Allot (ALLT) Q3 2026 earnings review
Allot's security subscriptions pick up, but overhead trims its profit
Allot, which sells cybersecurity and network traffic software to telecom operators, sped up its sales while higher overhead held back profit margins. Third-quarter revenue rose 16% as the company shipped equipment from its order backlog and grew its security subscriptions. Chief executive Eyal Harari lifted the middle of the full-year revenue forecast by $0.5 million, which by our math points to 14% growth in the fourth quarter.
| Revenue | $30.6M +16% from a year ago |
|---|---|
| Subscription security recurring revenue (ARR) | $38.8M +41% from a year ago |
| Operating margin, excluding one-offs | 12.9% 14.0% a year ago |
| Full-year revenue outlook | Raised $0.5M middle of the range: 15% growth |
⚖️ Verdict: 🟢 Bullish
The story got better because quarterly additions to subscription recurring revenue sped up to $2.7 million, breaking a two-quarter slide. Allot also started buying back stock as its cash pile reached $112 million. One caution: operating margin excluding one-offs fell by 1.2 percentage points from a year ago because general overhead rose faster than sales, and ten customers still drive 57% of revenue.
The question now is whether subscription security additions can stay near $3 million a quarter while deferred revenue draws down on equipment deliveries. Either newer telecom partners keep lifting subscription additions and replace the backlog, or growth slows once the large equipment deals finish shipping. Fourth-quarter recurring revenue additions and the deferred revenue balance will tell.
🐂 Bull Case
New Security Subscriptions Stopped Slowing
Allot sells cybersecurity software through telecom carriers under a subscription model it calls Security-as-a-Service, or SECaaS. Chief executive Eyal Harari said its annual recurring revenue, or ARR — the yearly value of active subscriptions — grew 41% from a year ago to $38.8 million.
The headline growth rate slowed from 44% last quarter because the total base is larger, so the quarterly addition tells the real story. By our math, Allot added $2.7 million of new recurring revenue this quarter, which broke a two-quarter slide from $3.2 million in the fourth quarter to $2.4 million in the second.
What to watch: fourth-quarter recurring revenue additions. Holding additions at or above $2.7 million would show that carrier customer sign-ups are expanding beyond last year's initial Verizon rollout.
Backlog Started Turning Into Product Sales
Alongside security subscriptions, the Israeli company sells network traffic equipment and software, which it calls SMART. "The SMART product growth follows our high level of backlog which we are converting into revenue, following our recent significant wins," Harari said.
Products and professional services revenue rose 14.4% from a year ago to $11.1 million, by our math, making it the largest revenue line at 36% of the total. Because Allot shipped these orders, deferred revenue — cash collected in advance for undelivered work — dipped by $2.0 million during the quarter to $52.0 million.
What to watch: fourth-quarter product sales against the change in deferred revenue. Steady deferred revenue alongside growing product deliveries would show that new orders are replacing shipped equipment.
Cash Reached $112M and Buybacks Began
Allot generated $7.4 million of operating cash flow in the third quarter, up 85% from $4.0 million a year ago. After spending $0.4 million on equipment, free cash flow reached $7.0 million by our math, or 22.9% of sales.
That cash generation lifted total cash, bank deposits and marketable securities to $112 million, up $24 million since December with zero debt. The network intelligence provider also started using the $40 million buyback plan it approved in June, spending $1.6 million to repurchase shares during the quarter.
What to watch: quarterly buyback spending in the fourth quarter. A faster repurchase pace would help shrink the share count after last year's stock issuance.
🐻 Bear Case
Overhead Costs Pushed Operating Margin Down
"Allot is now a sustainably profitable company, and we continue to expand our profitability as we grow our business," Harari said. Standard operating profit did rise from $2.2 million to $2.8 million, because stock-based compensation fell.
Excluding one-offs, profitability shrank compared with a year ago even though revenue grew 16%. Operating profit excluding one-offs rose only 6% to $3.9 million, so the operating margin fell by 1.2 percentage points to 12.9%.
- General and administrative overhead, excluding one-offs: 12.2% of revenue, up 2.4 percentage points from a year ago by our math
- Sales and marketing costs, excluding one-offs: 26.7% of revenue, down 2.4 percentage points by our math
- Profit per share, excluding one-offs: $0.09, down from $0.10 a year ago because diluted shares rose 14.8% after last year's stock offering
What to watch: general and administrative spending as a share of revenue next quarter. A drop back toward 10% would show that third-quarter overhead carried temporary costs rather than a higher cost base.
