Good. Super. Welcome to the 20th Annual Needham Growth Conference. I'm Ryan Koontz. I cover the communications and networking sector here at Needham. Really pleased to be joined today by Ceragon Networks, who is a leading wireless backhaul specialist, providing innovative, flexible, and cost-effective solutions that enable service providers to deliver broadband services to their subscribers. Joined today by CEO Doron Arazi, and CFO Ronen Stein. Welcome, gentlemen. How are you guys doing?
Hi.
Good.
How are you?
Welcome. Let's start. Let's talk a little bit about your last quarter. Revenues were down a bit. Gross margins 34%. What were kind of the drivers in finishing your third quarter results there in terms of revenue volatility? It came in a little lighter than you suspected.
First of all, this is not surprising to us. At least internally, we know it's important for the investors' community, but internally, we don't see that as a big deal. It's just a shift in delivery that is sometimes imposed by our biggest customers. We're used to it. We even account for it in our estimations. But sometimes it becomes bigger than our assumptions, and that was the case in Q4.
From your pre-announce.
Yeah. And obviously, the flip side is that we have backlog that is bigger for 2026 as a result because there were no cancellations. And actually, we received a bunch of orders with quite significant value from this customer within Q4.
I just add regarding Q3 that we've seen North America coming back again and impacting our mix. And that drives also a good trend in our gross margin. And we expect that also, with the good backlog that we have starting the year, also to have an impact.
You're feeling good momentum carrying into 2026 on the U.S. side. India, that's rolled off a bit here. What was India like in 2025 for you, kind of coming into the year versus kind of where you finished up?
We started 2025 with relatively high revenues, which basically was comprised of the residual of the large deal of $150 million that we won in prior years, and certain strength coming from new projects from other customers. It went down to a run rate of $100 million on the second part of the year that is comprised of two customers. We believe that this pace, the way we see it now, is the bare minimum. We see more opportunities within these two customers from two angles. One, we see opportunities to take market share from existing competitors. We are in active discussions with these two customers. Obviously, that will increase and put us beyond the $100 million. Specifically, in one particular customer, the pace of the rollout has slowed down relative to the beginning.
And if this customer resumes the original pace, that can also drive the numbers beyond the run rate of $100 million. And on top of that, the customer that we won with $150 million in the past is now issuing two RFPs. They were delayed. We believe that these RFPs will close during the first half of 2026. We believe that we are in a good position to win at least a significant portion, if not 100%. And if timelines are where we expect them to be, this could also fuel our business in terms of revenue on the second part of 2026.
Great. That's a great outline for India. How about North America? How are you generally thinking about your momentum of North America carried forward here?
Yeah, so in North America, we see multiple opportunities. I would dare say that the accumulation of opportunities, both within CSP segment and private networks, the accumulation as of the end of 2025 is something that I don't remember seeing in Ceragon in the past. We are talking about new products. We are talking about new use cases, and I would say that this gives us a lot of optimism for 2026 and obviously beyond.
Yeah. Some use cases around the acquired Siklu technology. You've seen some traction there?
Yeah. Generally speaking, first of all, I think we started 2026 with the best product portfolio or the strongest product portfolio Ceragon ever had. And part of it is associated with the very successful acquisition of Siklu. We are using this technology and their products for new use cases, predominantly around the security area. And we see a lot of traction. Some of them are in successful POCs. Some of them are awards. And some of them, we already started getting true solid orders. At the same token, we are also taking this technology to the next level and coming with new products around FR2, the higher frequencies of 5G, which is 26, 28 GHz, 39 GHz. We see a lot of demand for using these frequencies, not for mobility, but for fixed wireless access.
And with the technology that we bought, and obviously with the expertise that we have within Ceragon, we are going to launch a few new products within 2026. Some of them are already driving commitments from new customers as we speak. And some of them will obviously continue helping us grow within North America, but also outside North America.
So it sounds like an expanded TAM for you.
Yes. We see an expanded TAM. We believe that in the fixed wireless access, we can become a very strong player. And this is all based on customer needs. So we are in a constant dialogue about the specific requirements. It's not just high-in-the-sky thought that we hope to translate into good business.
Yeah. You talked about some customer traction with some of these newer products. Is that selling motion very different for you? Any of that moving through reseller channels, or are you mostly direct?
