ADTRAN Stock Falls 19% on the Day It Reports Q3 2026 Results

ADTRAN Holdings (Nasdaq: ADTN) fell 19.4% on Tuesday, closing at $5.06 from a previous close of $6.28, on volume about 3.4 times normal. The S&P 500 ETF (SPY) rose 0.30% that session. The decline came on the day the company released its third-quarter results in an 8-K filed that morning. The company did not comment on the share price move.

Revenue fell short of the guidance midpoint

Third-quarter revenue was $281.2 million, up 0.6% from a year earlier. Chairman and CEO Tom Stanton said revenue "came in slightly below the midpoint of our guidance range" as the company continued to navigate a challenging supply environment. GAAP gross margin was 38.5% and non-GAAP gross margin was 42.1%, which included a benefit of about 200 basis points from IEEPA refunds. The company reported a GAAP diluted loss of $0.10 per share and non-GAAP diluted earnings of $0.09 per share.

Fourth-quarter outlook and margin pressure

For the fourth quarter, ADTRAN expects revenue of $272.0 million to $292.0 million and non-GAAP operating margin of 1.0% to 5.0%, reflecting historical seasonality, supply availability and the timing of large customer projects. Non-GAAP operating margin was 5.0% in the third quarter. The company's investor presentation cited product and customer mix, tightening supply and component inflation as headwinds to gross margin, and said cost savings and pricing adjustments are underway. It also said a much smaller tariff refund benefit is expected in the fourth quarter.

Cash use in the quarter

Net cash used in operating activities was $24.5 million in the quarter, and free cash flow was negative $39.4 million after $14.9 million of capital expenditures. Cash, cash equivalents and restricted cash totaled $71.7 million at quarter end. Days sales outstanding rose to 77 days from 67 days in the second quarter, which the company attributed to the timing of billings and collections.