Executive Summary / Key Takeaways

• Ceragon Networks is strategically transforming its business, shifting beyond traditional wireless transport to embrace high-growth millimeter-wave solutions, private networks, and managed services, aiming for a long-term annual revenue target of $500 million.
• Despite a challenging wireless transport market and recent revenue headwinds in India, the company demonstrated operational resilience, maintaining healthy non-GAAP operating margins and generating positive free cash flow in Q2 2025.
• Technological leadership, particularly with its IP-50EXP, IP-50EXA, and upcoming Neptune-based products, provides a significant competitive edge, enabling market share gains and addressing new, high-capacity use cases like fixed wireless access and smart cities.
• Strategic acquisitions, such as Siklu and E2E Technologies, have significantly bolstered Ceragon's capabilities and market penetration in the fast-growing private networks segment, particularly in North American energy and utilities.
• While near-term visibility is impacted by temporary disruptions in India, the company's diversified strategy, strong pipeline in North America, and focus on high-margin recurring revenue streams position it for renewed growth and sustained profitability in 2026 and beyond.

The Wireless Backbone: Ceragon's Strategic Evolution in a Dynamic Landscape

Ceragon Networks Ltd., incorporated in 1996, has long been a critical provider of wireless transport solutions, utilizing advanced microwave and millimeter-wave radio technology to connect cellular operators and wireless service providers globally. The company's journey saw it achieve its highest revenue levels by 2012, with the IP-20C product around 2013-2014 proving instrumental in securing significant market share, particularly in India. This historical foundation now underpins a strategic evolution, as Ceragon pivots to capture new growth vectors in a rapidly changing telecommunications landscape.

The broader industry is undergoing significant shifts, driven by the rollout of 5G, the increasing demand for high-capacity fixed wireless access, and the emergence of private networks. While the overall wireless transport market experienced a decline of over 10% year-over-year in 2024, the millimeter-wave segment is projected by analysts to achieve double-digit growth. This trend, coupled with a deep interest from Communications Service Providers (CSPs) and private networks in software-driven services, forms the backdrop for Ceragon's three-pillar growth strategy: focusing on millimeter-wave products, expanding market share in end-to-end private network solutions, and increasing recurring revenue through managed services. This strategic diversification is designed to expand Ceragon's Total Addressable Market (TAM) and mitigate the cyclical nature of the traditional CSP market.

Ceragon's competitive positioning is defined by its technological differentiation and agility, allowing it to carve out niches against larger, more generalized players like Ericsson (ERIC) and Nokia (NOK), and specialized broadband providers such as ADTRAN (ADTN). While Ericsson and Nokia benefit from their immense scale, broader ecosystems, and integrated solutions, Ceragon's focus on cost-effective, high-performance microwave and millimeter-wave backhaul for challenging terrains and low-latency 5G fronthaul provides a distinct advantage. The company's new products, such as the IP-50EX, CX, and IP-50GP families, offer an "exceptional price performance ratio," enabling Ceragon to win and recapture market share, even in regions where Chinese competitors often employ "dumping price strategy." This is particularly evident in EMEA and Latin America, where operators are increasingly seeking alternatives to single-vendor Chinese solutions, creating opportunities for Ceragon to become a significant second vendor.

Technological Edge: Powering Next-Generation Connectivity

At the heart of Ceragon's strategy is its commitment to technological leadership. The company's core differentiated technology lies in its advanced microwave and millimeter-wave radio solutions, which are engineered to deliver high capacity, low latency, and spectral efficiency. These capabilities are crucial for the evolving demands of 4G, 5G, and broadband networks.

A prime example is the IP-50EXP solution, which delivers millimeter wave-like capacity over traditional microwave distances. This innovation offers tangible benefits, including a significantly lower total cost of ownership and, in many cases, higher bandwidth compared to conventional microwave deployments. This allows customers to upgrade their networks more efficiently and cost-effectively. Similarly, the IP-50EXA has gained substantial traction, especially in India, due to its "best price performance" in the industry.

Ceragon's R&D initiatives are focused on pushing these boundaries further. The company successfully tested its proprietary Neptune chip and is developing the IP-50100E, a groundbreaking product expected to deliver 25 gigabit per second capacity in a single box. This will be complemented by a multi-band solution offering 29 gigabit per second in a split-mount configuration, aiming to be the "best price performance product in the industry." These developments are designed to accelerate Ceragon's growth in the millimeter-wave market, enhance gross margins, and capture a larger market share. The company also plans to launch a new split-mount product in the first half of 2025, addressing a significant portion of the market that prefers such solutions.

The "so what" for investors is clear: these technological advancements form a robust competitive moat. They enable Ceragon to offer superior solutions that address critical customer needs, leading to stronger market positioning, potentially higher average selling prices (ASPs), lower manufacturing costs, and ultimately, better margins. This technological edge is a foundational element of Ceragon's long-term growth strategy, allowing it to outpace competitors and capitalize on emerging opportunities in high-growth segments.

Performance and Strategic Momentum

Ceragon's financial performance in 2024 underscored its operational strength, with annual revenue growing over 13% to $394.2 million, even as the broader wireless transport market contracted. The company achieved a record non-GAAP operating profit of $48.8 million, reflecting its cost discipline and strategic focus. Non-GAAP gross margin for the full year stood at 35.1%.

