At Needham’s 28th annual Growth Conference, executives from Allot (NASDAQ:ALLT) outlined the company’s focus on cybersecurity services for consumers and small businesses, delivered primarily through partnerships with communications service providers (CSPs). CEO Eyal Harari and CFO Liat Nahum described a business that is increasingly oriented around security-as-a-service growth while maintaining a stabilizing networking segment built on more than two decades of carrier-grade network intelligence experience.
Two business lines, with cybersecurity driving growth
Harari said Allot currently operates with two core business lines: a networking business that represents about 70% of revenue and a cybersecurity-as-a-service business (referred to as SECaaS/CCaaS during the discussion) that represents about 30%. He emphasized that the security services line has been delivering “strong double digits” growth in recent years and is increasingly influencing company-wide results as it becomes more material to overall revenue.
Momentum with major carriers and four growth drivers
Responding to questions about deal traction—including Verizon as a new security services customer—Harari said Allot’s momentum is being driven by increasing cybersecurity urgency and a gap in protection for consumers and SMBs. He argued that many traditional cybersecurity solutions are too complex or expensive for these segments and that CSPs are well positioned to offer cybersecurity as an add-on alongside connectivity.
Harari attributed Allot’s security services progress to four parallel drivers:
- New CSP partnerships: expanding the sales effort to sign additional carriers, each of which opens a new addressable base of subscribers.
- Expansion within existing CSPs: starting with one network segment (consumer vs. business; fixed vs. mobile; Wi-Fi vs. fiber) and then expanding into additional segments over time. He cited examples including Verizon expanding from protecting fixed wireless access customers to mobile business customers, and Vodafone expanding from consumer protection into home fiber networks.
- Organic growth over multi-year ramps: Harari said carrier services typically take 36 to 48 months to reach maturity as subscribers change devices and plans, creating a multi-year runway after each launch.
- Ongoing R&D and new security engines: product additions that expand the portfolio and create upsell/cross-sell opportunities, including products such as OffNet (protection when disconnected from the home network) and a firewall offering.
Harari also described CSP sales cycles as typically 12 to 24 months and said Allot prioritizes targets based on how strategically important cybersecurity is to a carrier, the value profile of its subscribers, subscriber scale, and local competitive dynamics. He added that Allot’s long-standing relationships from the networking business help open doors for cybersecurity conversations.
Compax partnership targets MVNOs with security-led differentiation
Management also discussed a newly announced partnership with Compax Ventures. Harari characterized Compax as a telco-as-a-service player focused on MVNOs (virtual carriers) rather than a traditional Tier 1 operator. He said Compax works “on top of” traditional carrier infrastructure—citing T-Mobile in the U.S. as one partner—and focuses on building community-oriented brands, primarily targeting business users.
According to Harari, Compax aims to differentiate its offerings by putting security at the center of bundled mobile plans, automatically including Allot’s security services (including DNS-based security and OffNet protection) as a strategic component rather than a simple add-on. He described the partnership as a “seed” that could contribute to Allot’s growth if Compax succeeds in building its subscriber base.
Margin profile and key KPIs
Nahum said Allot’s cybersecurity-as-a-service business typically carries gross margins around 80%, while the network intelligence segment has been around 70%. She added that as security becomes a larger portion of revenue, consolidated gross margin has been trending around the 70% range, citing Q3 as an example. She said gross margin should improve as the security mix increases, noting that analysts model potential long-run margins up to 80% if cybersecurity becomes the dominant revenue stream.
Harari said the primary KPI the company uses to track progress is security ARR. Nahum added that almost 70% of Allot’s revenue is recurring, comprised of maintenance and support on the networking side and ARR from cybersecurity services, which she said supports visibility into future results.
Networking business stability, Tera III, and visibility into 2026–2027
While cybersecurity remains the strategic focus, Harari said the networking business has shown improved stability. He described the segment as roughly half recurring revenue (support and maintenance) and half project-based product sales and professional services. He referenced a “tens of millions of dollars” traffic management win in EMEA announced several months earlier, which he said provides revenue visibility into 2026 and 2027, along with additional multi-million-dollar deals and new-logo wins.
Harari highlighted the launch of Tera III, which he called the most scalable platform in the market and capable of speeds up to 3 Tbps. He said Tera III combines multiple value-added capabilities—analytics, security, and traffic management—on one platform, which he argued improves operational efficiency for carriers facing rising network traffic driven by AI, 5G, and video consumption. He said the platform supports upgrades within the installed base and can also be competitive in new logo opportunities, including potential “swaps” from competitors.
Looking further ahead, Harari described a three-phase plan: a completed initial phase focused on turnaround, reaching break-even, and returning to growth; a 2025–2027 phase aimed at “profitable growth” largely through existing products and organic execution; and a longer-term phase focused on accelerating the company’s transformation, including expanding its cybersecurity offering and adding new channels beyond CSPs while still maintaining carriers as a core route to market.
About Allot (NASDAQ:ALLT)
Allot Ltd. is a provider of network intelligence and security solutions designed for service providers and enterprises worldwide. The company delivers software and cloud-based services that enable customers to gain real-time visibility into network traffic, enforce security policies and optimize bandwidth usage. Its platforms support a wide range of applications, from DDoS protection and threat prevention to subscriber experience management and network analytics.
Allot’s product portfolio includes managed solutions for mobile and fixed-line operators, as well as cloud-native services that can be deployed across private, public and hybrid environments.
