SECaaS business acceleration, can Allot's growth story continue to unfold?

Allot Ltd. [ALLT] is making a strong breakthrough relying on its cybersecurity services business (SECaaS). The company’s key growth driver is now clearly visible: in Q3 2025, the annual recurring revenue (ARR) from SECaaS grew approximately 60% year-over-year, far exceeding the overall business growth expectations.

Subscription Model Drives Revenue Quality Improvement

SECaaS accounted for 28% of Allot’s total revenue in Q3, and management expects this proportion to further approach 30%. This is not just about growth rate but also about the business model advantage—its subscription-based nature means revenue is more predictable.

From a macro perspective, recurring revenue accounted for 63% of total Q3 revenue, steadily rising from 58% in the same period last year, indicating that Allot’s revenue structure is optimizing. This quality improvement is often viewed by the market as an important signal of corporate health.

Telecom Operators Become Core Growth Engines

During the Q3 earnings call, management listed several key growth drivers. Large telecom operators have continuously launched security services in recent quarters, attracting new users, which creates strong demand for Allot’s solutions. Existing customers are also gradually expanding their service procurement scope, driving upselling opportunities.

More notably, Allot is continuously innovating its product line. For example, the newly launched OffNetSecure service allows users to receive protection even when leaving the operator’s network, significantly expanding the application scenarios of SECaaS and helping to increase revenue contribution per user.

If telecom partners continue to scale these services and user adoption remains stable, the momentum of SECaaS is expected to continue supporting Allot’s ARR growth over the next few quarters.

Valuation and Growth Expectations Balance

In terms of market performance, Allot has fallen 4.2% over the past three months, outperforming the 11.3% decline in the internet software industry. Regarding valuation, Allot’s forward price-to-sales ratio is 4.05, below the industry average of 4.7, indicating some relative valuation attractiveness.

Market consensus expects revenue growth of 10.3% and 13.3% for 2025 and 2026, respectively. The consensus estimate for full-year 2026 revenue implies a year-over-year increase of 15.9%, with upward revisions in the past 60 days.

Overall, Allot, with its high-growth, high-stickiness SECaaS business pillar, is building a more resilient revenue base. Key indicators to watch are whether telecom user growth can continue and whether new product innovations can further broaden revenue sources.