Ten Customers Still Drive 57% of Sales
Allot relies on large equipment orders from telecom operators, which makes its regional sales and customer mix swing widely from quarter to quarter. The top 10 customers accounted for 57% of revenue in the third quarter, matching the second quarter and up from 41% for full-year 2025.
Regional revenue shifted just as sharply by our math. Sales in the Americas fell 28% from a year ago and 32% from last quarter to $5.8 million, while Asia Pacific sales rose 85% from a year ago to $10.0 million.
What to watch: top-10 customer share in the fourth quarter. A drop below 50% as subscription security grows would reduce the risk of a single carrier pausing orders.
Risks this quarter didn't answer
Several standing risks around order visibility, partner reliance and input costs could not be checked from the earnings release alone.
- Remaining performance obligations (contracted backlog): promised for the mid-year report, which is not in the release; the filing or conference call will test it.
- Telecom partner concentration in SECaaS: the release does not state how much of the $2.7 million recurring revenue addition came from Verizon versus newer carrier launches.
- Hardware component costs and currency headwinds: non-GAAP gross margin held at 71.9%, down 0.4 percentage points from a year ago, with no breakdown of server memory inflation or Israeli shekel impact.
👓 Other Themes
AI Threats Drive New Connected-Device Security
Harari said that as attackers "use AI to target individuals and businesses at-scale", telecom operators face growing demand to protect their subscribers at the network level. During the quarter, the company released a new product through "our recent launch of Allot IOT security" to protect connected consumer devices, though the release did not give early customer counts or revenue figures.
💲 Other KPIs
Total deferred revenue — cash billed in advance for service and equipment not yet delivered — rose 91.5% from $27.1 million a year ago, by our math. After climbing for four straight quarters on upfront customer payments, the balance dipped by $2.0 million from the second quarter as Allot shipped network equipment.
Uncollected customer bills rose 15.1% from the second quarter and 66.0% from $17.5 million at the end of 2025, by our math, outpacing nine-month revenue growth of 15.1%. The increase reduced third-quarter operating cash flow by $3.8 million.
Diluted shares excluding one-offs rose 14.8% from 44.6 million a year ago after the cybersecurity provider issued stock in 2025 to pay off debt. Compared with the second quarter, the count barely moved even after $1.6 million of share buybacks.
🔮 Guidance
Raised. Harari noted the company is "raising the midpoint of our guidance for 2026 and narrowing the range to between $116 million and $118 million", lifting the middle of the range by $0.5 million to 14.7% full-year growth. By our math, that leaves $32.25 million for the fourth quarter, or 13.6% growth from a year ago versus 15.8% in the third quarter. It is the second raise this year, after a $1.5 million increase last quarter.
Unchanged. Management still plans for subscription security sales to grow more than 40% this year, which requires at least $37.5 million for the full year by our math. With $28.0 million already recorded in the first nine months, the floor leaves $9.5 million for the fourth quarter — 17.5% growth from a year ago and below the $9.9 million Allot just reported in the third quarter.
❓ Key Questions
What was the contracted order backlog at mid-year?
Management previously committed to publishing remaining performance obligations in its annual mid-year report. Because deferred revenue fell by $2.0 million this quarter, investors need the full backlog figure to see whether new equipment orders are replacing shipped ones.
Why did general and administrative overhead jump in Q3?
Overhead excluding one-offs rose 44% from a year ago to $3.7 million, taking 2.4 percentage points off the operating margin. Management did not say in the release whether this came from a stronger Israeli shekel, legal fees or permanent hiring.
Which telecom partners drove the $2.7M recurring revenue addition?
New subscription security additions picked up from $2.4 million in the second quarter to $2.7 million. Knowing how much came from Verizon versus newer carrier launches will show whether subscription growth is broadening across partners.
Why did trade receivables climb 66% in nine months?
Net trade receivables reached $29.0 million, up from $17.5 million in December, while revenue grew 16% this quarter. A breakdown of payment terms on the large network equipment deals would clarify when those bills turn into cash.