Allot came into the second quarter as a twenty-year-old Israeli network-security vendor most investors had written off years ago. It reported that the pivot had begun to work: revenue rose 15% to $27.7 million, the fourth consecutive quarter of double-digit growth, and the company turned its third straight GAAP-profit quarter. More telling than the beat itself was the denominator. A year ago a $40 million convertible note hung over the balance sheet and the share count was roughly twenty percent lighter. The note is gone, converted and redeemed in 2025, and Allot now sits on roughly $107 million of cash and investments against essentially no financial debt - about 28% of the current $377 million market value.
The business is bifurcating in the way management intended. The Security-as-a-Service line - the recurring subscription engine - grew 47% to $9.4 million in the quarter, with June ARR up 44% year over year to $36.1 million. The legacy base still pays the bills but is the laggard: product and professional services revenue of $9.1 million was roughly flat year over year ($9.2 million combined a year ago), and support and maintenance of $9.2 million grew only modestly from $8.5 million. The value of the quarter is that a company that lost $62.8 million as recently as fiscal 2023 earned $2.6 million of GAAP net income in Q2 alone, generated $8.5 million of operating cash flow, raised its full-year revenue guidance to $115–118 million, and authorized a $40 million buyback. The bet that a network-security vendor could convert a hardware-heavy installed base into recurring software revenue appears to be working. The concern, priced into a ~3.5x-sales multiple far below the growth-security peers, is concentration and scale.