Aviat Networks' 2026 Q1 Earnings Call: Contradictions Emerge on Fixed Wireless Access, BEAD Program, and Growth Outlook

Date of Call: November 4, 2025

Financials Results

• Revenue: $107.3M, up 21.4% YOY (vs $88.4M in prior-year Q1)
• EPS: Non-GAAP EPS $0.43 per diluted share, up $1.30 YOY (non-GAAP net income $5.5M; GAAP net income $0.2M)
• Gross Margin: GAAP 33.2% and non-GAAP 33.8% (vs GAAP 22.4% and non-GAAP 23.2% in prior-year Q1)
• Operating Margin: GAAP operating income $5.2M (vs $15.6M GAAP loss prior-year); Non-GAAP operating income $7.9M (vs $9.5M non-GAAP loss prior-year)

Guidance:

• FY2026 revenue guidance maintained at $440M–$460M.
• FY2026 adjusted EBITDA guidance maintained at $45M–$55M.
• Company expects BEAD-related demand timing uncertainty (benefit likely in calendar 2026, back half) and is monitoring potential modest timing shifts from a U.S. government shutdown.

Business Commentary:

* Revenue and Market Growth: - Aviat Networks reported total revenues of $107.3 million for Q1 FY2026, up 21.4% year-on-year. - Growth was driven by strong performance in private networks, particularly in public safety and utility sectors, and increased business from mobile network operators.

• Gross Margin Improvement:
• The company's non-GAAP gross margin improved to 33.8%, compared to 23.2% in the prior year.

• This improvement was due to higher volumes, regional and product mix, and increased efficiencies.

• Adjusted EBITDA and Profitability:

• Aviat's adjusted EBITDA for Q1 was $9.1 million, representing 8.5% of revenues.

• The increase in adjusted EBITDA was supported by growth in both private networks and mobile network operators, along with disciplined cost management.

• 4RF Acquisition and Product Expansion:

• The acquisition of 4RF has led to synergies in customer and channel overlap, enabling Aviat to cross-sell solutions in the utility sector.

• The integration of 4RF technology has resulted in the launch of the Aprisa LTE 5G router solution for public safety, opening up new market opportunities.

• BEAD Program and Market Opportunities:

• Aviat is optimistic about potential benefits from the BEAD program in calendar year 2026, likely in the back half of the year.
• Recent developments in customer engagement and specific state proposals suggest increased support for non-fiber solutions, which could drive microwave backhaul demand.

Sentiment Analysis:

Overall Tone: Positive

• Management called the quarter a "good start" with revenues $107.3M (up 21.4% YOY), non-GAAP EPS $0.43, adjusted EBITDA $9.1M; they maintained FY26 guidance ($440–460M revenue; $45–55M adj. EBITDA) and highlighted product launches and 4RF cross-sell traction.

Q&A:

• Question from Scott Searle (ROTH Capital Partners): Nice job on the quarter, Pete, Andrew. Just real quickly, I know you're not updating or expanding guidance in terms of the fiscal year given the current macro environment, and we're only in the first fiscal quarter. But I'm wondering if you can comment on the sequential outlook as we're going into December. I would assume there's some seasonal uptick there. And along those lines, where are you expecting the strength to come from? Is it from Tier 1 North American providers? Is it private networks? Or are you seeing something going on from an international standpoint?
  Response: Expect quarter-over-quarter lift driven primarily by U.S. public safety/private networks; management is cautious early in year and mindful of government-shutdown timing risk.

• Question from Scott Searle (ROTH Capital Partners): Okay. Fair enough. And then just in terms of some of the specific growth categories, 4RF is something you guys have started to talk about more recently have seen some strength there. You've identified public safety. I'm wondering how big this opportunity could be as you start to think about where we could be if you look out several quarters from a 4RF standpoint. And I'm not sure if I heard any update on MDUs in your opening remarks. I'm wondering if you could give us some updated thoughts in terms of what you're seeing there and if that opportunity is expanding beyond the Tier 1 that you were dealing with.
  Response: MDU work shows strong technical validation with Tier‑1 focus but no material revenue yet; 4RF integration is producing cross-sell into utilities with low customer overlap, creating meaningful channel/customer synergy.

