TipRanks Smart Growth Portfolio #66: Fiber of Thought
Dear Investors,
In this edition of the Smart Growth Portfolio and Newsletter, we spotlight a broadband box turning into an AI platform. But first, some news and updates.
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Portfolio News
❖ Morgan Stanley doubled its price target on Micron Technology (MU) to $1,050. The aggressive raise hinges on a major structural call: a prolonged, multi-year memory chip shortage that is fundamentally changing the economics of the industry.
Memory has become the principal bottleneck in the global AI infrastructure buildout, and Morgan Stanley projects that the supply shortage will remain highly constrained for at least the next two to three years, as scaling up production takes time. Amid this shortage, hyperscalers and AI leaders desperate to secure HBM and DRAM to train and run large AI models are willing to pay higher prices, giving Micron strong pricing leverage that directly translates into expanding margins and soaring cash flows.
Despite MU’s meteoric rise over the past year, Morgan Stanley argues that there is still significant room for multiple expansion because the market hasn’t yet begun to price in the sustainability of the scarcity-supported earnings windfall. This is apparent when forward valuations are examined: MU is trading at roughly 18x forward P/E – extraordinary low for a company with adjusted EPS growth in the triple digits – while its forward PEG ratio at about 0.13 reflects outright undervaluation.
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❖ Ondas (ONDS) stock dropped after the company filed a prospectus supplement to register 2.1 million shares for potential resale by shareholders. Put simply, this means the former owners of Omnisys – the company recently acquired by Ondas – can now sell ONDS shares they were granted in the deal (and that were previously locked up) at their discretion. While this doesn’t constitute a dilution, it may create some downward pressure on the share price if these specific shareholders sell a significant chunk of their holdings.
In other news, Ondas announced that it received over $30 million in new orders in May across its defense, security and autonomous technology platform, which brings its quarter-to-date orders to more than $110 million.
June has continued this pattern, with ONDS’ subsidiary World View Enterprises securing a $4.8 million contract from U.S. Navy to provide high-altitude balloon systems supporting SOUTHCOM’s counter-narcotics and illegal fishing operations.
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❖ Innodata (INOD) soared more than 25% over the past week, as Wedbush raised its price target on the stock from $100 to $120, its second hike within one month. The firm cited strong confidence in INOD’s ability to drive revenue growth throughout the fiscal year and beyond. Wedbush, along with many analysts and investors, now sees strong potential in data-layer companies whose products and services are essential for AI growth across industries.
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This Week’s Top Growth Pick: Calix (CALX)
Calix, Inc. helps broadband providers move past the commodity internet business and compete through smarter operations, better customer engagement, and faster service expansion. Its AI-native Calix One platform brings cloud software, network systems, analytics, and agentic tools into one operating layer for communications service providers serving homes, businesses, municipalities, and multi-dwelling communities. That matters because broadband is no longer just about laying fiber and selling internet plans. Providers need to lower support costs, personalize offers, launch new services, and keep subscribers from switching. Calix gives them the digital toolkit to do that, positioning the company as a key infrastructure software provider in the next phase of broadband competition.
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Cloud Connection
Calix traces its roots to broadband access equipment, spending much of its early history supplying the systems that helped communications service providers (CSPs) build and expand networks. That hardware foundation still matters, but the company’s bigger strategic shift has been the long move toward cloud software, managed services, subscriber intelligence, and recurring platform revenue.
The transition gained force as fiber expansion accelerated in the early 2020s. CSPs were no longer just trying to connect more homes; they needed to lower support costs, manage subscribers more intelligently, and defend against larger cable and telecom rivals with better digital experiences. Calix responded by expanding its cloud portfolio into a broader operating layer for service providers, combining network management, marketing tools, customer engagement, and business analytics.
That evolution gradually turned Calix Cloud into what is now: the Calix One platform. The platform was built to give CSPs a single environment for running networks, understanding subscriber behavior, launching new services, and improving retention. From a business model perspective, this is the key part of the company’s shift from selling telecom infrastructure into building a subscription-driven software ecosystem around the broadband customer relationship – a transition that pushed the company past the $1 billion annual revenue milestone by the end of 2025.
The latest step is artificial intelligence. In 2025, Calix announced a next-generation, cloud-and-agentic enabled Broadband Platform built on Google Cloud’s AI and data infrastructure, including Vertex AI and Gemini models. The platform went live in late 2025, and Calix completed the customer migration in Q1 2026, setting the stage for AI agents to be embedded across provider workflows in sales, marketing, support, and network operations. The goal is to give smaller and mid-sized providers tools that were historically almost exclusively available to larger telecom operators.
Regulatory momentum has also helped. Calix positioned parts of its Broadband Platform for the federal Broadband Equity, Access, and Deployment (BEAD) program, while FCC equipment approvals have enabled the use of its gateway appliance portfolio in subsidized broadband projects. That matters because public broadband funding can expand the addressable opportunity for Calix customers – and, indirectly, for the platform that supports them.
