What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-07-21 compared with 2026-04-22 · 98 added, 62 removed, 134 unchanged (54% of the section changed)

8 unchanged sentences

All forward-looking statements and reasons why results may differ included in this Quarterly Report on Form 10-Q are made as of the date hereof, and we assume no obligation to update these forward-looking statements or reasons why actual results might differ.

We develop, market and sell platform, cloud and managed services, which are powered by agentic AI, that enable communication service providers (“CSPs”) providers of all types and sizes to innovate and transform their businesses to focus on delivering outstanding subscriber experiences and become communication experience providers’ (“CXPs”).

We develop, market and sell platform, cloud and managed services, which are powered by agentic AI, that enable communications service providers (“CSPs”) providers of all types and sizes to innovate and transform their businesses to focus on delivering outstanding subscriber experiences and become communication experience providers’ (“CXPs”).

The platform combines the Calix Agent Workforce™ with intelligent appliances, software, cloud and fully integrated SmartLife™ managed services to enable simplified business models that acquire, retain and grow subscribers and revenue.

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Revenue fluctuations result from many factors, including, but not limited to:

increases or decreases in customer orders for our products and services, global economic and geopolitical events and conditions, including tariffs, trade controls, inflation, economic downturns and market, financial or other factors such as government stimulus or shutdowns that may delay or materially impact customer purchasing decisions, non-availability of products due to supply chain challenges, including component and labor shortages and increasing lead times as well as disruptions as a result of pandemics or natural disasters, contractual terms with customers that result in delayed revenue recognition and varying budget cycles and seasonal buying patterns of our customers.

increases or decreases in customer orders for our products and services, global economic and geopolitical events and conditions, including tariffs (and certainty related to the enforceability thereof), trade controls, inflation, economic downturns and market, financial or other factors such as government stimulus or shutdowns that may delay or materially impact customer purchasing decisions, non-availability of products due to supply chain challenges, including component and labor shortages and increasing lead times as well as disruptions as a result of pandemics or natural disasters, contractual terms with customers that result in delayed revenue recognition and varying budget cycles and seasonal buying patterns of our customers.

More specifically, our customers have in the past spent less in the first quarter as they are finalizing their annual budgets, and in certain regions, customers are challenged by winter weather conditions that inhibit fiber deployment in outside infrastructure.

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Supreme Court ruled that the broad tariffs implemented under International Emergency Economic Powers Act (“IEEPA”) exceeded the administration’s authority and eliminated those tariffs.

The impact of the ruling did not have a significant financial impact because the majority of our finished goods are exempt from tariffs.

We did not experience a significant financial impact as a result of the ruling because the majority of our finished goods are exempt from tariffs.

For imported components for domestic manufacturing and certain finished goods, the original tariff increased our cost of revenue but have since abated.

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Our critical accounting policies and estimates, which are revenue recognition and inventory valuation and supplier purchase commitments, are described under “Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2025.

For the three months ended March 28, 2026, there have been no significant changes in our critical accounting policies and estimates.

For the six months ended June 27, 2026, there have been no significant changes in our critical accounting policies and estimates.

Recent Accounting Pronouncements

There have been no additional accounting pronouncements or changes in accounting pronouncements during the three months ended March 28, 2026 as compared with the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2025 that are significant or expected to be significant to us.

There have been no additional accounting pronouncements or changes in accounting pronouncements during the six months ended June 27, 2026 as compared with the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2025 that are significant or expected to be significant to us.

Results of Operations

Comparison of the Three Months Ended March 28, 2026 and March 29, 2025

The following table sets forth our revenue by customer size (dollars in thousands):

Three Months Ended

2026 March 29,

Comparison of the Three and Six Months Ended June 27, 2026 and June 28, 2025

The following table sets forth our revenue (dollars in thousands):

Three Months Ended Six Months Ended

2026 June 28,

2025 Variance

Dollars Variance

Percent June 27,

2026 June 28,

2025 Variance

Dollars Variance

Appliance $ 242,783 $ 198,126 $ 44,657 23 % $ 475,626 $ 377,869 97,757 26 %

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$ 293,329 $ 241,882 $ 51,447 21 % $ 573,313 $ 462,124 $ 111,189 24 %

Our revenue increased by $59.7 million during the three months ended March 28, 2026 compared to the corresponding period in 2025.

