Cloud networking provider Extreme Networks (EXTR 15.02%) is having a rough day despite beating analyst expectations for revenue and earnings in the first quarter of fiscal 2026. The stock was down about 16% as of 12 p.m. ET on Wednesday, according to data provided by S&P Global Market Intelligence.
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Revenue rose by 15% year over year to $310.2 million on the strength of product sales, while adjusted earnings per share (EPS) jumped 29% to $0.22. Both metrics beat the average analyst estimates. Software-as-a-service (SaaS) annual recurring revenue reached $216.2 million, up 24.2% from the prior-year period.
While Extreme Networks' headline numbers looked good, there were some weak spots in the report. Adjusted gross margin dipped compared to the first quarter of fiscal 2025 and the previous quarter, and the company's outlook called for slower revenue growth in Q2 and the full year.
Mostly good news for Extreme Networks
Extreme Networks scored some major customer wins in Q2, including a large government customer in the Asia-Pacific region and a handful of venues around the world. CEO Ed Meyercord noted that bookings for the Extreme Platform ONE were strong during the quarter, and he called out the company's new service agent as a key growth driver:
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%. These innovations position us to drive growth, expand market share, and capitalize on opportunities arising from shifts among competitors.
However, Extreme Networks reported an adjusted gross margin of 61.3%, down from 63.7% in the prior-year period. The company also expects revenue growth to slow to around 12% in Q2. For the full year, Extreme Networks expects revenue growth of just 10%. The expected slowdown could be spooking investors.
NASDAQ: EXTR
Key Data Points
Is Extreme Networks a buy?
Trading for around 18 times forward adjusted earnings, Extreme Networks stock doesn't look overly expensive. However, the company's growth challenges shouldn't be ignored.
