CRNT — Q2 2026 Financial Report Analysis

Overview

Ceragon, an Israeli maker of wireless "transport" equipment (the radio links that carry mobile traffic from cell towers back into an operator's network, used in place of laying fiber), grew second-quarter 2026 revenue 14.2% to $93.9 million, its first year-over-year increase after a weak 2025. Almost all of that growth came from India. Profit went the other way: gross margin fell to 31.7% from 34.6%, operating income dropped to $0.2 million from $2.2 million, and the net loss widened to $2.1 million. The same day, management kept its 2026 revenue guidance but cut its margin guidance for the year.

At a glance

• Revenue up 14.2% to $93.9M — but India alone rose from roughly $25M to roughly $45M (48% of sales); revenue from everywhere else fell about 15%.
• Gross margin 31.7%, down 2.9 points — of the extra $11.7M in sales, only $1.3M survived as gross profit, which the company puts down to product and regional mix plus higher material and shipping costs.
• 2026 margin guidance cut — non-GAAP operating margin now 5%–6% (was 6.5%–7.5%) on unchanged revenue guidance of $355M–$385M, so management expects the same sales to earn less.

Results

Gross margin is the share of revenue left after paying to make and deliver the product; operating margin is what's left after also paying for research, sales and administration, before interest and tax. "Non-GAAP" figures are the company's own adjusted numbers, which leave out share-based pay, amortization of acquired intangibles, restructuring and acquisition costs, and some non-cash finance items.

Compared with the first quarter, revenue rose 10.5% (from $85.0 million), but GAAP gross margin fell from 35.4% to 31.7% and non-GAAP gross margin from 36.0% to 32.2%. So the margin drop is not just a weak year-ago comparison — it happened within 2026.

Where the growth came from: India, and only India

Ceragon gives revenue by region as percentages; applying them to total revenue gives approximate dollar figures (these are our derivation, and they reconcile with the dollar figures in the company's first-half review):

India is a market where two large mobile operators buy in big, uneven waves. In Q2 2025 those orders had stalled — the company declined to reaffirm its 2025 guidance at the time, citing poor visibility in India. They are now back: Ceragon announced on July 28 that it had booked about $120 million of Indian orders year to date (up from about $86 million announced in May), mostly for its E-band radios (very high-frequency links that carry a lot of data over short distances) and its IP-50 platforms.

North America moved the other way. It was 37% of revenue in Q1 2026 (about $31 million) but only about $21 million in Q2. Management described North American demand as "robust" with "record quarterly bookings in private networks" (networks run by utilities, public-safety agencies and similar non-telecom owners), and separately said it had booked over $10 million of private-network contracts in Q2. Bookings are orders received, not revenue yet, so the North American number in the table and the bookings commentary can both be true; the revenue just hasn't shown up.

Why profit fell while sales rose

• Cost of revenue grew almost as fast as revenue. Revenue rose $11.7 million; cost of revenue rose $10.4 million. The first-half review (filed August 13) breaks the half-year increase down: +$2.8 million in materials, +$2.0 million in shipping and storage, +$1.9 million in employee costs, partly offset by $3.6 million lower services costs, and says gross profit was held back "mainly" by "product and geographic mix as well as cost increases." The CEO referred to "near-term industry-wide cost and supply chain pressures." Our read: with India jumping from 30% to 48% of sales, a lower-priced, high-volume market is weighing on the average margin, on top of the cost inflation.
• Operating expenses rose 12.5% to $29.5 million. Sales and marketing rose 10.1% to $12.9 million and R&D rose 14.6% to $8.4 million. There was also a new $1.1 million restructuring charge (none in Q2 2025).
• Below the operating line, finance costs fell to $1.7 million from $2.9 million — mostly because Q2 2025 carried a $1.2 million lease-related finance expense that didn't recur. Tax of $0.7 million was still recorded despite a $1.4 million pre-tax loss.

What the headline numbers hide

• Cash flow was flattered by paying suppliers later. Operating cash flow was a positive $5.1 million against a $2.1 million net loss, but $9.3 million of it came from a rise in trade payables (bills owed to suppliers), while receivables grew $6.8 million. Without the supplier-payment timing, operating cash flow would have been negative. After $3.3 million of equipment purchases and $1.5 million of capitalized software, free cash flow was roughly $0.3 million for the quarter ($3.1 million for the half).
• The balance sheet still improved modestly. Cash fell to $34.8 million from $39.2 million at the end of March, but mainly because Ceragon repaid $5.1 million of bank loans. Short-term borrowings are $12.0 million versus $19.0 million at the start of the year, so net cash (cash minus bank debt) is about $22.8 million, up from about $19.4 million at year-end. In June, the bank credit facility was extended to August 2028 and its debt covenants were loosened (net debt allowed up to 50% of receivables and of working capital, from 30%).
• Receivables are large relative to sales. Trade receivables of $101.3 million are more than a full quarter's revenue — about 98 days of sales on our arithmetic — which is typical for telecom equipment sold to big operators, but it ties up cash that the growth in India will add to.
• The GAAP-to-adjusted gap is $3.8 million. Adjusted net income of $1.7 million versus a GAAP loss of $2.1 million: $1.8 million share-based pay, $0.6 million amortization of acquired intangibles (from past acquisitions such as Siklu), $1.1 million restructuring and $0.2 million acquisition/integration costs. Restructuring charges also hit Q1 2026 ($0.5 million) and Q1 2025 ($3.7 million), so treating them as one-off is generous.
• No buyback effect. Weighted shares rose 1.7% to 91.0 million, so per-share results were slightly diluted, not helped.
• Guidance: same revenue, less profit. In May the company "reiterated" 2026 guidance: $355–$385 million revenue, a 100-basis-point non-GAAP gross-margin improvement (which this release states as 35.5% at the midpoint) and 6.5%–7.5% non-GAAP operating margin. Now gross margin is guided to 33.5%–34.5% and operating margin to 5%–6%, with revenue unchanged.

Takeaway: India's order recovery has fixed Ceragon's revenue problem but created a margin one — the business grew 14% and earned less, and management has now lowered the full-year profit outlook while keeping the sales outlook. Outside India, revenue shrank about 15%, so the growth story currently rests on two Indian customers.

Outlook

The revenue midpoint of $370 million implies about $191 million in the second half, up roughly 7% on the $178.9 million booked in the first half. The ~$120 million of Indian orders announced by late July, plus the July 21 announcement of a five-year, ~$70 million agreement with a Tier-1 APAC operator, give that number visible support. At the guided 5%–6% non-GAAP operating margin for the year (versus 4.6% achieved in the first half), the second half needs adjusted operating margins of roughly 5.5%–7.5% and gross margins of roughly 33%–35%, so a recovery in gross margin from Q2's 32.2% is already built in.

What to watch in the Q3 report:

1. Gross margin. Does it move back toward 34% as costs settle, or does a heavier India mix keep it near 32%? A second quarter in the low 30s would put even the lowered operating-margin guidance at risk.
2. North America. In May the company said a new Tier-1 North American carrier could start ordering "starting Q3," and in August it cited a successful field trial of its 5G mmWave (FR2) product with that carrier. First revenue from that customer would be the clearest sign that growth is broadening beyond India.
3. Working capital. Whether operating cash flow stays positive once supplier payments catch up, and whether receivables grow faster than sales as India ramps.

Source: Ceragon's Q2 2026 earnings release (Form 6-K, August 11, 2026); further detail from the six-month interim financial statements and operating review filed on Form 6-K on August 13, 2026. Ceragon is a foreign private issuer and does not file a 10-Q; these 6-Ks are its quarterly reporting.