• Question from Jaeson Schmidt (Lake Street Capital Markets): Just curious if you could discuss what you're seeing in India and sort of what you're baking in from that region into this kind of fiscal '26 outlook?
  Response: India was a mid-single-digit revenue contributor this quarter with favorable margins and is expected to be similar for FY26; management sees a potential upgrade/replacement cycle that could meaningfully contribute in FY27.

• Question from Jaeson Schmidt (Lake Street Capital Markets): Okay. That's really helpful. And then just as a follow-up, when we look at gross margin for fiscal '26, is it fair to expect you guys to be able to kind of grow gross margin sequentially throughout the year?
  Response: Management expects opportunity to grow gross margin ~1–2 percentage points by year-end to the mid-30s percent range, though not necessarily a steady sequential increase.

• Question from Rustam Kanga (Citizens JMP Securities): Nice print here. Just one question on the Aprisa Router. Could you just kind of speak to the opportunity there from a competitive displacement standpoint versus your #1 competitor and some of the smaller players there and kind of how you're thinking about that opportunity?
  Response: Aprisa router targets a $2.8B market (12% CAGR); Aviat believes it can address roughly $800M of that, has engaged ~10 state/large municipal public-safety prospects, and expects it to become a material growth driver late FY26/into FY27.

• Question from Rustam Kanga (Citizens JMP Securities): Awesome. Great to hear. And then just wanted to touch on federal. I appreciate the 5% of the business metric there. Just curious if you could just help us quantify or maybe ring-fence the magnitude of sort of the accelerated pull-ins and then how much is sort of baked into the guide for Q2 that you said might push into Q3, just how to sort of think of that as a relative mix perspective?
  Response: Federal business ≈5% of revenue; worst-case accelerated pull-in impact ~1%, worst-case push-out ~4–5%; timing is uncertain so effects on Q2/Q3 are difficult to predict.

• Question from Theodore O'Neill (Litchfield Hills Research): Congratulations on the good quarter. Pete, on the Slide 9 here about the cellular routing solution for public safety. I'm just wondering what's the driver here? Do they -- do these vehicles not have routers? Or do they need some -- an updated router? I'm wondering if you could just fill me in on that.
  Response: Vehicles generally already have routers, but incumbents face dissatisfaction on price, OpEx model and functionality; Aviat's existing public‑safety relationships and integrated hardware/software make displacement more straightforward.

• Question from Theodore O'Neill (Litchfield Hills Research): That makes sense. So you're already the incumbent provider for other parts of the network. So it just -- it makes it an easy sell. ... And my other question is about the multi-dwelling unit fixed wireless broadband. So Verizon acquired Starry Group Holdings, so they could go after that market. And I was wondering what that acquisition means for Aviat, if anything?
  Response: Verizon's Starry acquisition validates the MDU/FWA market; Aviat believes its hardware is multiple generations ahead of Starry, supporting its FWA/MDU strategy.

• Question from Egor Tolmachev (Freedom Bank Broker): Could you please share a quick update on BEAD program progress you see among your clients and maybe how it will impact your business?
  Response: Management is increasingly encouraged by BEAD dialogues; several states are setting sizable non-fiber/fixed‑wireless allocations (e.g., NM 40%, KS 50%, WA 39%), which could drive microwave backhaul demand, but timing of awards/deployments remains unclear.

• Question from Egor Tolmachev (Freedom Bank Broker): And maybe a quick follow-up on your Intercom telecom partnership. Can you maybe provide some quantitative estimates or timing of -- for this partnership?
  Response: Partnership with Intercom is established and active; no quantitative timing or revenue estimates were provided.

Contradiction Point 1

Fixed Wireless Access and Multi-Dwelling Units Opportunities

It highlights differing perspectives on the drivers and timing of FWA and MDU opportunities, which are critical for understanding Aviat's growth strategies.

