Ribbon Communications Inc. (RBBN)

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the financial condition and results of operations of Ribbon Communications Inc. should be read in conjunction with the condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the U.S. Securities and Exchange Commission on February 26, 2026.

Overview

We are a leading global provider of communications technology to service providers and enterprises. We provide a broad range of software and high-performance hardware products, network solutions, and services that enable the secure delivery of data and voice communications, and high-bandwidth networking and connectivity for residential consumers and for small, medium, and large enterprises and industry verticals such as finance, education, government, utilities, and transportation. Our mission is to create a recognized global technology leader providing cloud-centric solutions that enable the secure exchange of information, with unparalleled scale, performance and elasticity. We are at the intersection of the adoption of Artificial Intelligence (“AI”) by service providers and enterprises addressing the rapid growth in fiber connectivity and integration of voice capabilities into agentic AI platforms. We are headquartered in Plano, Texas, and have a global presence with research and development or sales and support locations in over thirty countries around the world.

Key Trends and Economic Factors Affecting Ribbon

Tariffs. The global trade landscape continues to be highly volatile. In 2025, the U.S. government implemented a series of trade tariffs on goods imported into the U.S. from various countries. In many cases, these tariffs resulted in reciprocal tariffs and other actions on goods being exported from the U.S. These associated tariffs are complex and continue to evolve as negotiations occur. In February 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (“IEEPA”), which the U.S. government relied on to impose certain tariffs, does not authorize the administration to impose tariffs. On March 4, 2026, the U.S. Court of International Trade ordered the U.S. Customs and Border Protection (“CBP”) to process refunds of the IEEPA tariffs, although the Court immediately suspended the order while the CBP determines a refund process. The IEEPA tariffs remain subject to ongoing litigation between the administration and other parties. In response to the U.S. Supreme Court ruling mentioned above, the administration announced plans to implement new tariffs under alternative statutory authority and recently announced its intention not to renew the existing U.S.-Mexico-Canada Agreement (“USMCA”) on which we rely for the importation of many of our products from our contract manufacturer in Mexico. The full impact of the U.S. Supreme Court’s ruling and the administration’s response, including the timing and extent of any refunds and the impact of the new tariffs or the proposed termination of the USMCA, remain uncertain. While the announced tariffs have not had a material impact on our business to date, new or proposed tariffs, including exemptions under existing trade agreements or otherwise, could result in additional expenses for products we import into the United States. In addition, the economic uncertainty caused by the tariffs may result in customers delaying planned purchases of products and services.

Supplier Disruptions. Ongoing uncertainty in the global economy due to tariffs, inflation, global military conflicts, including in the Middle East and Ukraine, rising fuel prices, national security concerns and other factors, continue to disrupt various manufacturing, commodity and financial markets, increase volatility, and impede global supply chains. Our ability to deliver our solutions as agreed upon with our customers depends in part on the ability of our global contract manufacturers, vendors, licensors and other business partners to deliver products or perform services we have procured from them.

Continued uncertain global economic conditions may cause our customers to restrict spending or delay purchases for an indeterminate period of time and consequently cause our revenues to decline. Further, such factors may negatively impact our operating costs resulting in a reduction in net income. The degree to which the ongoing wars in the Middle East and Ukraine, and the high interest rate environment impacts our future business, financial position and results of operations will depend on developments beyond our control.

37

Table of Contents

The Ongoing War in Ukraine and the Middle East. The uncertainty resulting from the recent war in the Middle East and ongoing war in Ukraine, and the threat for expansion of one or both of these wars, could result in some of our customers delaying purchases from us. The conflict in the Middle East has significantly reduced the export of oil and natural gas from the Persian Gulf, creating upward pressure on oil and natural gas prices, and has also disrupted and increased the costs of certain other supplies. Further, a number of our employees in Israel are members of the military reserves and subject to immediate call-up in response to the war in the Middle East. Following the terrorist attacks in Israel in October 2023, a number of our employees have been activated for military duty and we expect that additional employees will also be activated if the war in Israel continues. While we have business continuity plans in place to address the military call-ups, it could affect the timing of projects in the short-term as the work is shifted to other team members both inside and outside of Israel.

The United States and European countries have imposed sanctions and trade restrictions against Russia in connection with the war in Ukraine. These sanctions and restrictions currently prohibit our ability to sell hardware products in Russia or provide any replacement parts in Russia. The sanctions continue to evolve and further changes in the current sanctions or trade restrictions could further limit our ability to sell products and services to customers in Russia, our ability to collect on outstanding accounts receivable from such customers, and our ability to repatriate funds. If we are further limited in our ability to sell products and services to Russia and other countries for an extended period, it could have a material impact on our financial results.

