Verizon And Federal Wins Power Ribbon Communications’ Confident Outlook

Ribbon Communications (NASDAQ:RBBN) reported a strong second quarter for 2025, pushed by sturdy demand and key buyer wins. Ribbon Communications reported complete second-quarter 2025 income of $221 million, marking a 22% sequential improve and a 15% year-over-year rise, surpassing estimates by roughly $6 million.

This development was fueled by sturdy efficiency with main purchasers, together with Verizon Communications (NYSE:VZ) and U.S. federal companies, and the profitable closure of a number of beforehand delayed offers.

Regardless of some strain on gross margins as a result of a mixture of {hardware} {and professional} providers gross sales, the corporate’s Cloud and Edge section delivered record-high profitability, and its IP Optical section noticed a major enchancment in its monetary efficiency. Ribbon Communications additionally maintained its full-year outlook, forecasting continued development and profitability.

Additionally Learn: Ciena Poised For Growth On Cloud Demand, But Analysts Warn About Margin Pressure, Tariff Costs

Following the earnings report, Rosenblatt analyst Mike Genovese reaffirmed a Purchase score for Ribbon Communications and elevated his value forecast from $5.50 to $6.00. This optimistic adjustment got here regardless of a slight dip within the inventory’s buying and selling value on the day of the announcement.

Genovese highlighted that the spectacular income development was pushed by continued sturdy demand from Verizon Communications, U.S. federal companies, new wins in vital infrastructure, and Bharti Airtel in India. He stated the corporate additionally secured a brand new contract with a Tier 1 telecom operator in Southeast Asia, whereas a number of beforehand delayed offers closed through the quarter.

Home income reached $117 million, leaping 40% quarter-over-quarter and 45% year-over-year. Worldwide income got here in at $104 million, rising 6% sequentially however declining 7% in comparison with the prior yr. Genovese famous that the Cloud and Edge section delivered $137 million in income, up 27% sequentially and 24% year-over-year, which was consistent with expectations pushed by sturdy development from Verizon and authorities clients. He identified that Verizon accounted for 20% of Ribbon’s complete income and was the one buyer exceeding 10% of gross sales, because it continues to modernize its voice community.

Cloud and Edge gross margins contracted 110 foundation factors sequentially and 410 foundation factors year-over-year to 61.9%, largely as a result of the next combine {of professional} providers and {hardware} and a dip in upkeep and software program gross sales. Regardless of the margin strain, Genovese identified that the section posted a report adjusted EBITDA of $37 million.

The analyst stated IP Optical income rose to $84 million, up 13% sequentially and a couple of% year-over-year, beating estimates by 6%. Gross sales in India and North America surged over 40% year-over-year. Excluding Jap Europe, the IP Optical section posted a 5% annual improve. He famous that the section’s gross margin expanded 760 foundation factors sequentially to 35.9%, supported by stronger North American gross sales, improved combine and margins in Asia-Pacific, and higher fastened value absorption from increased quantity. The adjusted EBITDA loss for IP Optical narrowed to $5 million from a $15 million loss a yr in the past.

Firm-wide gross margin reached 52.1%, increasing 340 foundation factors quarter-over-quarter, although contracting 230 foundation factors year-over-year, lacking estimates as a result of a larger share of {hardware} and providers income, Genovese famous. The analyst stated that working margin expanded sharply to 12.5%, up 1,120 foundation factors sequentially and 300 foundation factors year-over-year, beating projections by 20 foundation factors. He famous that adjusted EBITDA totaled $32 million, representing a 433% improve sequentially and 47% development year-over-year, on the excessive finish of firm steering.

Genovese famous that administration guided third-quarter income between $213 million and $227 million, barely under prior estimates. The analyst expects IP Optical income to develop sequentially, whereas Cloud and Edge income will possible decline, primarily as a result of challenge timing with Verizon. Gross margins are projected between 53.5% and 54%, under the prior 55.9% estimate, and adjusted EBITDA is forecast between $28 million and $34 million.

The corporate reiterated its full-year 2025 outlook, sustaining income steering of $870 million to $890 million, gross margins of 54%–55%, and adjusted EBITDA of $130 million to $140 million. Nevertheless, administration famous that GMs and EBITDA are trending towards the decrease finish of these ranges as a result of stronger-than-expected product {and professional} providers gross sales and a $2 million quarterly opex influence from the weaker U.S. greenback.

Genovese famous that administration expects the fourth quarter to stay the strongest quarter of the yr, as is typical for Ribbon. Moreover, the agency anticipates $15 million to $20 million in tax financial savings following a current invoice handed by Congress.

Genovese highlighted that the Ribbon story stays engaging, particularly at a valuation of 12.5x estimated 2026 EPS. The analyst emphasised Ribbon’s capacity to climate current headwinds, equivalent to its exit from Jap Europe and timing-related delays within the Federal and Enterprise sectors, whereas constantly delivering on its steering throughout a number of quarters.

He additionally famous significant enchancment within the Cloud and Edge narrative, notably with Verizon’s shift to next-gen voice infrastructure, enhancing Ribbon’s development prospects. Moreover, Genovese famous that Ribbon may win an analogous cope with AT&T (NYSE:T), which has dedicated to totally modernizing its voice methods by 2029. He highlighted rising synergies between Ribbon’s enterprise segments, as Verizon now makes use of its routers for the Cloud and Edge improve, a sign of broader strategic alignment and alternative forward.

Value Motion: RBBN inventory is buying and selling decrease by 11.7% to $3.76 eventually verify Thursday.

Learn Subsequent:

Date	Agency	Motion	From	To
Jan 2021	B. Riley Securities	Initiates Protection On		Purchase
Oct 2019	Northland Capital Markets	Downgrades	Outperform	Market Carry out
Aug 2018	Cowen & Co.	Upgrades	Underperform	Market Carry out

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