ADTRAN Holdings, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Third quarter 2026 revenue was $281.2 million, representing a 0.6% increase year-over-year.
• GAAP gross margin was 38.5%, while non-GAAP gross margin was 42.1%, including a benefit of approximately 200 basis points from IEEPA refunds.
• GAAP operating margin was -0.3%, compared to a non-GAAP operating margin of 5.0%.
• GAAP diluted loss per share was $0.10; non-GAAP diluted earnings per share was $0.09.
• Net cash used in operating activities for the quarter was $24.5 million.
• Cash, cash equivalents, and restricted cash totaled $71.7 million as of September 30, 2026.
• For the nine months ended September 30, 2026, total revenue was $848.4 million compared to $792.2 million in the prior year period.
• Net loss for the nine months ended September 30, 2026, was $14.9 million, compared to a net loss of $35.0 million in the same period last year.
• Non-GAAP net income attributable to ADTRAN Holdings, Inc. for the nine months ended September 30, 2026, was $19.6 million, compared to $3.6 million in the prior year period.

Guidance and Future Outlook:

• For the fourth quarter of 2026, the Company expects revenue to be between $272.0 million and $292.0 million.
• Non-GAAP operating margin for the fourth quarter is expected to be between 1.0% and 5.0%, reflecting historical seasonality, supply availability, and the timing of large customer projects.
• Management anticipates significant opportunities to build momentum as customers invest in network capacity, performance, and security.
• The rapid expansion of AI infrastructure is reshaping network investment priorities, creating opportunities in cloud infrastructure and traditional service provider markets.

Business Segments and Product Lines:

• Network Solutions revenue for the quarter was $231.2 million.
• Services & Support revenue for the quarter was $49.9 million.
• The Company reported continued growth in optical networking.
• The Company reported increasing growth with hyperscale customers.

Market and Competitive Landscape:

• The Company is navigating a challenging supply environment.
• Supply and cost pressures are affecting the business.
• The Company focuses on addressing supply constraints and cost pressures to translate market opportunities into revenue growth and profitability.

Risks and Challenges:

• Risks include the ability to remain in compliance with credit agreement covenants and satisfy payment obligations under convertible notes and the Domination and Profit and Loss Transfer Agreement (DPLTA) with Adtran Networks.
• Revenue fluctuations may occur due to lengthy sales and approval processes required by major service providers and shifting customer spending patterns.
• Risks related to inventory practices and the ability to match customer demand.
• Risks associated with ongoing material weaknesses in internal control over financial reporting.
• Exposure to changes in general economic conditions, monetary/fiscal/trade policies, and tariffs.
• Risks related to international operations, including potential exposure to ongoing military conflicts in Iran, Ukraine, and Israel.
• Risks posed by potential breaches of information systems and cyber-attacks.
• Risk of inability to effectively compete through product improvements and development.

Management Commentary and Tone:

• Chairman and CEO Tom Stanton noted that third-quarter revenue came in slightly below the midpoint of the guidance range due to supply environment challenges.
• Management expressed confidence in encouraging developments across the business, specifically in optical networking and hyperscale customer growth.
• The tone indicates a focus on maintaining financial discipline and translating market opportunities into stronger revenue growth, profitability, and cash generation.

Other Key Points:

• The Company holds a majority stake in Adtran Networks SE, formerly ADVA Optical Networking SE.
• For the nine months ended September 30, 2026, the Company redeemed redeemable non-controlling interest (RNCI) for $31.9 million in cash and accrued $6.5 million in net income attributable to non-controlling interest.
• The Company extinguished its Wells Fargo Revolving Credit Agreement on July 21, 2026, resulting in a write-off of unamortized debt issuance costs.
• A $1.4 million reversal of a provision related to a 401(k) plan corrective action was included in professional fees and other expenses.
• Business transformation expenses of $2.4 million were incurred related to the global ERP go-live and restructuring costs.
• The Company will hold a conference call on November 3, 2026, at 7:30 a.m. Central Time to discuss results.