cloud infrastructure orders—
    Recurring software service revenue—
    Revenue mix by product customer type—
    Design wins product cycle transitions—
    Front end vs back end scale up vs scale across mdoubled

    Orderbook & backlog

    2
    Product and service bookingsall-time highQ2 FY26

    Book-to-bill ratio of 1.6 times revenue.

    IP Optical backlogincreased >60%Q2 FY26

    up >60% YTD

    Increased so far this year.

    Product announcements

    1
    ProductTypeDetails
    Network in a Boxlaunch

    Deals & partnerships

    3
    SalesforceIntegration of Ribbon's secure carrier-grade voice capabilities into Salesforce's AgentForce Contact Center.

    Leveraging Ribbon's cloud-native portfolio to bring voice capabilities to the AgentForce platform, deployed across multiple AWS instances for scalability. Validates a new market segment for AI-powered applications with carrier-grade communications infrastructure.

    Fortune 50 financial institutionGlobal Microsoft Teams deployment.

    Leverages Ribbon's entire portfolio of SBC, policy routing, analytics, and management products, deployed on-premise across multiple data centers globally. Cybersecurity monitoring via a new SecOps offering was a key factor in selection.

    US car manufacturerGlobal voice communications upgrade and competitive replacement.

    New customer win where Ribbon was selected to replace a legacy platform for initiating a global voice communications upgrade.

    Risks & headwinds

    8
    Lower sales to Verizon in Cloud and Edge segmentQ2 FY26, H1 FY26

    Down 19% YoY for the segment; Verizon down ~$25M in H1 FY26

    Mitigation: Working closely with Verizon to re-accelerate voice switch upgrades; exploring additional products for cost savings.

    Slower-than-expected voice network modernization deployments with US Tier 1 service providersH2 FY26

    Moderating H2 FY26 growth rate

    Mitigation: Increasing backlog and opportunity for 2027; continued engagement with Verizon; exploring new products to eliminate legacy copper.

    Increased product costs due to higher components and logisticsH2 FY26, FY26

    ~$2M per quarter for H2 FY26; ~$5M for FY26 total

    Mitigation: Targeted price increases; surgical approach to manage inflationary costs.

    Supply limitations for key technologiesH2 FY26

    Anticipated

    Mitigation: Ramping supply to keep up with demand; managing long-term agreements with suppliers.

    FX headwinds from stronger Israeli shekelQ2 FY26

    Impacted non-GAAP operating expenses

    Mitigation: Offset most of the impact through targeted cost savings.

    Lower professional service revenue in Cloud and EdgeH1 FY26

    Impacted gross margin

    Mitigation: Adjusted key resources; expect improved services margin in H2.

    BEAD funding slow to materializeYTD FY26, H2 FY26

    Very slow adoption rate, not expecting much in H2 FY26

    Mitigation: Continuing to work with over 30 customers who have programs lined up for when funding is secured.

    IP Optical segment running negative EBITDAQ2 FY26, ongoing

    -$6M in Q2 FY26

    Mitigation: Focus on increasing efficiency, pulling more cost out (COGS and opex), and growing in higher-margin regions like North America and Europe.

    What to watch in Q3 FY26

    5

    Verizon Voice Modernization Deployment Rates

    Q3 FY26 and Q4 FY26
    CurrentSlower than expected
    TargetIncreased velocity and higher deployment rates

    Why it matters

    Verizon is a 10%+ customer, and re-accelerating these deployments is key to achieving full-year guidance and setting up 2027 growth.

    We continue to work closely with Verizon to re-accelerate voice switch upgrades within their network and have good alignment and engagement, although there is still more work to do to achieve the higher velocity that we're mutually targeting for the rest of the year and even higher deployment rates in 2027.

    Q&A highlights

    8

    Asked for more detail on the $2 million per quarter supply chain cost impact, specifically where the most sensitivity lies (optics, memory, high-end silicon).

    Management explained that the sensitivity is broad, depending on the product. For Cloud and Edge, it's commercial off-the-shelf hardware (Dell, HP servers) with costs passed through. For IP routing, it's core silicon and memory. For optical products, it's core optical transceiver technology. They are taking a surgical approach to manage costs and pass some to customers.

    “Yes, to your point, it's a number of areas. It does depend on the product to some extent.”

    asked by Ryan Kuntz · answered by Unknown Speaker

    3 min read6 chapters

    Detailed Narrative

    01

    IP Optical Networks Strength and Diversification

    The IP Optical Networks segment achieved its strongest bookings quarter since the ECI acquisition in 2020, with a 1.6x book-to-bill ratio and over 60% backlog growth year-to-date. Demand was broad-based across customer segments and geographies, with significant growth in North America. Key drivers included data center interconnect projects (doubling new projects sequentially and contributing over 10% of segment revenue) and mission-critical infrastructure for utilities, transportation, and government agencies, with defense-related revenue up nearly 60% sequentially and year-over-year.

    02

    Strategic Salesforce Partnership and AI Voice Market

    Ribbon announced a significant partnership with Salesforce, integrating its secure carrier-grade voice capabilities into Salesforce's new AgentForce Contact Center. This collaboration is seen as validating a new market segment for securely deploying AI-powered applications leveraging resilient communications infrastructure. Management anticipates a dramatic increase in total voice call sessions as AI agents augment or replace human agents, driving demand for Ribbon's cloud-native Session Border Controllers (SBCs) as voice firewalls for each AI agent.

    03

    Cloud and Edge Segment Evolution and Enterprise Wins

    The Cloud and Edge segment is strategically broadening its solutions beyond traditional voice modernization to a secure communications portfolio supporting cloud-native networking, AI-enabled communications, and mission-critical enterprise infrastructure. The company secured two significant voice communication infrastructure deals with Fortune 50 companies, including a global Microsoft Teams deployment with a major financial institution and a competitive replacement with a large US car manufacturer. Additionally, five new customer wins utilized AWS as the chosen deployment platform, highlighting the shift towards public cloud infrastructure.

    04

    Voice Modernization Delays and 2027 Outlook

    Voice network modernization deployments with US Tier 1 service providers, particularly Verizon, have improved slower than initially expected, moderating the company's second-half growth rate for 2026. However, this delay is increasing the backlog and opportunity for higher deployment rates in 2027. Ribbon is also exploring new products to enable further cost savings by moving TDM to IP conversion to the subscriber edge, completely eliminating legacy copper infrastructure, and expects full commercial deployment of large voice modernization projects with US defense agencies this year.

    05

    Diversified Growth Pillars and Market Focus

    Ribbon is focusing on several key growth areas: critical infrastructure and government markets (representing 10% of Q2 revenue), exponential growth in data traffic and fiber/wireless network infrastructure (especially with regional service providers and multi-purpose international deployments), and the emerging AI communications category. This diversification aims to expand the customer base and addressable market, creating a more balanced growth profile over time⏳, offsetting timing delays in other areas, and reinforcing confidence in a stronger 2027.

    06

    Supply Chain Headwinds and Cost Inflation

    The company anticipates approximately $2 million per quarter in increased product costs for the second half of 2026 due to higher components and logistics expenses. While targeted price increases may partially offset these costs, supply limitations are also expected in the second half due to increasing demand for key technologies. Management noted that full-year component cost inflation is now estimated closer to $5 million, up from a few million dollars at the start of the year.

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