NETGEAR (NTGR) Up 5.6% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for NETGEAR, Inc. (NTGR). Shares have added about 5.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is NETGEAR due for a pullback? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for NETGEAR, Inc. before we dive into how investors and analysts have reacted as of late.

NETGEAR Q4 Earnings Beat Estimates

NETGEAR reported fourth-quarter 2025 non-GAAP earnings per share (EPS) of 26 cents compared with the Zacks Consensus Estimate of 5 cents. The company reported a non-GAAP loss of 6 cents per share in the year-ago quarter. 

NETGEAR generated net revenues of $182.5 million, beating the consensus estimate by 2.9% and surpassing its guidance of $170-$185 million. Revenues were flat year over year and down 1.1% sequentially. The higher-margin enterprise segment buoyed the performance, benefiting from ASP and unit growth in ProAV-managed switch products.

At the end of 2025, NETGEAR now has 558,000 recurring subscribers and more than $40 million in annual recurring revenues driven by the Armor security offering. 

Management renamed the NETGEAR for Business segment to NETGEAR Enterprise. From the fourth quarter of 2025, the company is reporting revenues under two segments, NETGEAR Enterprise and NETGEAR Consumer. 

For 2025, revenues were up 3.8% to $699.6 million, while non-GAAP EPS came in at 44 cents in contrast to a loss of 91 cents in 2024. The enterprise segment revenues were up 18.8%.

However, management noted that DDR4 memory shortages are an escalating and uncertain risk, particularly in the second half of 2026. While the company expects to largely mitigate gross margin impact in the first half, it emphasized that the second-half outcome is uncertain, especially for the consumer segment, where memory represents a significantly higher percentage of bill of materials than the enterprise segment.

Government shutdown and softening demand within the Consumer segment amid pricing pressures from electronics makers, who are dealing with the higher cost of memory, will result in about a 35% year over year decline in revenues from Service Provider and related products in the first quarter. End-user demand for ProAV switches is expected to be strong. 

As a result, the first-quarter revenues are projected to be between $145 million and $160 million.

Quarter in Details

Driven by the ongoing momentum for ProAV managed switch products (demand up double-digit year over year), revenues from the Enterprise segment jumped 10.6% to $89.4 million. The company has added more than 150 partners to its AV ecosystem in the year. 

The company is also navigating supply-chain headwinds to boost supply and lower backlog, and still anticipates returning to an optimal inventory position in the first quarter of 2026.

The Consumer segment’s revenues of $93.1 million fell 8.4% year over year and 0.7% sequentially. Weakness in sales to Service Providers and associated products, which declined 30% year on year, proved a drag. Excluding this, the core Consumer business was up 1.6%, driven by strength in WiFi 7 routers and mesh systems. 

Our estimates for Enterprise, Home Networking and Mobile (together comprise Consumer) stood at $88.5 million, $67.7 million and $21.1 million, respectively. 

Region-wise, net revenues from the Americas were $123.9 million (68% of total revenues), up 0.8% year over year. Europe, the Middle East and Africa generated revenues (20%) were $36.2 million, up 0.7%. Revenues from the Asia Pacific region (12%) fell 5.2% year over year to $22.4 million.

Margin Details

The gross margin performance gained from improved mix of the higher-margin Enterprise business and Wi-Fi 7 products (within the consumer business), along with the license acquisition (a perpetual license for the operating system powering AV line managed switches in the fourth quarter). 

The adjusted gross margin increased year over year to 41.2% from 32.8%. Enterprise segment non-GAAP gross margin came in at 51.4%, up 750 basis points (bps) from the prior-year quarter. Consumer segment non-GAAP gross margin also improved 750 bps year over year to 31.4%, driven by favorable mix of Wi-Fi 7 products and strength in the higher-margin direct-to-consumer channel. 

The non-GAAP operating income was $5.95 million against an operating loss of $4.16 million in the year-ago quarter.

Non-GAAP operating expenses were $69.2 million, up 8.3% year over year, due to hiring plans.

Cash Flow & Liquidity

For the quarter ended Dec. 31, 2025, NETGEAR had $19.5 million in cash from operations.

The company also had $323 million in cash and cash equivalents, and short-term investments, as well as $250.2 million of total current liabilities.

NETGEAR repurchased shares worth $15 million in the quarter under review. In 2025, the company bought back $50 million worth of shares. The company has 1.5 million shares left under its existing authorization.

Guidance

Gross margin is expected to witness a 100-bps headwind stemming from the rising cost of memory. 

The GAAP operating margin is forecasted between (16.3)% and (13.3)%. The non-GAAP operating margin is estimated to be (6)% to (3)%. 

GAAP tax expenses are anticipated to be a benefit of $1 million to $2 million, with non-GAAP tax expenses between $0.3 million and $1.3 million. 

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -44.14% due to these changes.

VGM Scores

At this time, NETGEAR has a average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a score of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, NETGEAR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

NETGEAR is part of the Zacks Communication - Components industry. Over the past month, Lumentum (LITE), a stock from the same industry, has gained 29%. The company reported its results for the quarter ended December 2025 more than a month ago.

Lumentum reported revenues of $665.5 million in the last reported quarter, representing a year-over-year change of +65.5%. EPS of $1.67 for the same period compares with $0.42 a year ago.

Lumentum is expected to post earnings of $2.25 per share for the current quarter, representing a year-over-year change of +294.7%. Over the last 30 days, the Zacks Consensus Estimate has changed +44.8%.

Lumentum has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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This article originally published on Zacks Investment Research (zacks.com).

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