CALIX, INC

Results of Operations

Comparison of the Three and Nine Months Ended September 26, 2026 and September 27, 2025

Revenue

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

Our revenue increased by $36.3 million and $147.5 million during the three and nine months ended September 26, 2026, respectively, compared to the corresponding periods in 2025. The increase in appliance revenue was primarily due to the adoption of our platform, cloud and managed services by new customers as we continue to take footprint from legacy box vendors and the continued robust expansion of our appliances within our existing customer base. The increase in software and service revenue was primarily due to our CXP customers adding new subscribers. Our software is sold on a per-subscriber basis. CXPs use our platform, cloud and managed services to deliver better subscriber experiences as evidenced by best-in-class Net Promoter Scores SM, thereby allowing them to take market share.

United States revenue was $287.8 million and $830.8 million during the three and nine months ended September 26, 2026, respectively, or 95% of our revenue for both periods, compared to $249.2 million and $679.4 million, or 94% and 93% of our revenue, respectively, for the corresponding periods in 2025. International revenue was $13.9 million and $44.2 million during the three and nine months ended September 26, 2026, or 5% of our revenue for both periods, as compared to $16.2 million and $48.1 million, or 6% and 7% of our revenue, respectively, for the corresponding periods in 2025. Our primary focus has been, and in the near term is expected to be, the U.S. and Canada given our large, direct sales and marketing presence and the amount of government stimulus being invested into underserved and not-served areas of these countries. However, with the introduction of Calix Agent Workforce™, we have increased our focus on large CSPs, which includes international markets.

One customer accounted for 11% and 10% of our revenue for the three and nine months ended September 26, 2026, respectively. No customer accounted for more than 10% of our revenue for the three and nine months ended September 27, 2025.

Gross Profit and Gross Margin

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

Gross profit increased to $160.8 million and $480.2 million for the three and nine months ended September 26, 2026 from $152.0 million and $411.0 million for the corresponding periods in 2025. This increase was mainly due to the corresponding increase in revenue. Our gross margin decreased by 400 basis points for the three months ended September 26, 2026 compared to the corresponding period in 2025, primarily related to increased component memory costs. Our gross margin decreased by 160 basis points for the nine months ended September 26, 2026 compared to the corresponding period in 2025, primarily related to the increased component memory costs and a decline in our software and service gross margin, which declined by 250 basis points due to the transition in the first quarter of 2026 from our second-generation platform to our third-generation platform where we operated in a dual cloud environment to successfully support customer migrations during a portion of the respective periods.

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 26, 2026 increased by $3.3 million compared with the corresponding period in 2025 primarily due to increases in personnel expenses of $1.4 million, mostly related to increased headcount, stock-based compensation expense of $0.8 million, marketing expenses of $0.4 million, outside services of $0.4 million and software expenses of $0.4 million.

Sales and marketing expenses for the nine months ended September 26, 2026 increased by $7.4 million compared with the corresponding period in 2025 primarily due to increases in personnel expenses of $7.6 million, mostly related to incentive compensation and increased headcount, marketing expenses of $1.6 million, outside services of $1.3 million and software expenses of $1.1 million. These increases were partially offset by a decrease in stock-based compensation expense of $4.4 million.

For the three and nine months ended September 26, 2026, sales and marketing expenses as a percentage of revenue decreased to 21% from 23% and 22% from 25%, respectively, mainly due to increased revenue. 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 and approach new markets such as MDU and managed business.

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 26, 2026 increased by $7.0 million as compared with the corresponding period in 2025 mainly due to increases in personnel expenses of $4.5 million mostly related to increased headcount, outside services of $1.2 million, allocated shared services expenses of $1.1 million, facilities expenses of $0.5 million, and depreciation and amortization of $0.4 million. This increase was partially offset by a decrease in stock-based compensation expense of $0.4 million.

Research and development expenses for the nine months ended September 26, 2026 increased by $24.6 million as compared with the corresponding period in 2025 mainly due to increases in personnel expenses of $13.9 million mostly related to increased headcount, outside services of $5.6 million, allocated shared services expenses of $2.7 million, depreciation and amortization of $1.8 million and facilities expenses of $1.1 million.

For the nine months ended September 26, 2026, research and development expenses as a percentage of revenue decreased to 18% from 19% primarily due to the increase in revenue. We expect our investments in research and development to decrease in absolute dollars as we return to a more normal level of investment after we accelerated the development and delivery of Agent Workforce Cloud over the past year.

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 26, 2026 decreased by $0.7 million as compared with the corresponding period in 2025 mainly due to decreases in allocated shared services expenses of $1.4 million and personnel expenses of $0.5 million. These decreases were partially offset by an increase in depreciation and amortization of $0.8 million and outside services of $0.4 million.

General and administrative expenses for the nine months ended September 26, 2026 decreased by $2.3 million as compared with the corresponding period in 2025 mainly due to decreases in allocated shared services expenses of $3.7 million and stock-based compensation expense of $3.0 million. These decreases were partially offset by increases in depreciation and amortization of $2.6 million, facilities expenses of $0.6 million, travel expenses of $0.3 million and outside services of $0.3 million.

For the three and nine months ended September 26, 2026, general and administrative expenses as a percentage of revenue decreased to 9% from 10% and 9% from 11%, respectively, mainly due to the increase in revenue. We expect our general and administrative investments to increase in absolute dollars but 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 and nine months ended September 26, 2026, interest and other expense, net decreased by $1.4 million and $3.3 million, respectively, as compared with the corresponding periods in 2025 primarily due to a lower balance of marketable securities. We repurchased 6.3 million shares of common stock for $290.2 million using proceeds from the maturity or sale of marketable securities during the first nine months of 2026.

Income Taxes

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

For the three and nine months ended September 26, 2026, our income tax expense was $7.8 million and $18.4 million, respectively, for an effective tax rate of 43.4% and 32.3%, respectively, which differed from the statutory rate of 21% primarily due to state taxes and the effect of non-deductible stock-based compensation for executive officers offset by the favorable impact of research tax credits. The effective tax rate for the three months ended September 26, 2026 is higher than the corresponding period in 2025 primarily due to lower pre-tax earnings with a relatively similar level of non-deductible expenses and return-to-provision adjustments. The effective tax rate for the nine months ended September 26, 2026 is lower than the corresponding period in 2025 primarily due to higher pre-tax earnings with a relatively lower level of non-deductible expenses, offset by return-to-provision adjustments.

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.