Executive Summary / Key Takeaways

• A10 Networks is strategically positioned at the nexus of two powerful secular trends: the accelerating demand for cybersecurity and the massive build-out of AI infrastructure, driving robust growth in its specialized secure application and network solutions.
• The company's core technological advantage lies in its high-throughput, low-latency, and integrated security solutions, which offer superior efficiency for power-hungry AI applications, enabling customers to achieve target performance with fewer devices and improved total cost of ownership.
• Recent financial performance demonstrates strong execution, with Q3 2025 revenue growing nearly 12% year-over-year, driven by significant AI infrastructure investments in the Americas, and security-led revenue exceeding the long-term target of 65% of total revenue.
• Strategic initiatives, including the acquisition of ThreatX Protect for Web Application and API Protection (WAAP) and ongoing R&D in AI-enabled security, are expanding its enterprise footprint and enhancing its competitive moat.
• A10 maintains a strong balance sheet, disciplined capital allocation, and a commitment to shareholder returns through dividends and an active share repurchase program, while targeting full-year 2025 revenue growth of 10% and adjusted EBITDA margins of 26-28%.

The Foundation of Secure Digital Transformation

A10 Networks, Inc. (NYSE:ATEN) stands as a critical enabler of secure application and network solutions, safeguarding, optimizing, and scaling business-critical systems across diverse environments—from on-premises data centers to hybrid cloud and edge deployments. Founded in 2004, A10 has meticulously built a portfolio that integrates secure application delivery, DDoS and API protection, and unified management. This strategic focus has positioned the company to capitalize on the profound shifts reshaping the digital landscape, particularly the escalating demands for robust cybersecurity and the burgeoning requirements of artificial intelligence (AI) infrastructure.

The company's overarching strategy is grounded in disciplined capital allocation, aiming for durable revenue growth, expanding recurring revenue streams, and generating strong cash flow. This approach is intrinsically linked to its technological prowess. A10's network infrastructure and security products are engineered for high performance, reliability, and protection against cyber threats, critically preparing networks for the intensive demands of AI and next-generation applications. Its solutions, delivered through flexible software, cloud-native, and hardware form factors, are tailored to the scale and specific requirements of its global customer base, which spans large enterprises, service providers, and cloud platforms.

Technological Edge in an AI-Driven World

At the heart of A10's investment thesis is its differentiated technology, which provides tangible and quantifiable benefits, especially in the context of AI infrastructure build-outs. The company's hardware platforms and software are designed to support higher throughput, lower latency, and GPU-based architectures. This is a crucial advantage for AI applications, which are inherently power-hungry. A10's solutions deliver industry-leading efficiency, allowing customers to achieve target performance with fewer devices. This directly translates to improved total cost of ownership (TCO) by materially reducing power consumption without sacrificing network performance or security.

A10's innovation extends beyond core networking. Its cybersecurity products are evolving to detect and remediate new threats emerging from AI traffic, such as prompt injection and the potential loss of Personally Identifiable Information (PII). Furthermore, the company is actively developing AI tools for predictive analytics, leveraging long-term traffic data from complex networks to enhance network planning and resource management for its customers. These R&D initiatives are strategically aligned to position A10 at the intersection of network performance, protection, and AI-driven workloads, enhancing its competitive moat by offering solutions that are not merely reactive but anticipatory of future threats and demands.

Competitive Landscape and Strategic Positioning

A10 operates in a highly competitive market, facing established players like F5 Networks (FFIV), Akamai Technologies (AKAM), Cisco Systems (CSCO), and Fortinet (FTNT), as well as indirect competitors such as cloud providers offering integrated security features. A10's competitive advantage stems from its specialized, cloud-native, and high-efficiency solutions. While larger rivals like F5 and Cisco offer broader portfolios and greater market reach, A10 differentiates itself through targeted, agile appliances optimized for modern applications and specific high-demand use cases.

For instance, A10's cloud-native focus provides more adaptable solutions compared to F5's potentially more hardware-reliant legacy offerings. Against Akamai, A10's solutions can offer easier integration in specific edge computing scenarios. In the realm of AI data centers, A10's products are designed to deliver superior efficiency in throughput and low latency, a critical factor that allows service providers to deploy fewer A10 products compared to competitive offerings, thereby reducing power consumption and improving ROI. This efficiency is a key differentiator in large data center opportunities globally.

The company's strategic acquisition of ThreatX Protect in February 2025 for $19.10 million further bolsters its competitive standing in the enterprise cybersecurity market. This acquisition expanded A10's portfolio with Web Application and API Protection (WAAP), a crucial capability given the rise in attacks against web applications and APIs. ThreatX Protect's unique behavioral and risk profiling capabilities are particularly relevant for protecting AI applications, making A10 a more comprehensive and relevant solution provider for enterprise customers. This move is part of A10's broader strategy to enhance its position in the enterprise space, where it is seeing strong growth, particularly in North America.