The increase in appliance revenue was due to the adoption of our platform, cloud and managed services by new customers as we continue to take footprint from legacy box vendors and the continued robust expansion of our appliances within our existing customer base.

The increase in software and service revenue is due to our CXP customers adding new subscribers.

Our revenue increased by $51.4 million and $111.2 million during the three and six months ended June 27, 2026, respectively, compared to the corresponding periods in 2025.

The increase in appliance revenue was primarily due to the adoption of our platform, cloud and managed services by new customers as we continue to take footprint from legacy box vendors and the continued robust expansion of our appliances within our existing customer base.

The increase in software and service revenue was primarily due to our CXP customers adding new subscribers.

Our software is sold on a per-subscriber basis.

CXPs use our platform, cloud and managed services to deliver better subscriber experiences as evidenced by best-in-class Net Promoter Scores SM , thereby allowing them to take market share.

For the three months ended March 28, 2026, United States revenue was $265.3 million, or 95% of our revenue, compared to $211.2 million, or 96% of our revenue, for the same period in 2025.

International revenue was $14.6 million, or 5% of our revenue, as compared to $9.1 million, or 4% of our revenue, for the same period in 2025.

Our primary focus has been, and in the near term will continue to be, the U.S.

United States revenue was $277.7 million and $543.1 million during the three and six months ended June 27, 2026, respectively, or 95% of our revenue for both periods, compared to $219.0 million and $430.2 million, or 91% and 93% of our revenue, respectively, for the corresponding periods in 2025.

International revenue was $15.6 million and $30.3 million during the three and six months ended June 27, 2026, or 5% of our revenue for both periods, as compared to $22.8 million and $31.9 million, or 9% and 7% of our revenue, respectively, for the corresponding periods in 2025.

Our primary focus has been, and in the near term is expected to be, the U.S.

and Canada given our large, direct sales and marketing presence and the amount of government stimulus being invested into underserved and not-served areas of these countries.

With the introduction of our third-generation platform, we will increase our attention on international markets.

No customer accounted for more than 10% of our revenue for the three months ended March 28, 2026 or March 29, 2025.

However, with the introduction of our third-generation platform, we plan to increase our attention on international markets.

One customer accounted for 12% of our revenue for the three months ended June 27, 2026.

No customer accounted for more than 10% of our revenue for the six months ended June 27, 2026 or the three and six months ended June 28, 2025.

Gross Profit and Gross Margin

The following table sets forth our gross profit and gross margin (dollars in thousands):

Three Months Ended

2026 March 29,

Three Months Ended Six Months Ended

2026 June 28,

2025 Variance

Dollars Variance

Percent June 27,

2026 June 28,

2025 Variance

Dollars Variance

Gross profit:

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Gross margin:

Appliance 57.4 % 54.0 % 340 bps

Software and service 54.3 % 63.5 % (920) bps

56.9 % 55.7 % 120 bps

Gross profit increased to $159.3 million for the three months ended March 28, 2026 from $122.7 million from the corresponding period in 2025.

Appliance 52.8 % 54.4 % (160) bps 55.1 % 54.2 % 90 bps

Software and service 63.0 % 65.0 % (200) bps 58.8 % 64.3 % (550) bps

54.6 % 56.3 % (170) bps 55.7 % 56.0 % (30) bps

Gross profit increased to $160.1 million and $319.4 million for the three and six months ended June 27, 2026 from $136.3 million and $259.0 million for the corresponding periods in 2025.

This increase was mainly due to the corresponding increase in revenue.

Our gross margin increased by 120 basis points for the three months ended March 28, 2026, compared to the corresponding period in 2025, primarily related to the continued growth in our appliance offerings.

Our software and service gross margin declined by 920 basis points, which related to the transition from our second-generation platform to our third-generation platform during which time we operated in a dual cloud environment to successfully support customer migrations.