Inflation and Interest Rates. We continue to see near-term impacts on our business due to inflation, including ongoing global price pressures resulting in higher energy prices, component costs, freight premiums, and other operating costs above normal rates. Although headline inflation in the United States and Europe appears to be easing, core inflation (excluding food and energy prices) remains elevated and is a source of continued cost pressure on businesses and households. Interest rates remain high as central banks in developed countries attempt to subdue inflation while government deficits and debt remain at high levels in many global markets. However, since its peak in 2024, the Federal Reserve lowered the federal funds rate to its current target range of 3.50% to 3.75% as a result of indicators that inflation had made progress toward the Federal Reserve’s objective and labor market conditions had generally eased. Yet, the economic outlook remains uncertain, and the implications of current and future tariffs, higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital for our business.

Foreign currency. As a portion of our business is conducted outside the United States, we face exposure to adverse movements in foreign currency exchange rates. A weakened U.S. dollar could increase the cost of local operating expenses and procurement of raw materials from sources outside the United States. Therefore, changes in the value of the U.S. dollar against other currencies would affect our revenue, income from operations, net income and the value of balance sheet items originally denominated in other currencies. There is no guarantee that our financial results will not be adversely affected by currency exchange rate fluctuations.

Presentation

Unless otherwise noted, all financial amounts, excluding tabular information, in this Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") are rounded to the nearest million dollar amount, and all percentages, excluding tabular information, are rounded to the nearest percentage point.

Operating Segments

Our Chief Operating Decision Maker (“CODM”) assesses our performance based on the performance of two separate organizations within Ribbon: the Cloud and Edge operating segment ("Cloud and Edge") and the IP Optical Networks operating segment ("IP Optical Networks"). For additional details regarding our operating segments, see Note 13 - Operating Segment Information to our condensed consolidated financial statements.

38

Table of Contents

Financial Overview

Financial Results

We reported a loss from operations of $12.2 million and income from operations of $4.2 million for the three months ended June 30, 2026 and 2025, respectively. We reported a loss from operations of $43.9 million and $15.4 million for the six months ended June 30, 2026 and 2025, respectively.

Our revenue was $192.3 million and $220.6 million in the three months ended June 30, 2026 and 2025, respectively. Our gross profit and gross margin were $90.3 million and 47.0%, respectively, in the three months ended June 30, 2026, and $109.3 million and 49.6%, respectively, in the three months ended June 30, 2025. The lower revenue in the three months ended June 30, 2026 compared to 2025 is due to $26.5 million lower Cloud and Edge revenue and $1.7 million lower IP Optical Networks revenue. The IP Optical Networks revenue was lower primarily due to $1.1 million of lower product sales, and lower professional services sales and maintenance revenue of $0.6 million. The lower Cloud and Edge revenue was attributable to $18.4 million of lower product sales and $8.1 million of lower professional services sales and maintenance revenue. Our revenue was $354.9 million and $401.9 million in the six months ended June 30, 2026 and 2025, respectively. Our gross profit and gross margin were $160.0 million and 45.1%, respectively, in the six months ended June 30, 2026, and $191.7 million and 47.7%, respectively, in the six months ended June 30, 2025. The lower revenue in the six months ended June 30, 2026 compared to 2025 is due to $34.6 million of lower Cloud and Edge revenue, and $12.3 million of IP Optical Networks revenue. The lower Cloud and Edge revenue was attributable to $24.0 million of lower product sales and $10.6 million of lower professional services and maintenance revenue. The lower IP Optical Networks revenue was due to $9.4 million of lower product sales plus $2.9 million of lower maintenance and professional services revenue.

Revenue from our Cloud and Edge segment was $110.5 million and $137.0 million in the three months ended June 30, 2026 and 2025, respectively. Gross profit and gross margin for this segment were $65.7 million and 59.5%, respectively, in the three months ended June 30, 2026, and $83.7 million and 61.1%, respectively, in the three months ended June 30, 2025. Revenue from our Cloud and Edge segment was $210.0 million and $244.6 million in the six months ended June 30, 2026 and 2025, respectively. Gross profit and gross marg

[Excerpt truncated for page length; source filing is linked above.]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our financial statements and the related notes included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs and involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those disclosed in Item 1A, “Risk Factors”, elsewhere in this Annual Report, in other documents filed with the SEC and otherwise publicly disclosed. Please refer to “Cautionary Note Regarding Forward-Looking Statements” above for additional information. For a complete description of our business and other important information, please refer to Item 1 of Part I of this Annual Report.

