Shares of Extreme Networks Inc. closed about 12% higher today after the company posted better-than-expected revenue and earnings for its fiscal first quarter.

San Jose, California-based Extreme Networks makes switches, office Wi-Fi equipment and other networking gear for enterprises. It also offers hardware for internet providers. Carriers use the company’s Extreme 9900 appliances, which are powered by customized Intel Corp. silicon, to monitor their 5G infrastructure for technical issues and cybersecurity incidents.

Alongside its hardware lineup, Extreme Networks offers a collection of software tools. One application can split a corporate network into isolated segments to make it more difficult for malware to spread between systems. Another offering, a cloud service called ExtremeCloud Business Insights for Venues, helps stadium operators optimize the Wi-Fi connectivity they provide to visitors.

Extreme Cloud’s revenue dropped 24% year-over-year, to $269.2 million in its fiscal first quarter ended Sept. 30. Nevertheless, the company managed to top the consensus estimate handily. Analysts polled by FactSheet forecast sales of $260.5 million.

The company’s subscription and support revenue segment was a major contributor to its expectation-topping results. The segment, which includes revenue from Extreme Networks’ software-as-a-service products, grew 7.3% year-over-year. The SaaS business grew particularly fast: The company says annualized recurring revenue from its cloud services jumped 23.4% to $174.1 million.

Artificial intelligence is an increasingly important focus of Extreme Networks’ SaaS product roadmap. Earlier this year, the company teamed up with Intel to enhance a suite of AI tools it provides for detecting network performance issues and breach attempts.

The growth of Extreme Networks’ SaaS business helped it top not only the consensus revenue forecast but also earnings expectations. It posted a $10.5 million net loss for the first quarter, but on an adjusted basis, that number translated into positive earnings of 17 cents per share. The consensus estimate projected 12 cents per share. 

“Our first-quarter results highlight the early stages of market recovery and upside from projects that closed earlier than anticipated,” said Chief Executive Ed Meyercord. “We expect continued sequential growth in the second quarter and revenue growth for the full year, based on the size and quality of our funnel of opportunities.”

Extreme Networks expects to end the current quarter with $273 million to $283 million in revenue. For the full year, the company is projecting sales of between  $1.13 billion and $1.17 billion, the amount it generated in fiscal 2024. 

Chief Financial Officer Kevin Rhodes detailed that “we expect continued improving operating margins and cash flow generation during this fiscal year based on the ongoing recovery in revenue and prudent management of our expenses.”

Image: Extreme Networks