Ubiquiti Inc. (NYSE: UI) just raised its own ceiling. Revenue hit $1.03 billion, a 39.9% year-over-year surge that cleared the $977 million consensus by nearly 5%. Non-GAAP diluted EPS of $5.32 beat the $4.25 estimate by over 25%. Operating leverage is accelerating faster than the top line.
The headline numbers are striking. The composition matters more.
Enterprise Technology revenue rose 43.2% to $941 million, accounting for 92% of total sales. Service Provider Technology grew 10.8% to $85 million. The mix shift toward Enterprise is not new. The magnitude of acceleration is. In the year-ago quarter, Enterprise grew 33% from the prior year. This quarter's 43% pace suggests Ubiquiti's UniFi platform is capturing share in a networking market where incumbents still lean on license and subscription models.
Gross margin expanded 130 basis points year over year to 47.3%, and 150 bps sequentially from 45.8%. The release attributes the improvement to lower indirect costs, partially offset by higher component costs. That trade-off is worth watching. Ubiquiti explicitly warns that component costs may continue to rise and availability may remain constrained, which could pressure gross margins in coming quarters. The 47.3% print may be near a near-term peak if input cost inflation accelerates faster than the company can offset through pricing or efficiency gains.
Operating income rose 49.6% to $391.5 million, outpacing revenue growth by nearly 10 percentage points. That operating leverage came despite R&D spending rising 9.7% to $53.2 million and SG&A jumping 49.8% to $40.6 million. The SG&A increase was driven by higher professional fees, credit card processing fees from incremental webstore sales, and a provision for credit losses on accounts receivable. The credit loss provision is a small line item. It bears watching as a potential signal of distributor or end-customer stress in a high-growth environment.
Geographically, North America led with $542 million in revenue, up 41.5% year over year. Europe, the Middle East and Africa contributed $378 million, up 43.7%. Asia Pacific and South America grew 26.3% and 13.3%, respectively, from smaller bases. The concentration in North America and EMEA is not a concern given the growth rates. It does mean the company's fortunes remain tied to those regions' economic health and infrastructure spending cycles.
The board declared a $1.00 per share quarterly dividend, payable November 23, 2026. At the current share price, that yield is modest. The payout signals confidence in cash generation. Ubiquiti did not disclose a buyback program or any change to its capital allocation strategy in this release.
Ubiquiti's model of selling hardware without recurring license fees is gaining traction in an enterprise market increasingly fatigued with subscription pricing. The 43% Enterprise growth rate, if sustained, would imply the company is taking share from Cisco, Arista, and others in the mid-market and distributed enterprise segment. Supply chain constraints may cap that momentum. Ubiquiti's warning on component costs and availability is the one cloud in an otherwise clear sky. Investors should watch the gross margin trajectory over the next two quarters for signs that input cost inflation is eating into the structural advantage the company has built.