Key Points
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Ubiquiti beat Wall Street’s sales and earnings targets for fiscal Q4.
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The company also announced a 25% increase for its dividend.
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The networking technology specialist’s gross profit margin declined on a sequential basis last quarter.
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Ubiquiti (NYSE: UI) stock lost ground in Friday’s trading, but it managed to see a substantial recovery compared to its sell-off early in the session. While the company’s share price had been down as much as 10.1% near the opening of the market, it only closed the day down 2.6%.
Before trading started this morning, the networking technologies specialist posted results for the fourth quarter of its 2026 fiscal year — which ended June 30. The company’s sales and earnings for the period topped Wall Street’s estimates, and the company announced it was raising its dividend by 25%, but the stock still lost ground.
Ubiquiti stock slipped due to margin concerns
In fiscal Q4, Ubiquiti recorded non-GAAP (adjusted) earnings per share of $4.73 on revenue of $937.3 million. For comparison, the average analyst estimate had targeted adjusted earnings per share of $4.03 and revenue of $850.5 million. Sales were up 23.5% year over year in the period, and adjusted earnings per share increased 33.6%. On the other hand, the company’s gross margin decreased from the margin of 47% that it posted in the third quarter of the last fiscal year.
What’s next for Ubiquiti?
Ubiquiti’s sequential gross margin decline last quarter stemmed from higher costs for components and shipping and was partially offset by a decline in some indirect costs. That dynamic raises the possibility that component and shipping costs could remain elevated and that the company’s indirect costs could increase again, which would put further pressure on margins.
The company’s gross margin of 46.2% in fiscal 2026 represented a big step up from the margin of 43.4% recorded in fiscal 2025, and investors are concerned that last quarter’s results could be the start of a sustained reversion. On the other hand, the business’s results last quarter were quite strong — and Ubiquiti’s big dividend increase suggests that management is confident in the profitability outlook.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Ubiquiti. The Motley Fool has a disclosure policy.