It's mostly coming direct. But we also did, since you mentioned the indirect and the channel business, I will just say that we did a huge change in our structure so that we can also enjoy the indirect demand for our technology and better utilize this demand for higher revenues in 2026.
Yeah. Shifting gears a little bit here. A lot of excitement about AI and what that's doing to networks, really taxing networks in terms of capacity. Are you seeing some of that flow through to your customers?
Yeah. So if I need to kind of characterize where the market in terms of AI from obviously a communication equipment vendor perspective, we see the demand for stronger traffic capacity, predominantly in the enterprise business. It's not coming yet to the consumer business. And we believe that AI is moving faster in the enterprise domain, robotics, all this kind of autonomous stuff, and so on and so forth. And that can be helped by some of our products. For example, the 60 GHz product that is for short distances, but yet very high capacity, point-to-multipoint, can fit in very nicely. And this is short term. In the long term, obviously, things will get more and more complex for autonomous cars and for everything that is actually outside a specific facility. We will see much bigger capacity needed. And obviously, the latency will become even more critical.
Because of that, in the long run, we believe that there will be more need for that. That said, with a new CTO coming on board that has worked on 6G in one of the blue chip companies up until recently, we are also looking to actually leverage our radio strengths on the one hand, but also the existence of our equipment to extract more intelligence from the data that is running through our equipment, and by that, to help the customers better utilize this capability for the AI revolution.
Yeah. And I think your products have been fairly differentiated historically with your own silicon technology. Can you maybe expand on that advantage, where it comes from, and maybe the impact on margins related to your vertical integration around silicon?
Yeah. So obviously, as far as I know, we are the only player in this domain that has its own modem chip. And we also develop our RF chips. And I think this gave us a lot of advantage over the years. And this is the thing that won for us so much business in the Tier 1 operators, where we usually compete with the giants. The new chip, the Neptune chip, is obviously the next generation. We are not aware of any merchant chip that is about to be launched imminently that can compete with this capability.
Just to give you a rule of thumb example that will help you understand how important it is, we are going to launch the first millimeter wave box that will be able to do 25 gigabit per second in the air and with 24 dBm because we see that the high power in E-band is creating a lot of buzz in the market. We actually had a lot of wins just recently in North America with another version of product with very high transmission power. We are talking about a product that, if you compare it to other solutions, could be probably anything between 50%-60% lower in price. This is a huge impact on TCO for the operators.
And that's primarily driven by the fact that we put a lot of what we call vertical integration into the SoC, into the chip, that helps us to come with such a relatively cost-effective product. This is one example, just to give you magnitude.
Yeah. That's great. And Ronen, can you kind of walk us through the impact on the financials from a margin perspective and even the OPEX requirements of development?
So in 2026, the growth that we're guided for should give us the ability to grow the gross margins and the operating margins. We discussed an increase in gross margin of 1%. This is driven by a few factors: the mixture, the level of revenues, and also cost savings that we continue to do. In the operating margins, also, we aim to higher operating margins as we guided. And this is although we have some OPEX increases, as we mentioned in the last call, we still see the opportunity to increase the operating margin and continue to show our operating leverage.
And I think you talked about greater investment on the sales side as a big part of that.
Yeah. We discussed two things. We discussed some investments in the products that, as we said, we're going to launch four products. And also on the sales, anything that we see imminent ROI increase the opportunity to leverage the growth continuously. This is where we're going to invest.
I think a chunk of that is variable comp too from the sales side. That's great. Relative to what you're doing in software and SaaS, can you kind of expand on those new products and services that can deliver recurring revenue and be a lift on margins?
Yeah. So basically, we have had three avenues in terms of software development that now we are working on a strategic roadmap that will end up with software that is capable of doing things in two dimensions. One, being able to help customers in running their equipment in a very agnostic mode to the vendor's identity and to the technology they are using. And this is like a network digital twin element that was developed together with the customer. And it's now our intention to enhance it and to put it and become part as a unified platform. That's one direction. The other direction is the sophistication of the software. You can start with a simple network management system that manages very tactically the devices, the alarms that are coming from the device.
