Netgear, Inc. Connects With a Beat Despite Service Provider Weakness

Netgear's Arlo wireless security cameras and Nighthawk routers drove a "stellar" retail performance in Q2. Image source: Netgear.

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Netgear Inc.(NASDAQ: NTGR) released second-quarter 2016 results Wednesday after the market close, exceedingexpectations for the fifth consecutive quarter. With shares up around 7% in after-hours trading and touching a fresh 52-week high as of this writing, let'stake a closer look at what drove Netgear's strength in Q2.

Netgear results: The raw numbers


Q2 2016 Actual

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Q2 2015 Actual

Growth (YOY)


$311.7 million

$288.8 million


GAAP net income

$16.0 million

$3.7 million


GAAP earnings per share




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    Data source: Netgear.

    What happened with Netgear this quarter?

    What management had to say

    Lo added:

    We were pleased with our financial results for the second quarter of 2016, which came in higher than we had expected in revenue and non-GAAP operating margin. The Retail Business Unit and Commercial Business Unit both outperformed expectations by posting sequential growth despite typically slower second quarter seasonality. Overall, our financial results reinforce that the Company is on a strong trajectory in 2016.

    Looking forward

    For the current quarter, Netgear anticipates revenue of $315 million to $330 million, representing a year-over-year decline of 7.9% to 3.5%. This range accounts for back-to-school seasonality in the retail business unit, but also reduced service provider sales. Third-quarter adjusted operating margin is expected to be in the range of 10.5% to 11.5%.

    It's undeniably impressive that Netgear was able to exceed its guidance even as the lumpy service provider business under-performed last quarter. With shares now up more than 20% year to date, and with the lucrative back-to-school season right around the corner, Netgear's thriving retail business has a chance to continue running up the score from here. All things considered, I think Netgear investors have every right to celebrate today.

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