Ribbon Communications’ Q4 results take a hit from government shutdown and BEAD uncertainty 

However, Ribbon’s fourth-quarter revenues did not meet expectations due to customer and project delays.

“The delayed programs are not lost business and are primarily tied to two key reasons,” McClelland said. “Half of the shortfall was associated with projects already in backlog where implementation delays pushed out project completion milestones or product shipments, delaying revenue recognition to future quarters, including one of our primary U.S. customers where deployments slowed during their recent restructuring.”

Another issue was that several of Ribbon’s customers were affected by year-end budget constraints stemming from a delay in BEAD funding allocation and the government shutdown’s impact on federal agencies.  

“The remaining gap in the fourth quarter was with several customers impacted by budget availability at the end of the year, including an IP optical project where the end customer is still waiting for BEAD funding to be distributed,” McCelland said. “When comparing year-over-year, as expected, the largest contributor to the lower sales in Q4 was the reduction in new sales to U.S. federal agencies, which were approximately $10 million lower than the fourth quarter of 2024.”

Voice modernization, broadband accelerating

Amidst the challenges Ribbon faced during the fourth quarter, it is still making progress with key customers around voice network modernization and broadband projects.

Throughout 2025, Ribbon continued to ramp up its involvement in Verizon’s network modernization program. The company now sees an opportunity to entrench itself at Verizon further, now that it has completed its acquisition of Frontier.

“For the full year, our business with Verizon was very strong, with sales increasing 27% year-over-year,” McClelland said. “And now with the closure of the Frontier acquisition, there is a significant opportunity to expand the scope of our program across the Frontier footprint over the next several years.”

In addition to Verizon, Ribbon noted that it is conducting similar modernization projects with other service provider customers, a factor reflected in its fourth-quarter sales bookings. The company booked over $50 million of voice network transformation orders in the quarter across more than a dozen different customers.

“These projects are complex and can take 6 months or more to implement and include a significant number of professional services that Ribbon is uniquely positioned to provide,” McClelland said. “In many ways, the upfront investment can essentially be self-funded by the savings generated, and we're exploring creative ways to further unlock and accelerate voice modernization across the industry.”

In addition to voice network modernization, Ribbon is expanding its IPoDWDM platform customer base in the U.S., particularly among rural providers expanding their fiber-to-the-home (FTTH) networks.

McCelland said, “We expect these deployments to accelerate meaningfully in 2026 with federal funding.”

Revenue hits and misses

Given the challenges with government customers due to one of the longest shutdowns, service provider restructuring, and delays in providers' access to BEAD funding, Ribbon’s Q4 results were a series of hits and misses.

Ribbon saw revenue challenges in its two key segments—cloud and optical.

In its Cloud and Edge segment, revenue in the fourth quarter was $142 million, up 14% sequentially, but down 14% year-over-year against a record fourth quarter in 2024. However, McClelland noted that “cloud and Edge bookings set a new record high with product and professional services booked to revenue of 1.5x.”

Likewise, Ribbon’s IP Optical Networks business saw revenue dip 2% year-over-year in the quarter to $85 million, which McClelland said “was below our target of mid-single-digit growth.”

Similar to the cloud segment, Ribbon saw bright spots with wins in Southeast Asia with Converge CICT and Moratel. McClelland noted that Ribbo “also had a first win with one of the largest electric power generation and distribution cooperatives in the U.S., which provides service across nine states.”

For the full year, sales to global service providers increased 5% and accounted for 70% of the company's overall sales. Sales to enterprise customers increased 2% year-over-year, while sales to government and defense declined 23% and were 9% of overall sales.

A conservative outlook

Looking ahead to 2026, Ribbon has put forth a more cautious outlook, forecasting revenue of $160 million to $170 million.

Likewise, on a year-over-year basis, the company told investors it expects full-year 2026 revenues of $840 million to $875 million, representing approximately 1.5% year-over-year growth at the midpoint of its guidance.

“The underlying industry fundamentals are solid, and multiple positive long-term drivers are supporting the business, and it's imperative for our customers to continue to invest,” McClelland said. “However, we're taking a more cautious approach at this point in the year, given several near-term factors that are out of our control.”

McClelland noted that its near-term outlook is affected by several factors, including U.S. service provider spending priorities amid a surge in M&A, the sustainability of Indian service provider capex intensity, and the timing of federal spending and subsidy programs such as BEAD in the current political environment.

These factors led Ribbon to lay off over 80 employees. “Reflecting these macro uncertainties, we recently completed a restructuring that eliminated approximately 85 positions, lowering our annual expenses by more than $10 million,” McClelland said.

Despite the near-term challenges, Ribbon sees potential in its Cloud & Edge and IP Optical segments.

For the Cloud & Edge segment, the company is projecting about 6% growth in product and professional services revenue, offset by slightly lower maintenance revenue.

In the IP Optical segment, McClelland said, “We're projecting approximately 5% growth of product and professional services revenue.”

He added that “maintenance revenue is expected to be lower by approximately $10 million related to the completion of a maintenance contract with a European customer associated with legacy access equipment.”

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