Over the past several years, Calix has moved from a broadband equipment supplier toward an AI-enabled cloud platform company serving CSPs. The transformation was gradual, but the direction is clear: less dependence on hardware cycles, more emphasis on software, automation, customer experience, and recurring platform value.
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Beyond the Box
Calix has spent the past several years transforming itself from a supplier of broadband equipment into a software and platform company built around communications service providers (CSPs). While appliances and network infrastructure remain an important entry point, the company’s strategy increasingly revolves around Calix One – an AI-native platform that combines cloud software, managed services, subscriber analytics, and agentic AI into a single operating environment for broadband operators.
The goal is straightforward: help CSPs attract more subscribers, reduce churn, launch new services faster, and generate more revenue from existing customers. Through offerings such as SmartHome, SmartBiz, SmartMDU, SmartTown, and other SmartLife services, Calix helps providers move beyond selling internet access and toward delivering a broader digital experience. In turn, Calix deepens its own relationship with customers through recurring software and service adoption.
That shift is becoming increasingly important because broadband connectivity itself is gradually becoming commoditized. Competitive advantage is moving toward customer experience, personalization, automation, and operational efficiency. Calix’s platform sits directly in that layer. Rather than forcing providers to stitch together multiple vendors, it integrates network operations, marketing, subscriber engagement, support, analytics, and AI workflows under a single platform.
The completion of Calix One’s migration to Google Cloud in 2026 represents a major milestone. Beyond enabling AI capabilities through Google’s Vertex AI and Gemini models, the new architecture supports private-cloud deployments, international expansion, and larger operators with stricter security and sovereignty requirements. Management is increasingly positioning Calix as the operating system for CSPs, with AI agents designed to automate subscriber acquisition, customer support, network management, upselling, and retention activities.
The opportunity extends well beyond traditional residential broadband. One of the company’s most promising growth vectors is the multi-dwelling unit (MDU) market, seen as a major expansion vertical within Calix’s broader platform addressable market, giving the company another way to deepen customer relationships while opening a side-door into larger operators. Calix is also expanding into business, municipal, hospitality, and private-network environments while pursuing larger Tier 1 operators, where adoption cycles are longer but potential contract values are significantly larger.
The broader market backdrop remains favorable. Demand for fiber broadband continues to expand, while federal programs such as BEAD should support network deployments over the coming years. Importantly, Calix views those deployments as more than hardware opportunities. Each new network creates a potential long-term customer for software, managed services, and AI-powered workflows. The company’s recent FCC approvals further remove regulatory uncertainty around gateway deployments and strengthen its position in federally funded projects.
Perhaps the most compelling aspect of the story is that Calix’s competitive advantage extends beyond AI itself. The company has spent years building relationships with more than 1,200 platform customers, generating operational data and workflow intelligence that can be used to automate real-world actions inside CSP environments. As more providers adopt additional modules, managed services, and AI capabilities, Calix becomes increasingly embedded in day-to-day operations, raising switching costs and strengthening customer retention.
The opportunity remains substantial. Calix’s footprint within the broader markets for broadband software, subscriber engagement, managed services, and AI-driven network operations remains relatively small, leaving meaningful room for expansion through existing customers, new service categories, MDUs, larger operators, and international markets. Execution risks remain – broadband spending cycles can fluctuate, Tier 1 sales processes are measured in years, and larger competitors are pursuing many of the same opportunities. Yet the company appears increasingly aligned with the industry’s highest-value layer. As broadband providers shift from selling connectivity to managing subscriber experiences through software and automation, Calix is positioning itself as the platform that enables that transition.
Source: Calix Investor Day Presentation, April 2026
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Follow-On Traffic
Calix’s financial profile reflects a company in the middle of a transition from a hardware-led broadband supplier into a higher-value software and platform business. Importantly, that shift is happening while growth is accelerating. First-quarter 2026 revenue reached a record $280 million, up 27% year-over-year and marking the seventh consecutive quarter of growth. The result exceeded management’s guidance and extended a streak of six consecutive revenue beats, while Calix also maintained a run of non-GAAP EPS beats dating back to Q2 2021.
Growth remained broad-based. Appliance revenue rose to $232.8 million, while software and services revenue reached $47.1 million, increasing 16% year-over-year despite a shorter quarter. The larger story is where that growth is headed. Management increasingly views software, managed services, and AI-driven workflows as the primary engines of future value creation, with hardware serving as the gateway into the broader Calix One ecosystem.
Profitability remained solid despite several temporary headwinds. GAAP net income reached $11.2 million, a sharp improvement from a year-earlier loss, while non-GAAP gross margin was 57.2%, up 100 basis points year-over-year. Margin expansion was partially masked by the final stages of Calix’s migration to its third-generation platform, which required overlapping cloud environments and created an estimated $3-4 million cost burden last quarter. With that migration now complete, management expects software and services margins to recover, potentially reaching new highs beginning in the second half of 2026.
Forward indicators are becoming increasingly important. Total remaining performance obligations (RPO) were $376 million, down 2% sequentially but up 11% year-over-year, reflecting the platform transition and a tough fourth-quarter comparison. Current RPOs were stronger, reaching a record $157 million, up 3% sequentially and 22% year-over-year. Management expects RPO growth to reaccelerate in the second half of 2026 as Calix One adoption, Agent Workforce Cloud, and customer proof points build.
