Netgear's Q1 2025: Unraveling Contradictions in Supply Chains, Geopolitics, and Margins

Supply chain and demand constraints, geopolitical dynamics and competitive impact, investment priorities and strategy, TP-Link investigation and legal concerns, and gross margin sustainability are the key contradictions discussed in Netgear's latest 2025Q1 earnings call.



Strong Quarterly Performance:
- NETGEAR reported $162.1 million in revenue for Q1 2025, exceeding the high end of its guidance range, and saw a 550 basis point improvement in non-GAAP gross margin to 35%.
- The growth was driven by better-than-expected contributions from the B2B division, NETGEAR for Business, and improved supply chain execution.

Gross Margin and Segment Performance:
- The company's non-GAAP gross margin improved to 35% in Q1, up from 29.5% in the prior year period.
- This improvement was attributed to a stronger mix of higher-margin NFB business products and success in moving past older, higher-cost inventory.

NFB Segment Growth:
- The NFB segment revenue was $79.2 million, down 2% sequentially but up 15.4% year-over-year.
- Growth was driven by strong demand for ProAV managed switches and double-digit end-user momentum in the segment.

Home Networking and Mobile Segments:
- Home Networking revenue was $61.4 million, down 8.7% year-over-year, while mobile revenue was $21.5 million, down 25.3% year-over-year.
- The declines were due to seasonality in Home Networking and a focus on broadening the mobile product portfolio for future growth.

Operational Efficiency and Restructuring:
- NETGEAR's headcount decreased to 636, and non-GAAP operating expenses decreased by 8.2% year-over-year.
- This was a result of a restructuring in January that reduced annual operating expenses by approximately $20 million and focused on redeploying savings into growth opportunities.