Calix (CALX) Q3 2025: RPOs Up 20% as Platform Flywheel and AI Monetization Accelerate
Calix delivered its fifth straight quarter of sequential revenue growth and a 20% YoY jump in remaining performance obligations, fueled by broad-based customer wins and deep investments in platform innovation and AI-driven managed services. Gross margin hit a new high as the company leverages its agentic AI roadmap and diversified customer base to drive recurring revenue and operational scale. The outlook signals continued platform expansion, with AI and government broadband funding set to unlock incremental upside in 2026 and beyond.
Summary
- Platform Monetization Shifts: AI agent rollout and managed services deepen recurring value across the customer base.
- Broad-Based Demand Resilience: No single customer or segment dominates, insulating growth against concentration risk.
- AI and BEAD Funding Set Up 2026: Accelerating AI deployment and government broadband programs prime the flywheel for further upside.
Performance Analysis
Calix posted record revenue and its fifth consecutive quarter of sequential top-line growth, underpinned by robust demand from both new and existing customers. Remaining performance obligations (RPOs, a measure of contracted but unrecognized revenue) grew 2% sequentially and 20% year-over-year, reaching $355 million, with current RPOs up 28% YoY. This reflects not only ongoing platform adoption but also the stickiness of Calix’s managed services and cloud offerings.
Gross margin reached an all-time high for the seventh straight quarter, climbing to 57.7% on the back of higher software content and operational leverage. Free cash flow remained solid at $27 million, marking the tenth consecutive quarter of eight-figure cash generation, while cash and investments climbed to a record $340 million. Notably, no single customer contributed more than 10% of revenue, highlighting a diversified demand profile across Calix’s nearly 1,200-customer base.
- Competitive Displacement Drives Growth: Medium and large customer cohorts grew over 50% YTD, with much of the gain coming from switching away from legacy competitors.
- Managed Services Model Expands: 20 new customers adopted the Calix platform this quarter, broadening the recurring revenue base.
- AI Investment Accelerates: Operating expenses will rise to fund AI agent and platform functionality, but management expects to remain within its target model by end of 2026.
Calix’s ability to deliver sequential growth, margin expansion, and durable cash flow—while investing in next-gen AI and platform capabilities—positions it as a structural winner in broadband enablement.
Executive Commentary
"At Connections, we officially launched the Calix agent workforce, our end-to-end integration of agentic AI into everything that we do via our third-generation platform that will launch in partnership with Google this quarter. This marks the next stage in our company's ongoing evolution to help our customers simplify operations and go to market and innovate with our platform, enabling them to grow for their members, investors, and the communities they serve."
Michael Weening, President and Chief Executive Officer
"Our overperformance relative to our guidance reflected continued robust broad-based deployments from our BXP customers as they added new subscribers and footprint expansion as they continued to choose Calix for network upgrades, new builds, and competitive displacements. RPOs grew 2% sequentially to a record $355 million and increased 20% year-over-year."
Corey Sindelar, Chief Financial Officer
Strategic Positioning
1. Agentic AI and Platform Flywheel
Calix is leveraging 15 years and $2 billion of platform investment to embed agentic AI into its cloud and managed services stack, enabling customers to automate broadband operations and accelerate subscriber growth. The company’s AI agent workforce, developed in partnership with Google, is positioned to transform customer success from advisory to action, driving higher revenue per subscriber and lower churn for service providers.
2. Diversified Customer Base and Demand Visibility
With nearly 1,200 customers and no concentration risk, Calix’s growth is broad-based across small, medium, and large segments. This diversification insulates the business from volatility in any single account or region. New wins, competitive displacements, and expansion into untapped markets (like MDUs, or multi-dwelling units) create a durable pipeline for both hardware and recurring software revenue.
3. Managed Services and Recurring Revenue Expansion
The company’s managed services model—anchored by Access Edge (network consolidation), Experience Edge (premises intelligence), and Calix Cloud (workflow automation)—is driving up RPOs and recurring revenue. As AI agents automate more workflows, Calix expects to accelerate adoption of its three-cloud solutions across the customer base, deepening wallet share and long-term margin expansion.