Overview

We are a leading global provider of communications technology to service providers and enterprises. We provide a broad range of software and high-performance hardware products, network solutions, and services that enable the secure delivery of data and voice communications, and high-bandwidth networking and connectivity for residential consumers and for small, medium, and large enterprises and industry verticals such as finance, education, government, utilities, and transportation. Our mission is to create a recognized global technology leader providing cloud-centric solutions that enable the secure exchange of information, with unparalleled scale, performance and elasticity. We are at the intersection of the adoption of Artificial Intelligence (“AI”) by Service Providers and Enterprises addressing the rapid growth in fiber connectivity and integration of voice capabilities into Agentic AI platforms. We are headquartered in Plano, Texas, and have a global presence with research and development or sales and support locations in over thirty countries around the world.

Key Trends and Economic Factors Affecting Ribbon

Supplier Disruptions. Ongoing uncertainty in the global economy due to inflation, global military actions, including in Israel and Ukraine, national security concerns and other factors, continue to disrupt various manufacturing, commodity and financial markets, increase volatility, and impede global supply chains. Our ability to deliver our solutions as agreed upon with our customers depends in part on the ability of our global contract manufacturers, vendors, licensors and other business partners to deliver products or perform services we have procured from them.

Continued uncertain global economic conditions may cause our customers to restrict spending or delay purchases for an indeterminate period of time and consequently cause our revenues to decline. Further, such factors may negatively impact our operating costs resulting in a reduction in net income. The degree to which the ongoing wars in Israel and Ukraine and the inflationary and high interest rate environment impacts our future business, financial position and results of operations will depend on developments beyond our control.

The Ongoing War in Ukraine and military action in Israel. The uncertainty resulting from the recent war in Israel and ongoing war in Ukraine, and the threat for expansion of one or both of these wars, could result in some of our customers delaying purchases from us. Further, a number of our employees in Israel are members of the military reserves and subject to immediate call-up in response to the war in Israel. Following the terrorist attacks in Israel in October 2023, a number of our employees have been activated for military duty and we expect that additional employees will also be activated if the war in Israel continues. While we have business continuity plans in place to address the military call-ups, it could affect the timing of projects in the short-term as the work is shifted to other team members both inside and outside of Israel.

The U.S. and other European countries have imposed sanctions and trade restrictions against Russia in connection with the war in Ukraine. These sanctions and restrictions currently prohibit our ability to sell hardware products in Russia or provide any replacement parts in Russia. The sanctions continue to evolve and further changes in the current sanctions or trade restrictions could further limit our ability to sell products and services to customers in Russia, our ability to collect on outstanding accounts receivable from such customers, and our ability to repatriate funds. If we are further limited in our ability to sell products and services to Russia and other countries for an extended period, it could have a material impact on our financial results.

Inflation and Interest Rates. We continue to see near-term impacts on our business due to inflation, including ongoing global price pressures resulting in higher energy prices, component costs, freight premiums, and other operating costs above normal rates. Although headline inflation in the United States and Europe appears to be easing, core inflation (excluding food

43

​

and energy prices) remains elevated and is a source of continued cost pressure on businesses and households. Interest rates remain high as central banks in developed countries attempt to subdue inflation while government deficits and debt remain at high levels in many global markets. However, after peaking in 2024, the Federal Reserve reduced the federal funds target range to 3.50% - 3.75% by December 2025. The effective federal funds rate averaged 3.64%, consistent with the Federal Reserve’s view that inflation is decelerating. Yet, the economic outlook remains uncertain, and the implications of current and future tariffs, higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital for our business.

