Investors pulled the plug on Ubiquiti (UI 0.44%) stock this morning. The computer networking equipment stock fell 16.8% through 10:30 a.m. ET despite beating on earnings.
Heading into the report, analysts forecast Ubiquiti would earn only $2.92 per share, but this morning Ubiquiti reported a fiscal first-quarter 2026 profit of $3.43 per share instead ($3.46 non-GAAP).
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Ubiquiti Q1 earnings
Revenue surged 33% year over year to $733.8 million in the quarter ended Sept. 30. Growth was strongest in the lucrative North America market, where sales climbed 41%. Gross profit margin grew nearly 4 full percentage points to 46%, and operating margin was a strong 35.6%, driving net profit up nearly 62% to the reported $3.43 per share.
Sales did decline sequentially, quarter over quarter, however -- and that may be what's upsetting investors today.
NYSE: UI
Key Data Points
Is Ubiquiti stock a sell?
But is that a good enough reason to sell Ubiquiti -- worrying about a barely 3%, and perhaps seasonal, revenue decline, when year-over-year growth is so patently obvious? Perhaps. After all, Ubiquiti is a very richly priced stock, and when a stock's priced for perfection, any hiccup at all can seem unforgivable in investors' eyes.
Valued at $38 billion today, Ubiquiti trades for a hefty 48 times trailing earnings -- and more than 64 times trailing free cash flow. Relative to the 62% earnings growth Ubiquiti just demonstrated, these may be acceptable multiples to pay, but analysts on average forecast a steep slide in Ubiquiti's growth rate next year, to as little as 26%. That's still a fantastic number, don't get me wrong. But relative to a P/E ratio of 48 -- much less a price-to-free-cash-flow ratio of 64, it's probably too much to pay for Ubiquiti.
Earnings beat notwithstanding, this stock is a sell for me.