Our gross margin decreased by 170 basis points for the three months ended June 27, 2026 compared to the corresponding period in 2025, primarily related to increased component memory costs.

Our gross margin decreased by 30 basis points for the six months ended June 27, 2026 compared to the corresponding period in 2025, primarily related to a decline in our software and service gross margin, which declined by 550 basis points due to the transition from our second-generation platform to our third-generation platform where we operated in a dual cloud environment to successfully support customer migrations during a portion of the respective periods.

Operating Expenses

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The following table sets forth our sales and marketing expenses (dollars in thousands):

Three Months Ended

2026 March 29,

Three Months Ended Six Months Ended

2026 June 28,

2025 Variance

Dollars Variance

Percent June 27,

2026 June 28,

2025 Variance

Dollars Variance

Sales and marketing expenses $ 62,338 $ 63,653 $ (1,315) (2) % $ 125,824 $ 121,712 $ 4,112 3 %

Percent of revenue 21 % 26 % 22 % 26 %

Sales and marketing expenses for the three months ended March 28, 2026 increased by $5.4 million compared with the corresponding period in 2025 primarily due to increases in personnel expenses of $4.7 million, mostly related to incentive compensation and increased headcount, outside services of $0.5 million and software expenses of $0.3 million.

For the three months ended March 28, 2026, sales and marketing expenses as a percentage of revenue declined compared to the year ago period due to increased revenue.

Sales and marketing expenses for the three months ended June 27, 2026 decreased by $1.3 million compared with the corresponding period in 2025 primarily due to a decrease in stock-based compensation expense of $5.4 million.

This decrease was partially offset by increases in personnel expenses of $1.6 million, mostly related to increased headcount, marketing expenses of $1.4 million, outside services of $0.5 million and software expenses of $0.4 million.

Sales and marketing expenses for the six months ended June 27, 2026 increased by $4.1 million compared with the corresponding period in 2025 primarily due to increases in personnel expenses of $6.2 million, mostly related to incentive compensation and increased headcount, marketing expenses of $1.2 million, outside services of $1.0 million and software expenses of $0.7 million.

This increase was partially offset by a decrease in stock-based compensation expense of $5.2 million.

For the three and six months ended June 27, 2026, sales and marketing expenses as a percentage of revenue decreased to 21% from 26% and 22% from 26%, respectively, mainly due to increased revenue.

We expect our investments in sales and marketing will increase in absolute dollars on a year-over-year basis, but decline as a percentage of revenue as we continue to land new customers and expand our platform, cloud and managed services.

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The following table sets forth our research and development expenses (dollars in thousands):

Three Months Ended

2026 March 29,

Three Months Ended Six Months Ended

2026 June 28,

2025 Variance

Dollars Variance

Percent June 27,

2026 June 28,

2025 Variance

Dollars Variance

Research and development expenses $ 52,754 $ 45,787 $ 6,967 15 % $ 107,400 $ 89,767 $ 17,633 20 %

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Percentage of gross profit 33 % 34 % 34 % 35 %

Research and development expenses for the three months ended March 28, 2026 increased by $10.7 million as compared with the corresponding period in 2025 mainly due to increases in personnel expenses of $5.1 million, outside services of $3.7 million, stock-based compensation expense of $0.8 million, depreciation and amortization of $0.8 million and allocated shared services expenses of $0.5 million.

For the three months ended March 28, 2026, research and development expenses as a percentage of gross profit decreased to 34% from 36% due to the increase in revenue and gross margin and we expect our investments in research and development to increase in absolute dollars and as a percentage of gross profit in the short term as we accelerate the development of artificial intelligence (“AI”) functionality and capabilities of our platform, cloud and managed services.

Research and development expenses for the three months ended June 27, 2026 increased by $7.0 million as compared with the corresponding period in 2025 mainly due to increases in personnel expenses of $4.3 million mostly related to increased headcount, allocated shared services expenses of $1.0 million, outside services of $0.7 million, depreciation and amortization of $0.7 million and facilities expenses of $0.6 million.

