Calix (CALX) Rosenblatt 6th Annual Age of AI Technology Summit summary

Strategic platform evolution and AI integration

• Transitioned to a third-generation cloud platform leveraging Google Cloud and embedded AI, enabling greater scalability, cost efficiency, and Agentic workflows for productivity gains.

• Agentic workflows empower service providers to increase productivity, expand into larger and international markets, and offer private cloud instances for large telcos.

• Migration from the second- to third-generation platform completed in Q1, clearing the way for new Agentic capabilities and future growth.

• The new architecture supports international expansion by enabling single-tenant, private cloud deployments for large customers.

• AI-driven platform accelerates customer sub growth and enables new service offerings, such as SmartMDU, SmartTown, and SmartBiz.

Financial performance and margin outlook

• Q1 marked a low point due to dual cloud costs; Q2 expected to return to Q4 margin levels, with record gross margins likely in Q3.

• Software and services gross margins are projected to recover to the low 60s in Q2 and potentially reach prior peaks by Q3.

• Hardware margins face a 200 basis point headwind in 2024 due to rising memory prices, with normalization expected by 2027.

• Revenue growth is broad-based, supported by both price increases (passed through without margin stacking) and expanding customer footprint.

• RPOs are expected to accelerate in the back half of the year as Agentic workflows demonstrate value and customer adoption increases.

Market dynamics and competitive positioning

• Demand is strong across all customer tiers, with increased activity driven by competitive threats like Starlink and a focus on subscriber experience.

• The company claims a unique position in the market, with rapid innovation cycles and a comprehensive technology stack that competitors lack.

• Churn is virtually nonexistent due to high operational value and efficiency delivered to customers.

• The BEAD program is expected to provide incremental growth from 2026 onward, but current growth is not dependent on BEAD funding.

• MDU (multi-dwelling unit) market is a key growth vector, with a $10 billion TAM and potential to double business size.