Executive Summary / Key Takeaways

• Radware is rapidly transforming into an AI-driven cloud security leader, demonstrating four consecutive quarters of double-digit revenue growth, fueled by accelerating cloud Annual Recurring Revenue (ARR) and a strategic pivot towards best-of-breed application and data center protection.
• The company's proprietary EPIC-AI framework, including the AI SOC Xpert and advanced API protection, provides a significant technological moat, enabling real-time, automated threat detection and mitigation that dramatically reduces resolution times and enhances competitive win rates.
• Financial performance highlights include Q2 2025 revenue of $74.2 million (+10% YoY), cloud ARR accelerating to $85 million (+21% YoY), and non-GAAP EPS of $0.28 (+39% YoY), underpinned by a strong balance sheet with $459 million in cash and a shift to 84% recurring revenue.
• Strategic investments in expanding its global cloud security network, strengthening its North American presence, and deepening OEM and MSSP partnerships are poised to drive cloud ARR beyond 21% year-over-year, targeting nearly $100 million by year-end 2025.
• While facing a cautious enterprise spending environment and sophisticated AI-powered threats, Radware's specialized hybrid cloud offerings and continuous innovation position it for sustained growth and market share expansion in critical cybersecurity segments.

The Cybersecurity Battleground: Radware's Strategic Evolution

Radware Ltd. (NASDAQ:RDWR), established in 1996, has evolved from a foundational player in application delivery to a focused leader in application and data center security for multi-cloud environments. The company's core mission is to protect the "crown jewels" of its customers – their mission-critical applications and data centers – in an industry grappling with an escalating and increasingly sophisticated threat landscape. This environment is characterized by a sharp rise in AI-powered cyberattacks, which have lowered the barrier to entry for malicious actors while simultaneously increasing the urgency for robust defenses. Radware's strategic response over the past few years has been a deliberate pivot to become a best-of-breed provider, centered on three pillars: gaining significant market share in cloud security, leading with algorithm and AI-driven innovation, and expanding its go-to-market presence.

This strategic shift is critical in a market where Web DDoS attacks surged globally by 550% and web application and API attacks rose 41% between 2023 and 2024, according to Radware’s 2025 Global Threat Analysis Report. In the APAC region alone, DDoS attack volumes increased by 364% during the same period, with the average network DDoS attack size growing 240% to 1.7 Gbps. These alarming trends underscore the profound market demand for advanced, automated security solutions, which Radware is actively addressing through its specialized offerings.

Technological Edge: Radware's AI-Powered Moat

Radware's competitive advantage is deeply rooted in its differentiated technology, particularly its comprehensive integration of Artificial Intelligence (AI) across its security portfolio. This AI-first approach is encapsulated in its EPIC-AI framework, designed to fight AI with AI.

A cornerstone of this framework is the AI SOC Xpert, a cloud service purpose-built to detect and mitigate DDoS attacks in real-time. This technology continuously analyzes global traffic patterns using behavioral baselines, anomaly detection, and machine learning to identify attacks that bypass standard security controls. Once detected, the AI agent automatically performs an analysis and generates specific recommendations for mitigation, dramatically reducing the mean time to resolve (MTTR) from potentially hours or days to mere seconds and minutes. This capability offers a significant operational advantage, providing customers with significantly better business outcomes by minimizing downtime and exposure.

Furthermore, Radware's cloud-based API protection solutions leverage AI-driven capabilities to secure APIs and business logic in real-time. What sets Radware apart is its ability to automatically and continuously map business logic, generate and optimize protection rules, and enforce them in real-time. This automation is a key differentiator against competitors who often rely on more manual rule-setting, which struggles to keep pace with the dynamic nature of modern applications and evolving business logic.

For on-premise protection, the DefensePro X solution represents Radware's next-generation DDoS mitigation platform. Now comprising 100% of new on-premise DDoS mitigation sales, DefensePro X incorporates the latest AI and machine learning algorithms to combat sophisticated attacks like Web DDoS, Layer 7 application attacks, and advanced DNS attacks. It features a next-generation FPGA that delivers a 3x to 5x performance improvement across various security metrics. This enhanced performance, coupled with the new Cyber Controller management system, provides superior efficacy and drives a significant refresh cycle among existing customers, less than 20% of whom had migrated as of Q3 2024.

Radware's Bot Manager also stands out, delivering real-time, AI-powered bot protection. It uses CAPTCHA-less, AI-based behavioral algorithms to accurately identify sophisticated bad bots and generate real-time signatures to block attacks. This multi-layered, AI-driven approach, combining behavioral intent-based analysis, cross-correlation with WAF and API security, and proactive mitigation, ensures organizations can outpace evolving threats. This is particularly crucial given that automated bots, including sophisticated AI-enhanced agents, accounted for 57% of e-commerce website traffic during the 2024 holiday season, surpassing human shoppers for the first time.