This increase was partially offset by a decrease in stock-based compensation expense of $0.6 million.

Research and development expenses for the six months ended June 27, 2026 increased by $17.6 million as compared with the corresponding period in 2025 mainly due to increases in personnel expenses of $9.4 million mostly related to increased headcount, outside services of $4.4 million, allocated shared services expenses of $1.5 million, depreciation and amortization of $1.5 million and facilities expenses of $0.6 million.

For the three and six months ended June 27, 2026, research and development expenses as a percentage of gross profit decreased to 33% from 34% and 34% from 35%, respectively, primarily due to the increase in revenue and gross margin and we expect our investments in research and development to increase in absolute dollars in the short term as we accelerate the development of artificial intelligence (“AI”) functionality and capabilities of our platform, cloud and managed services.

General and Administrative Expenses

The following table sets forth our general and administrative expenses (dollars in thousands):

Three Months Ended

2026 March 29,

Three Months Ended Six Months Ended

2026 June 28,

2025 Variance

Dollars Variance

Percent June 27,

2026 June 28,

2025 Variance

Dollars Variance

General and administrative expenses $ 23,183 $ 26,464 $ (3,281) (12) % $ 51,631 $ 53,214 $ (1,583) (3) %

Percent of revenue 8 % 11 % 9 % 12 %

General and administrative expenses for the three months ended March 28, 2026 increased by $1.7 million as compared with the corresponding period in 2025 mainly due to increases in personnel expenses of $1.0 million, mostly related to incentive compensation and increased headcount.

For the three months ended March 28, 2026, general and administrative expenses as a percentage of revenue decreased to 10% from 12% due to the increase in revenue.

General and administrative expenses for the three months ended June 27, 2026 decreased by $3.3 million as compared with the corresponding period in 2025 mainly due to decreases in stock-based compensation expense of $2.7 million and allocated shared services expenses of $1.5 million.

This decrease was partially offset by an increase in depreciation and amortization of $0.8 million.

General and administrative expenses for the six months ended June 27, 2026 decreased by $1.6 million as compared with the corresponding period in 2025 mainly due to decreases in stock-based compensation expense of $3.0 million and allocated shared services expenses of $2.2 million.

These decreases were partially offset by increases in depreciation and amortization of $1.8 million, personnel expenses of $0.6 million, facilities expenses of $0.4 million and software expenses of $0.3 million.

For the three and six months ended June 27, 2026, general and administrative expenses as a percentage of revenue decreased to 8% from 11% and 9% from 12%, respectively, mainly due to the increase in revenue.

We expect our general and administrative investments to increase in absolute dollars but decline as a percentage of revenue.

Interest and Other Expense, net

Interest and Other Income (Expense), net

The following table sets forth our interest and other expense, net (dollars in thousands):

Three Months Ended

2026 March 29,

Three Months Ended Six Months Ended

2026 June 28,

2025 Variance

Dollars Variance

Interest and other expense, net $ 2,516 $ 3,091 $ (575) (19) %

Percent June 27,

2026 June 28,

2025 Variance

Dollars Variance

Interest and other income (expense), net $ 1,746 $ 3,036 $ (1,290) (42) % $ 4,262 $ 6,127 $ (1,865) (30) %

Percent of revenue 1 % 1 % 1 % 1 %

For the three months ended March 28, 2026, interest and other expense, net was down compared with the corresponding period in 2025 due to a lower balance of marketable securities.

We repurchased 3.3 million shares of common stock for $170.9 million during the first quarter of 2026.

For the three and six months ended June 27, 2026, interest and other income (expense), net decreased by $1.3 million and $1.9 million, respectively, as compared with the corresponding periods in 2025 primarily due to a lower balance of marketable securities.

We repurchased 5.0 million shares of common stock for $240.2 million using proceeds from the sale of marketable securities during the first half of 2026.

