Ribbon sees sales potential with U.S. enterprise, government customers
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Ribbon Communications likes its chances in the enterprise and U.S. federal government market segments, both of which continue to drive new IP transitions.
Speaking to investors during its second-quarter earnings call, Bruce McLelland, CEO of Ribbon, said its momentum with enterprise and federal government customers would cushion the blow of a dip in service provider sales.
“We expect higher sales to a variety of enterprise and U.S. federal customers, offsetting lower shipments this quarter to U.S. Tier 1 service providers,” he said. “Verizon deployments are expected to continue at a robust pace with strong professional service revenue, but lower equipment and software revenue this quarter.”
However, McLellan added that due to the nature of the Verizon program, there’s plenty of room to grow, including when it completes its acquisition of Frontier next year.
“We're still early in the initial phase of this multiyear program with significant opportunity for multiple years beyond this, as well as a significant potential opportunity as Verizon completes its acquisition of Frontier,” McLelland said.
Government, private network momentum
In North America, Ribbon continues to see momentum with federal government agencies and other new vertical segments, such as utilities and transportation.
“We have two different initiatives, one focused on voice modernization with many of the large DoD agencies, and have a significant pipeline and a series of programs going there,” McLelland said. “And we are starting to see several key wins in the U.S. for critical infrastructure, energy companies, transportation, those sorts of areas.”
Like other vendors, Ribbon continues to pursue government-related programs through channels, including systems integrators and specialty providers.
“There has been, quite obviously, a renewed focus in that space on ensuring that every dollar spent is used efficiently and reducing overhead,” McLelland said. “This involves streamlining technology to get it into the hands of agencies and optimizing the sales process.”
While the government vetting process can cause delays in buying decisions, McLelland maintains it “plays to the strength of the technology OEMs and makes our products more cost-effective and achieves the goals that the government is trying to focus on here.”
Eying new IP optical opportunities
Another key area for Ribbon is IP Optical. Ribbon forecasted 5% to 10% year-over-year growth for the IP Optical sector in the third quarter.
McLelland said that in the North American market, the focus is on working with new customers in the utility industry and smaller service providers who are rolling out fiber networks.
“In North America, we're continuing to build momentum with both critical infrastructure and regional service providers tied to the growth in fiber networks,” he said. “We're also effectively leveraging our IP routing portfolio to differentiate our voice core platform further, creating opportunities to land and expand inside major service provider networks.”
The latest product in its pipeline is the new modular Neptune 2714 router, which was recently introduced and is expected to be generally available this quarter.
While he could not cite specific customers, McLelland said, “We have a healthy sales funnel and trials underway and have secured our first win” for the Neptune 2714 router.
Optical and cloud revenues rise
During the second quarter, Ribbon saw growth in its Cloud & Edge and optical segments.
In its Cloud & Edge business, Ribbon generated revenues of $137 million, representing a 24% year-over-year increase and a $29 million increase from the first quarter.
“We continued to deliver impressive growth in the second quarter as we executed strongly with our service provider and U.S. federal agency customers, maintaining the network transformation momentum that we've created,” said John Townsend, CFO of Ribbon.
Ribbon’s IP Optical Networks results recorded second-quarter revenue of $84 million, a 2% increase versus the prior year.
Ribbon’s overall second-quarter revenue rose 15% year over year to $221 million, exceeding guidance.
During the quarter, the company announced a new stock repurchase program, expecting to utilize a portion of its free cash flow over the next several years to repurchase up to $50 million of its common stock.
“We had an exceptional quarter, generating revenues of $221 million, an increase of 15% from the prior year and above the top end of the guidance we gave during our Q1 earnings call. “Our financials reflect the operational momentum that we have built within the business.”
Looking toward the third quarter of 2025, Ribbon has forecast revenue of $213 million to $227 million. Its 2025 projections remain unchanged.
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Sean Buckley
Sean is responsible for establishing and executing the editorial strategy of Lightwave across its website, email newsletters, events, and other information products.