Ribbon Communications (NASDAQ:RBBN) reported fourth-quarter and full-year 2025 results that included record product and professional services bookings, but also revenue that fell short of management’s expectations due to customer and project delays. Executives said a number of large voice modernization orders signed in the quarter are expected to translate into revenue beginning in the second half of 2026, while near-term uncertainty around customer spending and project timing led the company to issue a cautious outlook for early 2026.
Quarterly results impacted by timing delays
Chief Executive Officer Bruce McClelland said the company entered the fourth quarter “with a sense of optimism” but operated amid a “very dynamic macro environment.” Ribbon closed multiple significant deals and achieved record product and professional services bookings, while expanding its customer base in cloud-centric voice modernization and seeing strong interest in its Acumen AIOps platform.
On a year-over-year basis, management said lower fourth-quarter sales were driven mainly by reduced sales to U.S. federal agencies, which were about $10 million lower than the prior-year quarter, along with a difficult comparison to a record fourth quarter in 2024 that included significant Verizon shipments to ramp a voice modernization project.
Full-year mix shifts: service providers up, government down
For the full year, McClelland said Verizon business increased 27% year-over-year and that, following the closure of Verizon’s acquisition of Frontier, Ribbon sees an opportunity to expand the scope of its modernization program across the Frontier footprint over the next several years.
Ribbon also described broader mix trends in 2025:
- Sales to global service providers increased 5% and represented 70% of total company sales.
- Sales to enterprise customers increased 2%.
- Sales to government and defense declined 23% and represented 9% of total sales.
Regionally, management said Americas sales were essentially flat, as reduced U.S. federal sales were offset by increased service provider business. EMEA sales were down due to reduced sales to Russia beginning in the second quarter of 2024; excluding Russia, EMEA sales were flat year-over-year. Asia-Pacific sales grew 19% on increased business in India.
Financial performance and a sizable tax benefit
Chief Financial Officer John Townsend reported fourth-quarter 2025 revenue of $227 million, down 10% year-over-year, and full-year revenue of $845 million, up 1% year-over-year. Non-GAAP gross margin in the fourth quarter was 55.4%, down 270 basis points, which Townsend attributed to lower software revenue and higher professional services revenue, as well as geographic mix that included “a very strong performance” in India. Full-year non-GAAP gross margin was 52.3%, down 355 basis points, driven by higher India sales and higher services revenue.
Fourth-quarter non-GAAP operating expenses were $90 million, down $4 million year-over-year. Full-year operating expenses were $352 million, down $9 million, reflecting reduced employee-related costs that more than offset foreign exchange pressures.
Adjusted EBITDA was $40 million in the fourth quarter, down from the prior year, and $107 million for the full year, down $12 million, driven by lower gross margin.
Townsend highlighted a deferred tax benefit recognized during the quarter of approximately $90 million related to Ribbon’s investment in ECI. He said the benefit contributed $0.50 to non-GAAP EPS and that the tax asset is expected to be utilized over the next several years, resulting in expected cash tax savings of $15 million to $20 million per year.
Non-GAAP net income in the quarter was $106 million, up $78 million year-over-year, with non-GAAP diluted EPS of $0.59. Full-year non-GAAP net income was $118 million and diluted EPS was $0.66.
Cash from operations was $29 million in the fourth quarter and $51 million for the full year, driven by collections. Ribbon ended the quarter with $98 million in cash and a net debt leverage ratio of 2.3x. The company spent $2 million in CapEx in the quarter and $15 million for the year, plus an additional $10 million related to a new Israeli facility. Ribbon also repurchased about 972,000 shares for $3.3 million in the quarter, bringing 2025 repurchases to 2.5 million shares for approximately $9 million.
Segment highlights: IP Optical growth in India; Cloud and Edge bookings set records
In IP Optical Networks, fourth-quarter revenue was $85 million, down 2% year-over-year, and full-year revenue was $333 million, up 1%. Gross margin in the quarter was 34%, down 600 basis points, driven principally by higher revenue in India. Segment adjusted EBITDA was a loss of $8 million in the quarter and a loss of $27 million for the full year.
McClelland said IP Optical was below the company’s target of mid-single-digit quarterly growth due to projects in North America that shifted into 2026, including a deployment awaiting BEAD funding, and lower EMEA sales tied to a year-end budget freeze with a government defense agency. He said those items were partially offset by continued growth in India, where fourth-quarter sales increased 28% year-over-year on deployments with Bharti and first shipments for a “new world broadband deployment.” For the full year, management said sales in India grew more than 40% and exceeded $100 million.
In Cloud and Edge, fourth-quarter revenue was $142 million, up 14% sequentially but down 14% year-over-year, while full-year revenue was $511 million, up $6 million. Fourth-quarter non-GAAP gross margin was 68%, supported by core Session Border Controller sales that Townsend said increased 10%. Cloud and Edge gross margin for the full year was 64%, down 300 basis points due to higher professional services revenue associated with transformation programs.
Management emphasized record Cloud and Edge bookings in the quarter, with a product and professional services book-to-revenue ratio of 1.5x. McClelland said Ribbon booked over $50 million of voice network transformation orders in the quarter across more than a dozen customers, excluding Verizon, and that revenue for these projects typically spreads over six to 12 months or longer for larger programs. On the call, he added that about 25% of the revenue associated with those bookings shipped in the fourth quarter, with the remainder expected to play out over roughly the next 15 months. He also noted that none of the Q4 bookings represented a three-year commitment, describing them as 12- to 15-month horizon programs.
2026 outlook: cautious near term, restructuring completed
Looking ahead, McClelland said Ribbon expects improving results as 2026 progresses, but management is taking a more conservative stance due to factors “out of our control.” He cited several near-term risks affecting timing, including shifts in investment priorities at major U.S. service providers amid elevated M&A, questions around the sustainability of India service provider CapEx intensity, and timing of U.S. federal spending and subsidy programs. Ribbon recently completed a restructuring that eliminated about 85 positions and is expected to lower annual expenses by more than $10 million.
For full-year 2026, Ribbon guided revenue to a range of $840 million to $875 million. The company projected adjusted EBITDA of $105 million to $120 million and said it expects consolidated gross margin to increase 50 to 100 basis points year-over-year. For the first quarter of 2026, Ribbon expects revenue of $160 million to $170 million and adjusted EBITDA ranging from a loss of $3 million to a profit of $1 million, reflecting what management described as a “slower than typical start” due to lower sales in India and lower maintenance revenue.
On AIOps, McClelland said Optimum remains the lead customer for Acumen and that Ribbon expects additional proofs of concept in the first half of the year, with “modest revenue” expected in the second half as customers validate operational savings. He also said Ribbon recently signed a multi-year collaboration agreement with AWS aimed at simplifying the transition of critical network services to public cloud.
About Ribbon Communications (NASDAQ:RBBN)
Ribbon Communications Inc is a global provider of real-time communications software and network solutions for service providers and enterprises. The company’s offerings address the full life cycle of voice, video and data transmission across fixed, mobile and cloud environments. Ribbon’s technology portfolio is designed to enable secure, intelligent and interoperable communications in applications such as unified communications, contact centers, wholesale VoIP interconnect and next-generation 5G networks.
Ribbon’s product suite includes session border controllers (SBCs), which secure and interwork IP voice and multimedia sessions; Diameter signaling controllers for 4G/5G policy and charging control; network edge virtualization platforms; and analytics engines for service assurance and fraud management.