The following table sets forth our income taxes (dollars in thousands):

Three Months Ended

2026 March 29,

Three Months Ended Six Months Ended

2026 June 28,

2025 Variance

Dollars Variance

Percent June 27,

2026 June 28,

2025 Variance

Dollars Variance

Income taxes $ 6,484 $ 3,626 $ 2,858 79 % $ 10,506 $ 5,423 $ 5,083 94 %

Effective tax rate 27.5 % 105.8 % 27.1 % 1,241.0 %

For the three months ended March 28, 2026, our income tax expense was $4.0 million for an effective tax rate of 26.4%, which differed from the statutory rate of 21% primarily due to state taxes, the effect of non-deductible stock-based compensation for executive officers offset by the favorable impact of U.S.

For the three and six months ended June 27, 2026, our income tax expense was $6.5 million and $10.5 million, respectively, for an effective tax rate of 27.5% and 27.1%, respectively, which differed from the statutory rate of 21% primarily due to state taxes, the effect of non-deductible stock-based compensation for executive officers offset by the favorable impact of U.S.

federal research tax credits and excess tax benefits from stock-based compensation.

The effective tax rate for the three months ended March 28, 2026 is higher than the corresponding period in 2025 primarily due to higher pre-tax earnings with a relatively lower level of non-deductible expenses.

The effective tax rate for the three and six months ended June 27, 2026 is lower than the corresponding period in 2025 primarily due higher pre-tax earnings with a relatively similar level of non-deductible expenses, compared to break-even pre-tax results in the corresponding period in 2025.

Our income taxes may be subject to fluctuation during the year and in future years as new information is obtained.

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We fund our operations and investing activities from cash flow generated from our operations as well as the issuance of common stock under our equity incentive plans.

As of March 28, 2026, we had cash, cash equivalents and marketable securities of $243.3 million, which consisted of deposits held at banks and major financial institutions and highly liquid marketable securities such as U.S.

As of June 27, 2026, we had cash, cash equivalents and marketable securities of $194.3 million, which consisted of deposits held at banks and major financial institutions and highly liquid marketable securities such as U.S.

government and its agency securities, corporate debt securities and commercial paper.

Operating Activities

Net cash provided by operating activities was $14.6 million for the three months ended March 28, 2026 and consisted of net income of $11.2 million and non-cash charges of $25.8 million partially offset by cash flow decreases of $22.4 million reflected in the net change in assets and liabilities.

Net cash provided by operating activities was $31.1 million for the six months ended June 27, 2026 and consisted of net income of $28.3 million and non-cash charges of $49.7 million partially offset by cash flow decreases of $46.8 million reflected in the net change in assets and liabilities.

Non-cash charges primarily consisted of stock-based compensation of $37.3 million, depreciation and amortization of $8.8 million and deferred income taxes of $4.3 million partially offset by the net accretion of available-for-sale securities of $0.7 million.

Cash flow decreases resulting from the net change in assets and liabilities primarily consisted of an increase in inventory of $20.9 million to support increased revenue, an increase in accounts receivable of $17.4 million due to higher revenue and decrease in accrued liabilities of $11.4 million relating to various factors including a decrease in incentive compensation related accruals.

This was partially offset by an increase in accounts payable of $26.2 million due to increased inventory purchases and a decrease in prepaid expenses and other assets of $0.8 million.

Net cash provided by operating activities was $17.2 million for the three months ended March 29, 2025 and consisted of a net loss of $4.8 million offset by non-cash charges of $21.4 million and cash flow increases of $0.6 million reflected in the net change in assets and liabilities.

Cash flow decreases resulting from the net change in assets and liabilities primarily consisted of an increase in inventory of $46.7 million to support future revenue, an increase in accounts receivable of $37.0 million due to higher revenue, an increase in prepaid expenses and other assets of $10.1 million mainly due to an increase in inventory deposits and a decrease in accrued liabilities of $9.6 million relating to various factors including a decrease in incentive compensation-related accruals.

This was partially offset by an increase in accounts payable of $50.9 million due to increased inventory purchases and an increase in deferred revenue of $5.8 million primarily related to an increase in our remaining performance obligations on appliances.

Net cash provided by operating activities was $56.6 million for the six months ended June 28, 2025 and consisted of a net loss of $5.0 million offset by non-cash charges of $50.5 million and cash flow increases of $11.0 million reflected in the net change in assets and liabilities.