The first quarter of 2025 continued this momentum, with revenue reaching $88.7 million, a slight increase of 0.2% year-over-year, and the highest bookings since Q1 2024. Non-GAAP net income was $2.6 million, or $0.03 per diluted share. However, the non-GAAP gross margin saw a slight decline to 33.5% from 36.7% in Q1 2024, primarily due to a shift in revenue mix, with India's contribution increasing to 48% and North America's declining to 20%.

The second quarter of 2025 presented a mixed picture. Revenue was $82.3 million, a 14.4% decrease from Q2 2024, primarily due to significant headwinds in India. Revenue from Indian customers decreased 30% year-over-year to $24.8 million, as a key customer faced "well-publicized financial challenges" that temporarily halted order activity. Despite this disruption, Ceragon maintained a healthy non-GAAP gross margin of 35.2%, unchanged from the prior year, largely attributed to strong performance in North America. The company delivered non-GAAP earnings per share of $0.03 and generated $6.1 million in free cash flow, enabling debt reduction and demonstrating its operational resilience. Non-GAAP operating income for Q2 2025 was $4.7 million, down from $13.1 million in Q2 2024, primarily due to lower gross profit and the absence of a $4 million credit loss recovery benefit recorded in the prior year.

North America emerged as a standout region in Q2 2025, with both bookings and revenue exceeding $20 million, excluding E2E contributions. Ceragon secured a multimillion-dollar project as a preferred vendor for a new major Tier 1 carrier in North America, leveraging Siklu technology. This win, along with increased interest in its point-to-multipoint solutions for smart cities and small cell backhauling, is expected to unlock substantial new business and contribute significantly to revenue in 2026. A multi-year smart city project in Latin America, operating under a connectivity-as-a-service model, is projected to generate recurring annual revenue of $7 million to $8 million for a minimum of five years.

The strategic acquisitions of Siklu (late 2023) and E2E Technologies (February 2025) have been instrumental in expanding Ceragon's capabilities. Siklu's point-to-multipoint platform is proving valuable in private network applications, particularly for smart cities and large enterprises. E2E Technologies has significantly strengthened Ceragon's expertise in private networks, especially in the North American energy and utilities sector. E2E's bookings in Q1 2025 "outperformed expectations," and it is projected to be "accretive to non-GAAP earnings by the second half of 2025."

Outlook and Risk Assessment

Ceragon's outlook for 2025 has been impacted by the temporary challenges in India. While the company withdrew its prior guidance in Q2 2025, it anticipates second-half revenue to be "roughly in line with the first half," with a strong belief that the India situation is a "timing issue" rather than a loss of market share. Management remains "much more optimistic" about India for 2026, with a new traditional microwave opportunity potentially adding "tens of millions of dollars" in revenue.

For the full year 2025, the company had previously reiterated revenue guidance of $390 million to $430 million, with non-GAAP operating margins of at least 10% at the low end of the revenue range, and higher positive free cash flow than in 2024. The main revenue uptick for 2025 is still expected in the second half, predominantly from India, driven by the rollout of E-Band for fixed wireless access technology. Long-term, Ceragon maintains its target of $500 million in annual revenues, driven by a combination of organic growth and strategic acquisitions. Revenue from Neptune-based products is hoped to commence in the second half of 2025, with significant scaling expected in 2026. The long-term gross margin objective remains between 35% to 38%.

Despite the positive long-term outlook, several risks warrant investor attention. The most immediate is the disruption in the Indian market, where a key customer's financial challenges have stalled projects and limited near-term visibility. While Ceragon believes this is temporary, the timing of resolution remains uncertain. Geopolitical risks, particularly the evolving situation in Israel, and global economic trends could also impact demand. The concentration of business on a limited number of large mobile operators and the inherent volatility in revenues, margins, and working capital needs are ongoing concerns. In certain regions, fierce Chinese competition, often employing aggressive pricing strategies, continues to exert pressure. However, Ceragon's new product families and emerging trend of operators seeking vendor diversification offer a strategic response. The company's proactive management of its supply chain has mitigated significant issues, demonstrating its ability to navigate component scarcity.

Conclusion

Ceragon Networks stands at a pivotal juncture, transforming its business model to capitalize on the evolving demands of wireless connectivity. Its strategic focus on high-growth millimeter-wave solutions, private networks, and managed services, underpinned by a robust technological roadmap, positions the company for long-term success. Despite recent headwinds in India, Ceragon's operational resilience, demonstrated by sustained profitability and positive free cash flow, highlights the strength of its underlying business.

The company's differentiated technology, including its IP-50EXP and the anticipated Neptune-based products, provides a clear competitive advantage, enabling it to capture market share and address new, high-capacity use cases. Strategic acquisitions like Siklu and E2E Technologies are accelerating its penetration into the lucrative private networks segment. While near-term revenue visibility is constrained by temporary market dynamics, particularly in India, Ceragon's expanding pipeline in North America and its commitment to increasing recurring revenue streams suggest a strong foundation for renewed growth in 2026 and beyond. Investors should recognize Ceragon's proactive strategic shifts and technological leadership as key drivers for sustained value creation in a dynamic and competitive industry.