Why is there interest in the cellular routing solution for public safety? - Theodore O'Neill (Litchfield Hills Research, LLC)

2026Q1: Fixed wireless access is driven by a preference for multi-dwelling units and the cost-effectiveness of wireless solutions in rural areas away from urban centers. - Peter Smith(CEO)

What's driving fixed wireless access adoption for business and multi-dwelling units, and are there any delays in the BEAD program? - Theodore O'Neill (Litchfield Hills Research, LLC)

2025Q4: We are seeing interest in both broadband solutions for MDUs and fixed wireless access for rural areas or areas where fiber is not an easily accessible solution. - Peter Smith(CEO)

Contradiction Point 2

BEAD Program Impact and Timing

It involves differing expectations regarding the impact and timing of the BEAD program, which is a critical government initiative for Aviat's growth.

Can you update on the BEAD program with your clients? - Egor Tolmachev (Freedom Bank Broker)

2026Q1: BEAD is looking more promising; customers are discussing BEAD funding and deployments. We see growing non-fiber support. We expect some BEAD revenue growth opportunity this fiscal year. - Peter Smith(CEO)

What’s driving fixed wireless access growth in business and multi-dwelling units, and are there any delays in the BEAD program? - Theodore O'Neill (Litchfield Hills Research, LLC)

2025Q4: The BEAD program's funding impact is expected in calendar year 2026. Aviat is not currently including BEAD funding in guidance due to ongoing uncertainty. However, there are positive signs around BEAD funding flowing. - Peter Smith(CEO)

Contradiction Point 3

Growth Outlook and Drivers

It shows varying expectations for growth drivers and the overall growth outlook, which are critical for investors.

What is the outlook for December, and where will the strength come from? - Scott Searle (ROTH Capital Partners, LLC, Research Division)

2026Q1: We feel increasingly confident about FY '26, but we're cautious about the December quarter due to the government shutdown. We see significant strength in U.S. private networks, principally driven by public safety. - Andrew Fredrickson(CFO)

What is driving the 4% growth outlook for fiscal 2026, and how do growth trends differ between North American Tier 1 and global 5G customers? - Tim Savageaux (Northland Capital Markets, Research Division)

2025Q4: The growth outlook is conservative due to underperformance in Q1 FY2025. Positive environmental drivers include funding increases for state and local government, backlog growth, and emerging markets. - Peter Smith(CEO)

Contradiction Point 4

Gross Margin Expectations

It involves changes in financial forecasts, specifically regarding gross margin expectations, which are critical indicators for investors.

Will gross margin grow sequentially throughout the year? - Jaeson Schmidt (Lake Street Capital Markets, LLC, Research Division)

2026Q1: We expect gross margins to improve by a percentage point or 2 by the end of the year, reaching the mid-30s. Growth might not be sequential but will likely improve over the course of fiscal '26. - Andrew Fredrickson(CFO)

Will the strong gross margin from March be sustained in June, or is a decline expected due to mix changes? - Jason Schmidt (Lake Street)

2025Q3: Our gross margin guidance for the full year remains at 36% to 38%. We expect Q4 to be in the mid 30s. - Michael Connaway(CFO)

Contradiction Point 5

Market Demand and Opportunities

The responses differ regarding the demand outlook for the U.S. Tier 1 market and the potential for growth opportunities, which are crucial for revenue forecasting and strategic planning.

Can you comment on the December outlook and where the strength will come from? - Scott Searle (ROTH Capital Partners, LLC, Research Division)

2026Q1: We feel increasingly confident about FY '26, but we're cautious about the December quarter due to the government shutdown. We see significant strength in U.S. private networks, principally driven by public safety. - Andrew Fredrickson(CFO)

Have you reached the bottom in the U.S. Tier 1 market? - Jason Schmidt (Lake Street)

2025Q3: We are feeling very good about new business opportunities across both our U.S. and international Tier 1 markets. - Pete Smith(CEO)