Radware Ltd.

Q2 non-GAAP revenue was $928 million, up 1.4% year over year and more than 4% sequentially. Adjusted EBITDA was $121 million, up 8% year over year, with margin expanding 80 basis points to 13%. Adjusted EPS was $1.10, up 17% year over year. Non-GAAP gross margin was 26.4%, essentially flat year over year and up 100 basis points sequentially. Product gross margin was 28.7%, up 70 basis points year over year; service margin was 24.9%, down 60 basis points year over year. Free cash flow was an outflow of $11 million, mainly due to an approximately $40 million inventory build. Cash and cash equivalents were $282 million, liquidity was over $590 million, and net leverage was 1.4x. The company repurchased about 752,000 shares for $60 million, with about $57 million remaining under authorization. Full-year 2026 guidance was reaffirmed: revenue of $3.86 billion to $3.94 billion, adjusted EBITDA of $510 million to $535 million, free cash flow of $255 million to $270 million excluding about $50 million of higher-than-expected tax payments, and adjusted EPS of $5.25 to $5.75. Full-year product gross margins are now expected to be comparable with prior year, while service gross margins are still expected to improve up to 50 basis points. For Q3, revenue is expected to be about 25% of full-year revenue at the midpoint, gross margin about 25% excluding the tariff refund, and adjusted EBITDA about 24% of full-year midpoint.

Octavio Marquez struck an upbeat tone, emphasizing that commercial momentum remained strong, demand was healthy, and the company is executing across banking, retail, and services. He highlighted the strategy to expand beyond the ATM into branch automation, teller cash recyclers, middleware, managed services, and AI-enabled retail offerings, framing these as longer-term growth drivers. He also pointed to record service levels, lean initiatives, and a stronger operating foundation as evidence that the business is improving while still investing for growth.

Thomas Timko focused on margin execution, cost discipline, and cash flow normalization. He cited Q2 non-GAAP revenue of $928 million, adjusted EBITDA of $121 million, non-GAAP operating profit of $82 million, and non-GAAP EPS of $1.10, while explaining that roughly $13 million of tariff refund benefit was mostly offset by about $10 million of higher memory costs. He said operating expenses declined 4% year over year, now expected to decline about 2% for the full year, and noted that Q2 free cash flow was pressured by an approximately $40 million inventory build, but Q4 should improve materially as inventories come down and customer prepayments arrive.

Analysts focused heavily on the back-half earnings and cash flow ramp, asking why Q4 needs to be so strong to hit full-year guidance. Management said the larger Q4 is supported by backlog, deferred banking deployments, service-margin improvement as the fleet investment cycle matures, and expected inventory reduction, while reaffirming confidence in both EBITDA and free cash flow. Questions also probed North American retail, memory-cost pass-through, Germany-related cash taxes, and the Brink's/Atleos combination; management said retail demand remains strong, memory pricing actions and shorter quote windows should help offset costs, the German tax payment is a one-time catch-up that does not change long-term cash flow expectations, and they have not yet seen an impact from the competitive transaction.