The company's global cloud security network, comprising over 50 service centers worldwide with a mitigation capacity exceeding 15 Tbps, further enhances its technological moat. Recent expansions in Peru, India, Kenya, Tel Aviv, and Bogotá ensure attacks are mitigated closest to their origin, improving application response times and meeting stringent data privacy regulations. This extensive network, combined with a hybrid cloud security offering that provides unified management and protection for both cloud and on-premise applications, is a major competitive differentiator, especially for large enterprises navigating complex IT landscapes.

Strategic Execution and Market Capture

Radware's strategic execution has translated into tangible market gains and financial momentum. The company's focus on cloud security as its primary growth engine is clearly paying off. Cloud Annual Recurring Revenue (ARR) has shown consistent acceleration, growing from 15% year-over-year in Q3 2024 to 19% in Q4 2024 and Q1 2025, and further accelerating to 21% year-over-year in Q2 2025, reaching $85 million. This surpassed the company's short-term target of 20% growth. The company aims to continue this acceleration, targeting 25% long-term ARR growth and close to $100 million in cloud security ARR by the end of 2025.

The ongoing DefensePro X refresh cycle is another key driver. With the end-of-sale announced for approximately 60-70% of the older DefensePro line in late 2024 and the last DefensePro 8 platform in Q1 2025, a substantial installed base is poised for migration. This refresh, coupled with the enhanced software subscription content of DefensePro X, is contributing to strong security product subscription growth.

Radware is also strategically expanding its go-to-market presence. Its OEM partnerships with Cisco (CSCO) and Check Point (CHKP) have been particularly fruitful, generating double-digit growth and record bookings in 2024 and continuing into Q1 2025. The integration of Radware's cloud application security into the Cisco Enterprise Agreement is expected to streamline purchasing and unlock new growth opportunities. Furthermore, the company is deepening its channel and Managed Security Service Provider (MSSP) ecosystem, as evidenced by new U.S. MSSP partnerships in July 2025 and an agreement with Latvian ISP Tet in August 2025. These partnerships enable Radware to scale more efficiently and capture new customers by offering ISPs a low-risk way to introduce proven application and network security services.

To further capitalize on the robust demand, Radware is increasing investments in sales, marketing, and R&D, particularly in cloud and AI innovation. This includes strengthening its North American presence with new leadership hires, such as Constance Stack as Chief Growth Officer and Randy Wood as Senior Vice President of North American Sales, and adding over 30 new positions across sales, marketing, and cloud services. These investments are expected to drive a ramp-up in productivity and pipeline growth, rather than disruption, as the new leadership team is already in place and executing.

Financial Strength and Operational Leverage

Radware's financial performance reflects the successful execution of its strategic initiatives and the inherent leverage in its business model. The company has delivered four consecutive quarters of double-digit revenue growth, with Q2 2025 revenue reaching $74.2 million, a 10% increase year-over-year. This consistent top-line expansion is accompanied by impressive profitability gains. Non-GAAP earnings per share (EPS) rose 39% year-over-year to $0.28 in Q2 2025, following a 69% increase to $0.27 in Q1 2025.

The shift towards a recurring revenue model is a significant financial highlight, with recurring revenue representing 84% of total revenue in Q2 2025, up from 82% in the prior year period. Gross margins remain consistently strong, standing at 82.2% in Q2 2025. Operating income grew over 50% year-over-year to $9.5 million in Q2 2025, and adjusted EBITDA (excluding the Hawks business) reached $14.1 million, representing a healthy 19% margin.

The company's balance sheet is robust, with approximately $459 million in cash, cash equivalents, bank deposits, and marketable securities at the end of Q2 2025. This strong liquidity provides ample flexibility to fund ongoing investments in cloud security and AI innovation.

Cash flow from operations has seen a remarkable turnaround, reaching $14.5 million in Q2 2025 and $71.6 million for the full year 2024, a significant improvement from a negative $3.5 million in 2023. This strong cash generation underscores the operational efficiency and scalability of Radware's core business. Remaining Performance Obligations (RPO) stood at $350 million at the end of 2024, indicating solid future revenue commitments.

Competitive Landscape: Outmaneuvering Rivals

Radware operates in a highly competitive cybersecurity market, contending with established players like Cloudflare (NET), Akamai Technologies (AKAM), F5 Networks (FFIV), Cisco Systems (CSCO), and Fortinet (FTNT). While these competitors possess larger scale and broader portfolios, Radware carves out its niche by excelling in the security, automation, and algorithms crucial for mission-critical application and data center protection.

Radware's AI-driven API protection and AI SOC Xpert offer a distinct advantage over competitors, many of whom rely on more manual processes for business logic mapping and attack mitigation. This technological edge translates into higher win rates and significant competitive displacements, such as a 7-digit deal with a European government that replaced an incumbent due to Radware's unified management and protection for hybrid environments. The company's "superior DDoS technology, strong SLAs and solid relationships" were key in securing a Cloud DDoS and application protection deal with a Central Bank in Latin America.

Compared to Cloudflare and Akamai, which are strong in cloud and content delivery, Radware differentiates itself through its specialized focus on the depth of security for applications and data centers, particularly with its AI-powered algorithms. While Akamai boasts a vast global network, Radware's targeted innovation in areas like API security and AI-driven SOC capabilities provides a best-of-breed offering for complex threats.