Financial Performance and Operational Momentum

A10 Networks has demonstrated consistent financial execution, converting strategic growth into profitability and strong cash flow. For the third quarter ended September 30, 2025, the company reported total net revenue of $74.7 million, marking an 11.9% increase year-over-year from $66.7 million in the prior year period. This growth was significantly propelled by a 16.9% increase in products revenue to $43.1 million, which management views as a leading indicator of future performance. Services revenue also saw a healthy 5.7% increase to $31.6 million.

The Americas region was a standout performer, contributing 65% of global revenue in Q3 2025 and experiencing a 42.5% year-over-year increase, primarily driven by substantial investments in AI infrastructure. This regional strength effectively offset macro-related headwinds observed in other regions, such as a 27.4% decline in APJ revenue and a 3.2% decrease in EMEA revenue for the quarter. On a trailing 12-month basis, revenue from the Americas surged 25%, largely due to AI infrastructure investments.

Profitability metrics underscore the company's operational discipline. Non-GAAP gross margin stood at 80.7% in Q3 2025, comfortably within the company's stated long-term goal of 80% to 82%. Non-GAAP operating margin expanded from 22.6% to 24.7% year-over-year, and Adjusted EBITDA margin reached 29.3% of revenue, up from 26.7% in Q3 2024, reflecting the inherent leverage in A10's business model despite increased R&D investments. For the nine months ended September 30, 2025, total net revenue grew 12.1% to $210.2 million, with products revenue up 22.6% and service revenue up 1.0%.

The company's focus on security-led solutions continues to pay dividends, with security-led revenue exceeding the long-term target of 65% of total revenue in Q3 2025. This reflects strong customer demand and A10's alignment with critical needs, particularly in North America.

Liquidity and Capital Allocation

A10 Networks maintains a robust financial position, providing significant flexibility for strategic investments and shareholder returns. As of September 30, 2025, the company held $86.6 million in cash and cash equivalents and $284.3 million in highly liquid marketable securities. This strong liquidity position, totaling $370.9 million, is deemed sufficient to meet anticipated cash needs for at least the next 12 months and beyond.

In March 2025, A10 strategically issued $225 million in 2.75% Convertible Senior Notes due 2030, generating net proceeds of approximately $217.7 million. These notes, classified as long-term debt, provide additional capital while offering flexibility for conversion into cash or a combination of cash and common stock at the company's election.

The company remains committed to returning capital to shareholders. In Q3 2025, A10 repurchased 633,985 shares for $11 million under its $75 million share repurchase program, with $60.1 million remaining under the authorization as of quarter-end. Additionally, the Board approved a quarterly cash dividend of $0.06 per share, payable on December 1, 2025, underscoring a consistent return of capital strategy.

Outlook and Risks

A10 Networks' management is confident in its strategic positioning and anticipates continued growth. The company expects a full-year 2025 revenue growth rate of 10%, driven by momentum in key strategic initiatives. Looking ahead to 2026, management aims to sustain growth in the "high single-digit range," supported by secular tailwinds in AI and cybersecurity. The company also maintains its long-term targets of 80% to 82% gross margins and 26% to 28% adjusted EBITDA margins. Operating expenses, particularly R&D, are expected to increase modestly in 2025, reflecting strategic investments in cybersecurity and AI technologies.

Despite this positive outlook, A10 faces several risks. Macroeconomic uncertainties, including fluctuating interest rates and evolving trade policies, can create friction in order timing and impact cost inputs. While A10's supply chain is not exclusively dependent on China, increased tariffs could raise costs or necessitate price increases, potentially impacting profitability or competitiveness. The company's convertible indebtedness also presents risks, as the issuance of common stock upon conversion could dilute existing shareholders, and the company may need to raise funds to repurchase notes for cash. Furthermore, foreign currency fluctuations, particularly involving the Japanese Yen, British Pound, and Euro against the U.S. Dollar, can affect financial results.

Conclusion

A10 Networks is demonstrating resilient performance and strategic foresight in a dynamic technological landscape. Its specialized, high-efficiency solutions are proving indispensable for service providers and enterprises grappling with the dual imperatives of advanced cybersecurity and the burgeoning demands of AI infrastructure. The company's consistent financial results, robust liquidity, and commitment to shareholder returns, coupled with targeted R&D and strategic acquisitions like ThreatX Protect, underscore a compelling investment thesis. As the digital world continues its rapid evolution, A10's technological leadership and disciplined execution position it as an efficient engine poised for sustained growth, particularly within the critical and expanding markets of AI and secure application delivery.