Tariffs. We manufacture certain of our appliance products and purchase a portion of our raw materials and components from suppliers in Mexico, Malaysia, Thailand, Israel, China and other foreign countries. The commerce we conduct in the international marketplace makes us subject to tariffs, trade restrictions and other taxes when the raw materials or components we purchase, and the products we ship, cross international borders. Import tariffs and/or other mandates recently imposed or threatened by the United States, have led to and could in the future lead to retaliatory actions by affected countries, including Canada, Mexico and China, resulting in “trade wars,” and could significantly increase the prices on raw materials, the manufacturing of our equipment, and/or increased costs for goods imported into the United States, all of which are critical to our business. While some of the tariffs have been temporarily stayed, we continue to develop plans to adjust manufacturing locations, if necessary, to avoid tariffs or other restrictions, any such tariffs could reduce customer demand for our products if our customers have to pay increased prices for our products as a result of such tariffs. In addition, tariff increases may have a similar impact on other suppliers and certain other customers, which could increase the negative impact on our operating results or future cash flows.

Presentation

Unless otherwise noted, all financial amounts, excluding tabular information, in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are rounded to the nearest million dollar amount, and all percentages, excluding tabular information, are rounded to the nearest percentage point.

Private Placement

On March 28, 2023, we issued 55,000 shares of newly designated Series A Preferred Stock (the “Preferred Stock”) to investors in a private placement offering at a price of $970 per share, along with 4.9 million warrants (the “Warrants”) to purchase shares of our common stock, par value $0.0001 per share (the “Private Placement”), at an exercise price of $3.77 per share. The proceeds from the Private Placement were approximately $53.4 million, including approximately $10 million from existing related party stockholders. On June 25, 2024, we redeemed the Preferred Stock with a portion of the proceeds from the refinancing of the 2020 Credit Facility at a rate of 103% for a total of approximately $63.5 million. The Warrants remain outstanding and without modification. For additional detail on the Private Placement, see Note 15 - Preferred Stock and Warrants to our consolidated financial statements.

Common Stock Repurchases

In the second quarter of 2025, the Company's Board of Directors approved a program to repurchase up to $50 million of the Company’s common stock (the “2025 Repurchase Program” or the “Repurchase Program”). Commencing on June 5,2025 and continuing through December 31, 2027, the Repurchase Program is being funded with cash on hand or cash generated from operations. During the year ended December 31, 2025, the Company used $9.0 million, including transaction fees, to repurchase and retire 2.5 million shares of its common stock under the Repurchase Program, with $41.0 million remaining for future repurchases as of December 31, 2025.

Operating Segments

Our CODM assesses our performance based on the performance of two separate organizations within Ribbon, the Cloud and Edge operating segment (“Cloud and Edge”) and the IP Optical Networks operating segment (“IP Optical Networks”). For additional details regarding our operating segments, see Note 17 - Operating Segment Information to our consolidated financial statements.

44

​

Financial Overview

Financial Results

We reported a loss from operations of $3.3 million for 2025 and income from operations of $16.9 million for 2024. We reported net income of $39.6 million for 2025 and a net loss of $54.2 million for 2024.

Our revenue was $844.6 million in 2025, comprised of $511.4 million attributable to Cloud and Edge and $333.2 million attributable to IP Optical Networks. Our revenue was $833.9 million in 2024, comprised of $505.2 million attributable to Cloud and Edge and $328.7 million attributable to IP Optical Networks. Our gross profit was $420.7 million in 2025, comprised of $323.1 million attributable to Cloud and Edge and $97.6 million attributable to IP Optical Networks. Our gross profit was $439.5 million in 2024, comprised of $329.2 million attributable to Cloud and Edge and $110.3 million attributable to IP Optical Networks. Our gross margin was 49.8% in 2025 and 52.7% in 2024. In 2025, our Cloud and Edge gross margin was 63.2% and our IP Optical Networks gross margin was 29.3%. In 2024, our Cloud and Edge gross margin was 65.2% and our IP Optical Networks gross margin was 33.6%. The revenue increase in 2025 compared to 2024 was primarily driven by a $6.3 million rise in Cloud and Edge sales, largely attributable to higher demand from U.S. service providers, partially offset by lower sales to Federal customers. In addition, IP Optical Networks revenue increased by $4.4 million, led by strong sales in India, though this growth was partially offset by declines in the Eastern European region.

Our operating expenses were $424.0 million in 2025 and $422.6 million in 2024. Our 2025 operating expenses included $23.8 million of amortization of acquired intangible assets, $19.7 million of restructuring and related expense and $4.3 million of acquisition-, disposal- and integration-related expenses. The following section provides information on our restructuring and cost-reduction initiatives. Our 2024 operating expenses included $26.0 million of amortization of acquired intangible assets and $10.2 million of restructuring and related expense.

We recorded stock-based compensation expense of $19.4 million in 2025 and $16.1 million in 2024. These amounts are included as

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]