Against F5 Networks, known for its multi-cloud application services and security, Radware's solutions are often noted for easier integration into diverse data center environments and specialized cyber-command capabilities. While F5 may lead in overall profitability and efficiency due to its larger scale, Radware's focus on real-time network attack mitigation and web application firewalls offers a compelling alternative for specific use cases.

When facing Cisco Systems, a dominant force in networking and security hardware, Radware's agile, cloud-native approach and specialized cybersecurity solutions can offer lower operating costs in deployment for smaller-scale data centers. Cisco's extensive partnerships and broader enterprise integration provide a formidable presence, but Radware's innovation speed in web application firewalls and real-time mitigation through DefensePro allows it to compete effectively in targeted segments.

Similarly, against Fortinet, which specializes in unified threat management, Radware's emphasis on cloud and edge environments can provide significantly greater efficiency in application-specific protection. Radware's MSSP Portal for managed services also offers a unique differentiator.

Industry analysts consistently recognize Radware's competitive strength. It was named a leader and fast mover in the GigaOM Radar for Application and API Security for its AI-driven capabilities in vulnerability detection, account takeover protection, and bot management. Quadrant Knowledge Solutions also named Radware a technology leader in their SPARK Matrix analysis for the web application firewall market, citing the highest rating in technology excellence, and a leader in Bot Management for the fourth consecutive year. These accolades reinforce Radware's position as an innovator with a strong competitive moat built on its technological prowess.

Outlook and Investment Horizon

Radware's outlook is characterized by a clear commitment to accelerating growth, particularly in its high-potential cloud security business. For the third quarter of 2025, the company projects total revenue in the range of $74.5 million to $75.5 million. Non-GAAP operating expenses are expected to be between $51.5 million and $52.5 million, reflecting continued strategic investments. Non-GAAP diluted net earnings per share are guided to be between $0.26 and $0.27.

Management remains focused on growing cloud ARR and gradually accelerating it beyond the current 21% year-over-year rate, with a long-term target of 25% growth. This ambition is supported by ongoing investments in cloud security innovation, the integration of AI-driven capabilities, and the expansion of its go-to-market strategy. Analysts anticipate Radware to earn $1.05 per share for the fiscal year ending December 2025, with rising earnings estimates signaling an improvement in the company's underlying business.

The company's strategic investments in North America, including new leadership and increased sales and marketing resources, are expected to drive stronger pipeline and customer engagement. The DefensePro X refresh cycle, with less than 20% of the installed base migrated, presents a substantial runway for future growth and subscription revenue. Furthermore, deepening relationships with OEM and MSSP partners are expected to unlock new growth opportunities and accelerate market share gains globally.

Risks and the Path Forward

Despite its strong momentum, Radware faces several pertinent risks. The broader economic environment continues to present challenges, with large enterprise customers exhibiting cautious spending behavior, leading to long sales cycles and increased budget scrutiny. While Radware's solutions address critical security needs, these macro factors can impact the timing and amount of orders.

The rapidly evolving threat landscape, particularly the rise of AI-powered attacks and the changing attack surface due to Agentic AI adoption by enterprises, poses a continuous challenge. Radware's own Cyber Survey highlighted critical weaknesses in application security measures, including a lack of protection against AI threats, API, and business logic attacks. The prevalence of sophisticated bots, accounting for a majority of e-commerce traffic, underscores the persistent and evolving nature of these threats. While Radware is actively developing AI-powered defenses, the arms race against cybercriminals necessitates continuous and significant R&D investment.

Competition from larger, more diversified players like Cloudflare, Akamai, F5, Cisco, and Fortinet remains intense. These competitors often have broader ecosystems and greater financial resources, which could impact Radware's market share and pricing power in certain segments. Additionally, supply chain dependencies for its hardware components could introduce operational risks.

However, Radware's strategic focus on AI-driven innovation, its best-of-breed security offerings, and its hybrid cloud approach are designed to directly address these risks. By providing superior protection and operational efficiency, Radware aims to differentiate itself and maintain its competitive edge, even in a challenging market. The company's strong balance sheet provides the financial flexibility to continue these critical investments and navigate potential headwinds.

Conclusion

Radware is at a pivotal juncture, transforming into a formidable force in the cybersecurity landscape. Its strategic pivot towards AI-driven cloud security, underpinned by innovative technologies like the EPIC-AI framework and DefensePro X, is yielding tangible results in accelerating cloud ARR growth and enhancing profitability. The company's ability to deliver real-time, automated protection against increasingly sophisticated threats, coupled with a robust go-to-market strategy through direct sales and strategic partnerships, positions it favorably for continued market share expansion. While a cautious macro environment and intense competition present ongoing challenges, Radware's strong financial health, disciplined execution, and unwavering commitment to technological leadership underscore a compelling investment thesis. Investors should watch for continued acceleration in cloud ARR, the successful execution of its North American expansion, and further advancements in its AI-powered security solutions as key indicators of its long-term value creation.