But you can go all the way up to a very sophisticated analysis with AI tools that will even drive actionable intelligence into orders to the devices, how to behave, how to change configuration, and so on and so forth. So on our traditional product, we have the Insight software that has a lot of capabilities, including power consumption analysis, predictive maintenance, and this kind of stuff on our own software, on our own product, sorry. From the network Digital Twin, we have certain capabilities more on the strategic level of modeling, networks, prioritizing investments, and so on and so forth, and even managing the facilities in which the devices are residing in. And with the recent acquisition of E2E, this system integrator, he was able to develop a very, very nice software that is vendor agnostic, but is doing the tactical part.
The idea is that we combine these three things, and the vision is into a single software that the customer will be able to pick and choose. Does he want only the NMS, very simple, only on our own devices? This is one fee. If he wants to go all the way to the right edge, the highest side, he can get a lot of digital twin capabilities with AI-driven results and capabilities. That's the vision. We have seen more and more interest coming from customers. If in the past, predominantly CSPs, were not willing to pay for this, and this was coming as part of the product, now we see more openness to pay. The idea is to build a sustainable model of SaaS. Sometimes it may come with also some additional services on top. That's the vision.
We have started seeing the initial seeds of interest in this direction.
So you're doing some POCs and these sort of things with customers?
We got POCs. We got some orders, and we are moving forward with this gradually.
Let's unpack E2E a little bit more. You made that play into the private network and the enterprise network. Can you maybe talk about what verticals you bought them to go after? Are you seeing any changes in the strategy of what verticals you're seeing the most strength from? Are you repositioning sales or products for those verticals?
Yeah. So first of all, they were experts and are still experts in the energy and utility sector, and so far, their performance is in accordance with our expectations for the first year. So we're very happy, and obviously, they brought a lot of knowledge into the company and obviously that software asset that is so important. We are pursuing, I would say, four or maybe even five segments. One is the energy. The second one is utility. The third one is security/public safety. And the fourth one is defense. These are the four segments, and in order to move forward and to bring more success, first of all, we have changed the sales personnel dramatically to fit into these segments and to make sure that they are coming with knowledge and, so to speak, relationship in these domains. That's one thing.
In parallel, we are continuing to pursue system integration opportunities in these domains to basically accelerate our market share take with such acquisitions.
Were they previously a channel partner for you, helping you reach those, or are they selling new products into the existing customers?
It's a combination of our products and others' products. By the way, the other aspect of this strategy is that we are looking for opportunities to buy adjacent technologies that can help us fulfill this vision and strategy of being an end-to-end solution provider to the private network domain.
Is it a different competitive playing field in private networks?
It's different. It's a different landscape, for sure. We see many of the competitors that we see in the CSP. But by the same token, we also see other competitors. I think that at the market that we are predominantly looking at, which is the small to medium deals, the concept and the strategy of selling end-to-end solution is probably what happened to this? Sorry for that.
No worries.
I think that our specific strategy of selling end-to-end solution fits very well into this market. This market is not of interest to the giants on the one hand because it's relatively smaller. We're talking about a few million dollars a deal, and by the same token, they want one throat to choke because they don't.
They need the integrator.
Exactly. And if the integrator also comes with the IP, the level of flexibility in terms of business models, in terms of adjusting certain technologies to specific needs is by far bigger. And this is why we believe that this go-to-market strategy is a differentiator.
Yeah, and new for you.
New for us, of course. We need to prove ourselves. And happily, I can say that in 2025, we made very nice progress winning a few end-to-end transactions, including LTE technology, including Wi-Fi technology. And therefore, we are getting bigger and bigger confidence in this strategy.
Private wireless.
Yes.
Yeah. And there's been a lot of talk about Private 5G coming. So are you seeing any signs of customers looking to bet on that yet?
The biggest problem with Private 5G is that it's very costly.
Yeah.
Because of that, I believe that the pace of deploying Private 5G is not as one would expect.
Yeah. It's been disappointing.
We'll have to see how things are evolving. There could be different avenues in this respect. There could be some alternate technologies that are not 5G standard that will take a bigger market share. There could be some evolution within the private 5G so that cost will go down, and that will make private networks more enthusiastic on exploring this technology. At this point, I would say that the pace of the adoption is quite disappointing.
Makes sense. On the North America front, looking forward into 2026 and beyond, you've talked about some traction with new Tier 1s. Can you maybe expand how you think about your major Tier 1 customer that you've had for a long time, how you think about the spending environment in 2026, and then maybe new Tier 1s coming on board?
