Radware crossed the cloud recurring-revenue mark that has defined its multi-year repositioning, and the print still left reported profit moving the wrong way. The Israeli application-security vendor posted another double-digit sales quarter and said cloud annual recurring revenue, the booked run-rate of cloud subscriptions, cleared the long-advertised hundred-million threshold. That is the operating proof that DefensePro appliances and Alteon delivery boxes are no longer the whole story. What the quarter did not prove is that the mix shift has started to drop through to reported earnings.
Americas sales rose 24 percent and now account for nearly half of revenue, while shekel strength and a still-heavy cost base pulled reported profit the other way. Cloud recurring revenue now represents 40 percent of the recurring book, up from a lower share a year earlier. Subscription products already contribute more than half of sales. Diluted earnings from continuing operations still slipped versus last year on a reported basis. The adjusted figure that strips stock compensation and amortization was merely flat. Management pointed to Israeli-shekel strength as the main culprit and said the cloud pipeline is growing faster than current recurring revenue.
The next several quarters resolve a narrow question. Can cloud annual recurring revenue climb toward the mid-twenties growth rate management has named as the first waypoint, and can reported operating income stop shrinking while that happens? Outlook for the coming quarter is essentially a sequential pause on both sales and adjusted earnings. If cloud scale keeps printing and reported profit stays thin, the market is paying a modest sales multiple for a conversion story that has not yet arrived.