4. International and Tier 1 Expansion
The upcoming third-generation platform, built with Google Cloud, opens new geographies and Tier 1 customer opportunities, including sovereign data center support and dedicated platform instances. These initiatives are not yet in the near-term guidance, but management expects them to be incremental growth levers as adoption ramps in late 2026 and beyond.
5. Government Broadband Funding (BEAD) Catalyst
Calix is now proactively discussing the BEAD (Broadband Equity, Access, and Deployment) program, which will begin to flow in 2026. While the addressable market has narrowed (now estimated at $30 billion with matching funds), fiber remains the dominant technology. Calix expects to benefit both from network build-outs and the incremental subscribers passed during deployments—expanding its total addressable market beyond the funded footprint.
Key Considerations
This quarter marks an inflection for Calix, as the company executes on both platform monetization and operational leverage while preparing for major catalysts in AI and broadband funding. Investors should weigh the following:
Key Considerations:
- AI Agent Monetization Model: Calix will monetize AI not only via direct charges, but by accelerating customer subscriber growth and upselling managed services, which expands recurring revenue and margin.
- Gross Margin Expansion Moderation: After a record year, gross margin growth will be at the lower end of the 100-200 basis point target in 2026 as software content continues to rise.
- BEAD Funding Upside: The company now expects BEAD dollars to begin contributing in 2026, with a “lens-shaped” deployment curve and significant incremental TAM from adjacent, non-funded subscribers.
- RPO and International Growth Not Yet in Guidance: Neither international expansion nor Tier 1 wins are included in the 10-15% growth model, representing potential upside as these initiatives scale.
Risks
Execution risk remains around the pace of AI agent adoption and the timing of BEAD funding deployment, both of which are subject to customer readiness and government processes. Permitting and labor constraints could slow network build-outs, while any delays in international or Tier 1 platform adoption could push out revenue realization. Management flagged no acute supply chain pressures, but noted memory cost inflation as a minor offset.
Forward Outlook
For Q4 2025, Calix guided to:
- Revenue between $267 million and $273 million (2% sequential growth at the midpoint)
- Non-GAAP gross margin to increase slightly from Q3, exceeding the high end of the 100-200 basis point annual target
For full-year 2025, management expects:
- 20% revenue growth over 2024
- Gross margin improvement above the target range
Management emphasized that AI investment will increase OpEx in early 2026, but expects to return to the target model by year-end. BEAD revenue is now expected to begin modestly in 2026, with a ramp-up as programs mature.
- Continued broad-based demand with no single customer or segment driving results
- Accelerated AI agent rollout and managed services adoption
Takeaways
Calix’s platform strategy is now translating into tangible operating leverage, recurring revenue growth, and a widening competitive moat. The AI flywheel and government funding tailwinds are set to expand the company’s addressable market and deepen customer relationships, while a diversified base protects against downside volatility.
- Platform Monetization: AI agents and managed services are moving Calix up the value chain, unlocking new recurring revenue streams and margin expansion.
- Demand Durability: Broad-based customer wins and competitive displacements drive sequential growth, with no single point of failure in the model.
- 2026 Catalysts: BEAD program funding and international/Tier 1 expansion are not yet in the outlook, representing potential upside as execution accelerates.
Conclusion
Calix’s Q3 results and forward guidance underscore a business model at scale, with platform investments and AI integration now driving sustainable growth and margin gains. The company’s ability to translate technology leadership into operational and financial outperformance positions it to benefit from both near-term adoption and long-term broadband infrastructure tailwinds.
Industry Read-Through
Calix’s results send a clear signal that broadband enablement is entering a platform-first, AI-driven era, with managed services and operational automation becoming table stakes for service providers. The company’s success in embedding AI into workflows and monetizing through customer outcomes, rather than simple software upsell, raises the bar for competitors. The evolving BEAD funding landscape also highlights the importance of having a diversified customer base and the flexibility to capture incremental TAM as government dollars flow. For the broader telecom and cloud infrastructure sectors, Calix’s execution illustrates the value of deep vertical expertise and workflow automation in unlocking recurring revenue and margin expansion.