CALIX, INC

Results of Operations

Comparison of the Three and Nine Months Ended September 27, 2025 and September 28, 2024

Revenue

The following table sets forth our revenue by customer size (dollars in thousands):

Our revenue increased by $64.5 million and $102.2 million for the three and nine months ended September 27, 2025, respectively, as compared to the corresponding periods in 2024. After bottoming in the second quarter last year, we have experienced sequential quarterly revenue growth. That growth has been broad based. Specifically, during the third quarter of 2025, the large-customer segment increased $25.0 million primarily due to a North American customer that increased its capital expenditures this year relative to last year and the reclassification of a small customer to the large-customer segment after being acquired by a different large customer. The medium-customer segment increased $6.2 million primarily due to increased shipments to a few customers. The small-customer segment increased by $33.3 million as BXPs focused on adding subscribers.

For the three and nine months ended September 27, 2025, United States revenue was $249.2 million and $679.4 million, or 94% and 93% of our revenue, respectively, compared to $187.1 million and $579.9 million, or 93% of our revenue for the same periods in 2024. International revenue was $16.2 million and $48.1 million, or 6% and 7% of our revenue, respectively, for the three and nine months ended September 27, 2025, as compared to $13.9 million and $45.5 million, or 7% of our revenue, for the same periods in 2024.

No customer accounted for more than 10% of our revenue for the three and nine months ended September 27, 2025 or September 28, 2024.

Gross Profit and Gross Margin

The following table sets forth our gross profit and gross margin (dollars in thousands):

Gross profit increased to $152.0 million and $411.0 million for the three and nine months ended September 27, 2025, from $110.0 million and $340.2 million during the corresponding periods in 2024. These increases were mainly due to the corresponding increases in revenue. Our gross margin increased by 250 and 210 basis points for the three and nine months ended September 27, 2025, respectively, compared to the corresponding periods in 2024, primarily related to the continued growth in our platform, cloud and managed services offerings.

Operating Expenses

Sales and Marketing Expenses

The following table sets forth our sales and marketing expenses (dollars in thousands):

Sales and marketing expenses for the three months ended September 27, 2025 increased by $8.0 million compared with the corresponding period in 2024 primarily due to increases in personnel expenses of $6.2 million, mostly related to incentive compensation and increased headcount, stock-based compensation of $1.5 million and travel expenses of $0.5 million. These increases were partially offset by a decrease in marketing expenses of $0.5 million.

Sales and marketing expenses for the nine months ended September 27, 2025 increased by $23.5 million compared with the corresponding period in 2024 primarily due to increases in personnel expenses of $14.9 million, mostly related to incentive compensation and increased headcount, stock-based compensation of $10.0 million and travel expenses of $1.6 million. These increases were partially offset by a decrease in marketing expenses of $2.0 million.

For the three months ended September 27, 2025, sales and marketing expenses as a percentage of revenue declined compared to the year ago period as revenue returned to a record level. We expect our investments in sales and marketing will increase in absolute dollars on a year-over-year basis, but decline as a percentage of revenue, as we continue to land new customers and expand our platform, cloud and managed services.

Research and Development Expenses

The following table sets forth our research and development expenses (dollars in thousands):

Research and development expenses for the three months ended September 27, 2025 increased by $1.6 million as compared with the corresponding period in 2024 mainly due to increases in stock-based compensation of $1.2 million, depreciation and amortization of $0.7 million, outside services of $0.4 million and prototypes and test equipment expenses of $0.4 million. These increases were partially offset by a decrease in personnel expenses of $0.8 million.

Research and development expenses for the nine months ended September 27, 2025 increased by $2.8 million as compared with the corresponding period in 2024 mainly due to increases in stock-based compensation of $3.2 million, depreciation and amortization of $1.6 million and prototypes and test equipment expenses of $1.2 million. These increases were partially offset by decreases in personnel expenses of $3.0 million.

For the three and nine months ended September 27, 2025, research and development expenses as a percentage of gross profit decreased to 31% from 41% and 33% from 39%, respectively, due to the increase in revenue and gross margin. We expect our investments in research and development to increase in absolute dollars and as a percentage of gross profit in the short term as we accelerate the development of AI functionality and capabilities of our platform, cloud and managed services.

General and Administrative Expenses

The following table sets forth our general and administrative expenses (dollars in thousands):

General and administrative expenses for the three months ended September 27, 2025 increased by $4.1 million as compared with the corresponding period in 2024 mainly due to increases in personnel expenses of $1.9 million, mostly related to incentive compensation and increased headcount, and stock-based compensation of $1.6 million.

General and administrative expenses for the nine months ended September 27, 2025 increased by $8.4 million as compared with the corresponding period in 2024 mainly due to increases in personnel expenses of $4.7 million and stock-based compensation of $3.9 million. These increases were partially offset by a decrease in professional services expenses of $0.8 million.

For the three and nine months ended September 27, 2025, general and administrative expenses as a percentage of revenue were relatively flat compared to the same periods in 2024. We expect our general and administrative investments to be fairly constant in absolute dollars in the near term and decline as a percentage of revenue.

Interest and Other Expense, net

The following table sets forth our interest and other expense, net (dollars in thousands):

For the three months ended September 27, 2025, interest and other expense, net was down slightly compared with the corresponding period in 2024 due to lower accretion of marketable securities. For the nine months ended September 27, 2025, interest and other expense, net increased by $0.8 million compared with the same period a year ago as we had a larger average cash balance.

Income Taxes

The following table sets forth our income taxes (dollars in thousands):

For the three and nine months ended September 27, 2025, our income tax expense was $4.7 million and $10.1 million for an effective tax rate of 23.0% and 48.6%, respectively, which differed from the statutory rate of 21% primarily due to the effect of non-deductible stock-based compensation for executive officers offset by the favorable impact of U.S. federal research tax credits and excess tax benefits from stock-based compensation. The effective tax rate for the three months ended September 27, 2025 is lower than the corresponding period in 2024 primarily due to lower return-to-provision adjustments and higher excess tax benefits from share-based compensation exercises, offset by a relatively higher level of non-deductible stock-based compensation for executive officers. The effective tax rate for the nine months ended September 27, 2025 is higher than the corresponding period in 2024 primarily as a result of higher pre-tax earnings with a relatively higher level of non-deductible stock-based compensation for executive officers.

Our income taxes may be subject to fluctuation during the year and in future years as new information is obtained. This may affect the assumptions used to estimate the interim income tax provision, including factors such as actual results differing from our estimates of pre-tax earnings in the various jurisdictions in which we operate, which could impact the recognition of our deferred tax assets, further benefits from stock option exercises, investments in our foreign operations, the recognition or de-recognition of tax benefits related to uncertain tax positions and changes in or the interpretation of tax laws in jurisdictions where we conduct business.