So generally speaking, I would say that the spending environment in North America, especially towards the second part of 2025, looked good. I would even dare say that we saw a certain increase in demand. At least when we opened 2026, we don't have any reason to believe that this will change. I think what's fueling my optimism is that it's not just the traditional use cases, but rather new use cases. For example, network resiliency is a big topic on the table of some of the operators, and some of the solutions we are offering are getting a lot of traction. As I said, fixed wireless access, save the license, and generally speaking, E-band or the millimeter wave as the new microwave is also getting a lot of traction because of such a huge reduction in total cost of ownership.
And so we see also a wake-up in demand from large and medium ISPs as well. Some of them are new to us. Some of them we just recently won because of our strengths in the portfolio. And that's in the CSP domain. Obviously, we can discuss the private network domain. But in the CSP domain, I believe that 2026 should be at least as good as 2025. And I'm expecting growth in 2026.
Yeah. And some of that from a new Tier 1, you think you can get on board?
In Tier 1s, I think that we are in good position in relatively advanced stages. It looks like the relationship is strengthening. I believe that there will be a certain impact on our revenue in 2026, predominantly in the second half. At this point, I don't think it's going to be huge or even significant. The discussions are showing us even bigger opportunities. We're trying to advance certain opportunities into 2026 by delivering faster. At the same token, we see a demand for other versions of the existing products to fuel 2027. All in all, I'm very optimistic with the traction we are getting from large Tier 1 operators.
Great. And any concerns about supply chain? Pretty steady state?
Not in terms of quantities and supplying the demand. This has not yet created any concern. What we do see is a very high increase in prices, especially in the memory chips. And that obviously is a big topic for us to deal with because it's obviously increasing the cost of our products. This is something that we're looking at very carefully. If I need to see a risk for our increase in gross margin at this point, this is the place where I would take a careful look. We're looking into this very intensely. And I trust my technology folks together with our operational folks to make it minimized. And at the same token, doing a lot of cost cutting on other elements of our products can actually offset this price increase.
Good to hear. How about changes in the competitive landscape as we wrap up here? Obviously, Nokia has announced they want to divest their business. So are you seeing any impacts on deal flow opportunities? And what do you think that means in the end? If we fast forward to 2027, how do you think the competitive landscape might change?
Look, generally speaking, I would say that for Ceragon, it's more positive than negative, at least after giving it some thought and based on what we know today. I think that the market, it makes a lot of sense that this market will have consolidation. I was pitching to that for a very long time. But people need to agree on the prices. And people need to put more emphasis on the long run rather than the short run. Sometimes people are brave enough to go in this direction. Sometimes they are not. So all in all, reducing the competition will just make this market become more compelling, more profitable. And therefore, I believe in this trend in general. Specifically, we are looking very carefully on the impact of this announcement on customers, predominantly Nokia customers.
Obviously, as a competitor, we intend to make our own moves to benefit from this announcement.
Great. Great to hear. Well, any last statements you wanted to lay out in terms of what investors are missing most about the Ceragon story?
Look, I think that the challenge for investors, and I really accept that, it's not that I'm asking the investors to behave differently. The challenge in the business of Ceragon has always been the visibility, and I was talking to many investors, and I was asking the investors, when I use the word visibility or you use the word visibility, what do you mean, and I got tons of versions to the word visibility, so for me, I see it in a very simple way. First of all, I'm looking at the opportunity. Now, if I feel very comfortable about the opportunity and eventually the order that was supposed to be received in this queue moved to the next queue, I'm not impressed by that, definitely not negatively impressed, and from my perspective as a CEO of the company, the business is still healthy.
The next level of visibility is when these orders are going to be delivered, especially when talking about the bigger customers. And in this respect, once again, not every schedule that even was committed by the customer is in our control. And because of that, I'm also not that impressed, negatively impressed by the fact that things are moving from one quarter to another. And I think if investors put more emphasis on the evolution of our product set in line with the customer needs and on the new wins that we're trying to announce once they are solid, this could, to a certain degree, compensate for the fluctuation in our business.
Sure. Makes sense. Well, thanks, gentlemen, for joining today. Appreciate it.
Thank you so much.
Thank you.
Appreciate it.