Non-cash charges primarily consisted of stock-based compensation of $45.4 million and depreciation and amortization of $8.6 million partially offset by deferred income taxes of $1.3 million and the net accretion of available-for-sale securities of $2.1 million.

Cash flow increases resulting from the net change in assets and liabilities primarily

consisted of a decrease in accounts receivable of $3.8 million due to the timing of customer payments, an increase in deferred revenue of $3.2 million driven by support contract renewals, a decrease in prepaid expenses and other assets of $2.8 million mainly due to a reduction in our inventory deposits and an increase in accounts payable of $3.5 million due to the timing of inventory receipts.

This was partially offset by a decrease in accrued liabilities of $14.6 million relating to various factors including a decrease in incentive compensation related accruals.

Cash flow increases resulting from the net change in assets and liabilities primarily consisted of a decrease in accounts receivable of $16.2 million due to the linearity of shipments through the quarter and timing of customer payments, a decrease in prepaid expenses and other assets of $13.8 million mainly due to a reduction in our inventory deposits and an increase in accounts payable of $2.3 million due to the timing of inventory receipts.

This was partially offset by an increase in inventory of $7.8 million to support increased revenue, a decrease in accrued liabilities of $11.7 million relating to various factors including a decrease in incentive compensation-related accruals and a decrease in deferred revenue of $1.7 million.

Investing Activity

For the three months ended March 28, 2026, cash provided by investing activities consisted of net maturities and sales of marketable securities of $56.0 million partially offset by capital expenditures of $8.1 million, consisting primarily of purchases of test equipment.

For the three months ended March 29, 2025, cash provided by investing activities of $11.0 million consisted of net purchases of marketable securities of $15.3 million and partially offset by capital expenditures of $4.3 million, consisting primarily of purchases of test and computer equipment.

For the six months ended June 27, 2026, cash provided by investing activities consisted of net maturities and sales of marketable securities of $119.6 million partially offset by capital expenditures of $12.7 million, consisting primarily of purchases of test equipment.

For the six months ended June 28, 2025, cash provided by investing activities of $25.9 million consisted of net maturities and sales of marketable securities of $33.9 million partially offset by capital expenditures of $8.0 million, consisting primarily of purchases of test and computer equipment.

Financing Activities

Net cash used in financing activities of $150.9 million for the three months ended March 28, 2026 primarily consisted repurchases of our common stock of $170.9 million partially offset by proceeds from the issuance of common stock related to our equity plans of $20.0 million.

Net cash used in financing activities of $29.1 million for the three months ended March 29, 2025 primarily consisted repurchases of our common stock of $40.0 million partially offset by proceeds from the issuance of common stock related to our equity plans of $10.8 million.

Net cash used in financing activities of $212.2 million for the six months ended June 27, 2026 primarily consisted repurchases of our common stock of $240.2 million partially offset by proceeds from the issuance of common stock related to our equity plans of $28.1 million.

Net cash used in financing activities of $49.3 million for the six months ended June 28, 2025 primarily consisted repurchases of our common stock of $73.5 million partially offset by proceeds from the issuance of common stock related to our equity plans of $24.2 million.

Working Capital and Capital Expenditure Needs

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We believe that our outsourced approach to manufacturing provides us significant flexibility in both managing inventory levels and financing our inventory.

Furthermore, we have a common stock repurchase program, which had $63.4 million available as of March 28, 2026.

Furthermore, we have a common stock repurchase program, which had $94.1 million available as of June 27, 2026.

Our stock repurchase program does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time.

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Contractual Obligations and Commitments

Our principal commitments as of March 28, 2026 consisted of contractual obligations under non-cancelable outstanding purchase obligations and operating lease obligations for office space.

The following table summarizes our contractual obligations as of March 28, 2026 (in thousands):

Our principal commitments as of June 27, 2026 consisted of contractual obligations under non-cancelable outstanding purchase obligations and operating lease obligations for office space.

The following table summarizes our contractual obligations as of June 27, 2026 (in thousands):

Payments Due by Period

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis