Allot (ALLT) Q3 2025: CCaaS Revenue Surges 60%, Cybersecurity Share Nears 30% of Business
Allot delivered its strongest operating profit in over a decade as Cybersecurity-as-a-Service (CCaaS) revenue soared 60% and now approaches 30% of total sales, marking a pivotal mix shift. The company’s cybersecurity-first strategy is translating into both top-line and margin expansion, with recurring revenue and backlog providing enhanced forward visibility. Management’s guidance raise and commentary point to a durable inflection, as CCaaS momentum and smart platform wins set the stage for continued profitable growth into 2026.
Summary
- Cybersecurity-First Strategy Accelerates: CCaaS now nearly a third of revenue, driving margin and ARR growth.
- Recurring Revenue Mix Expands: Subscription-based sales reach 63%, underpinning improved cash flow and visibility.
- 2026 Positioned for Profitable Growth: Robust backlog and pipeline support management’s optimistic outlook.
Performance Analysis
Allot posted a 14% year-over-year revenue increase to $26.4 million, marking the company’s first double-digit growth in several years. The standout driver was Cybersecurity-as-a-Service (CCaaS), a subscription platform for network operators, which grew 60% year-over-year and now represents 28% of total revenue. This mix shift is significant, as CCaaS carries higher recurring revenue and margin potential compared to legacy hardware and network intelligence offerings.
Gross margin improved to 72.2%, and operating expenses were tightly managed, resulting in non-GAAP operating income of $3.7 million—more than tripling from the prior year. Recurring revenue, defined as predictable subscription and service contracts, climbed to 63% of total sales, up from 58% a year ago. Operating cash flow was positive for the third consecutive quarter, and the balance sheet remains debt-free with $81 million in cash and equivalents.
- CCaaS Expansion Outpaces Core: CCaaS ARR reached $27.6 million, reflecting broad customer adoption and new launches, especially in the Americas.
- Smart Platform Contributes to Growth: Network intelligence solutions, including Terra 3, delivered new wins and backlog, supporting the unified cybersecurity platform narrative.
- Regional Sales Mix Shifts: Americas revenue increased, with notable smart product orders and growing CCaaS traction in the US market.
Allot’s improving profitability is a direct result of its strategic pivot toward recurring, high-margin cybersecurity services, with both new and existing customers driving ARR growth. The company’s ability to maintain cost discipline while scaling SaaS and smart platform revenues is translating into sustainable earnings leverage.
Executive Commentary
"We reported double-digit year-over-year revenue growth for the first time in multiple years, continued strong CCaaS momentum and our highest level of operating profitability in over a decade. As each quarter passes, CCaaS is becoming an ever more important part of the revenue pie, and it made up 28% of our revenues in the quarter."
Eyal Harari, CEO
"Recurring revenue continue to grow as a percentage of our overall revenue, standing at 63% in Q3 2025 versus 58% in Q3 2024...We reported $4 million positive operating cash flow in the third quarter, representing the third quarter in a row that we are generating positive operating cash flow."
Liat Nahum, CFO
Strategic Positioning
1. Cybersecurity-as-a-Service (CCaaS) Momentum
CCaaS, a managed cybersecurity platform for telecom operators, is now the primary growth engine, with ARR up 60% year-over-year. Management highlighted new customer launches and the debut of Off-Net Secure, extending protection beyond operator networks and creating always-on security for end users. This product innovation drives both higher adoption rates and new upsell opportunities, reinforcing operators’ roles as trusted digital security providers.
2. Smart Platform and Network Intelligence
Smart, Allot’s network analytics and intelligence suite, continues to win new customers and contribute to higher backlog. The Terra 3 product line, integrated into the broader cybersecurity platform, is creating competitive differentiation, especially as telco capex remains tight. Management emphasized that Smart is being sold as part of a unified platform, leveraging technology enhancements and visibility tools to unlock new sales opportunities and improve retention.
3. Recurring Revenue and Cash Flow Focus
Subscription-based recurring revenue reached 63% of total sales, a key milestone that underpins both cash flow stability and margin expansion. The company’s ability to generate positive operating cash flow for three consecutive quarters, alongside a net cash position, provides ample resources to fund growth initiatives and weather industry cyclicality.
4. Geographic Expansion and Go-to-Market Execution
Americas sales growth was a highlight, with both smart and CCaaS products contributing. Management’s renewed go-to-market focus, including support for partner marketing campaigns and consulting on best practices, is helping operators drive adoption and expand the addressable subscriber base. New customer wins in both regions and product lines signal a broadening pipeline and improved sales execution.
Key Considerations
Allot’s third quarter results mark a clear inflection in its business mix and strategic trajectory, with cybersecurity now at the core of both growth and profitability. The company’s execution on product innovation, customer launches, and recurring revenue conversion is translating into tangible financial leverage and improved visibility.
Key Considerations:
- Mix Shift to Cybersecurity: CCaaS’s growing share of revenue is driving higher margins and recurring revenue, reducing reliance on legacy hardware sales.
- Backlog and Visibility: Robust backlog and pipeline in both CCaaS and smart platforms provide confidence in sustained growth into 2026.
- Customer Adoption Drivers: Product enhancements like Off-Net Secure and consultative go-to-market support are accelerating customer onboarding and upsell opportunities.
- Operating Discipline: Flat operating expenses and R&D grants are supporting profit expansion even as the company invests in new capabilities.
Risks
Allot remains exposed to telco industry capex cycles, and while CCaaS is scaling, the competitive landscape for both cybersecurity and network intelligence remains dynamic. The company’s growth is also contingent on successful customer launches and adoption rates, which can be influenced by partner execution and end user demand. Any slowdown in operator spending or increased competitive pricing pressure could impact growth and margin sustainability.
Forward Outlook
For Q4 2025, Allot guided to:
- CCaaS ARR growth surpassing 60% year-over-year
- Full-year revenue between $100 and $103 million (raised from prior guidance)
For full-year 2025, management raised guidance:
- CCaaS to approach 30% of total revenue by year-end
- Continued positive operating cash flow and profitability
Management highlighted several factors that underpin its outlook:
- Strong backlog and pipeline in both core product lines
- Broad-based customer adoption and new launches, especially in the Americas
Takeaways
Allot’s Q3 2025 results confirm a business model inflection, with cybersecurity now the primary engine of growth and profitability. The company’s focus on recurring revenue, product innovation, and disciplined execution is delivering both margin expansion and improved visibility, positioning it for continued outperformance.
- Cybersecurity Drives Profitable Growth: The CCaaS business is scaling rapidly, underpinning both revenue and margin gains as adoption broadens.
- Recurring Revenue and Cash Flow Strengthen: Subscription-based sales and sustained cash generation provide a foundation for future investment and resilience.
- 2026 Watchpoints: Investors should monitor the pace of CCaaS adoption, expansion of the smart platform, and execution on new product launches like Off-Net Secure as key drivers of next year’s growth trajectory.
Conclusion
Allot’s third quarter 2025 results mark a decisive pivot toward a recurring, high-margin cybersecurity business model. With CCaaS momentum accelerating, recurring revenue rising, and a robust backlog, the company is well positioned for sustained profitable growth into 2026.
Industry Read-Through
Allot’s results reinforce the secular shift among telecom infrastructure providers toward recurring, software-based cybersecurity offerings, as legacy hardware and network analytics become increasingly commoditized. The company’s ability to scale CCaaS ARR and expand recurring revenue mix offers a template for other network technology vendors seeking margin expansion and growth resilience. For the broader cybersecurity sector, Allot’s Off-Net Secure launch highlights growing demand for always-on, operator-delivered protection, signaling new opportunities for SaaS security platforms that can integrate seamlessly across fixed and mobile networks.