The balance sheet remains a source of strength. Calix ended the quarter with $243 million in cash and investments and no meaningful debt burden, giving the company flexibility to fund AI and platform investments while maintaining positive free cash flow.
Management raised full-year 2026 revenue growth guidance to 15-20%, up from 10-15% previously, and guided for second-quarter revenue of $287-293 million, implying roughly 32% year-over-year growth at the midpoint. The main near-term risk is memory component inflation, which Calix is partially offsetting through customer surcharges beginning in May. Those surcharges support reported revenue but pressure gross margin because they pass through cost with little or no gross profit. As a result, management expects full-year non-GAAP gross margin to decline 50-150 basis points, with the surcharge dynamic creating roughly a 200-basis-point headwind.
That makes 2026 a transition year, but a constructive one: stronger revenue growth, temporary margin compression, and elevated AI investment are all happening at the same time. The pressure is tied mostly to migration timing and component costs, while demand indicators remain healthy. With Calix One now live across the customer base, software margins set to normalize, and RPO expected to reaccelerate in the second half, Calix is positioned to exit 2026 with better revenue visibility, improving profitability, and a clearer path toward platform-led earnings expansion.
Source: Calix Investor Day Presentation, April 2026
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Signal Through Noise
Calix occupies a somewhat unusual position within the communications infrastructure landscape, combining broadband access hardware with a growing layer of cloud software, managed services, and AI-driven operational tools. As a result, no single company perfectly mirrors its business model. ADTRAN represents the closest direct comparison, serving many of the same communications service providers and competing across fiber-access and broadband infrastructure markets. Harmonic provides a useful benchmark for broadband platform software and the industry’s shift toward cloud-managed networks. Extreme Networks offers perhaps the best comparison for Calix’s transition from hardware sales toward recurring software and subscription revenue, while Digi International captures the combination of connected devices, gateways, cloud management, and embedded software services. Together, these peers help frame Calix as a broadband platform company increasingly moving up the value stack beyond network hardware.
The peer group has broadly benefited from the recovery in networking, broadband, and connected-device spending, with ADTRAN, Digi, Extreme, and Harmonic all rebounding from lower expectations as investors rotated back into cleaner margin-recovery stories. Calix moved in the opposite direction because expectations had already run ahead of the numbers. The market initially treated CALX as a growth re-rating candidate, attaching a software-style multiple upfront as the company pushed deeper into cloud platforms, managed services, and AI. But investors have become far less forgiving toward growth tech names that cannot yet translate that story into visible operating leverage – especially outside the core AI infrastructure winners. For Calix, that made the transition a double-edged sword: highly valuation-positive over time, but messy in the short term as investors questioned revenue quality, margin mix, implementation costs, and the pace of software adoption. Cautious guidance, dual-cloud costs, RPO noise, and later memory-driven margin pressure only intensified the de-rating. The result is a stock now priced more like a “show me” transition story than a clean software compounder – which is exactly where CALX’s reset may become interesting.
Calix’s transition is beginning to show on the books, prompting Wall Street to assign the stock a Strong Buy consensus and an average price target implying more than 70% upside over the next year. Valuation metrics that became much more reasonable over the past year help support that optimism. Following the stock’s sharp underperformance, CALX now trades at roughly 1.9x forward EV/Sales, 13.5x forward EV/EBITDA, and about 21x forward adjusted earnings – with next year’s P/E dropping to roughly 15.4x as earnings are expected to grow faster. Those multiples sit below or near most of its peer group despite Calix delivering the fastest current revenue growth and the strongest forward growth outlooks in the comparison set.
Harmonic, Extreme, and Digi all command materially higher sales and EBITDA multiples despite slower expected revenue growth. Even ADTRAN, the closest direct broadband-access competitor, trades at a higher forward earnings multiple despite lower margins, weaker profitability, and heavier hardware exposure. Calix now offers the rare combination of peer-leading growth, strong gross margins, and a discounted transition-story valuation.
That discount reflects real skepticism. Investors want evidence that Calix One can turn platform adoption into sustained operating leverage, margin recovery, and higher recurring revenue. But the setup is no longer priced for perfection: revenue growth is accelerating, current RPO is at a record, the platform migration is complete, and management has raised its 2026 outlook. The stock now reflects transition risk, while the business is starting to show transition payoff.
Management’s actions suggest it sees the same disconnect. Calix has long maintained an opportunistic buyback program, but accelerated repurchases dramatically as the stock sold off. In Q1 2026 alone, the company repurchased $170.9 million worth of shares, while the board continued expanding authorization capacity through additional approvals in January and April – after which CALX retains roughly $163 million in unused capacity. More importantly, the company was able to do so from a position of financial strength, ending the quarter flush with cash and no material debt. Calix used that strength to buy aggressively into weakness, signaling confidence in the long-term transition while still preserving ample flexibility to fund AI and platform investments.
The stock may remain volatile until margins recover and software adoption translates into unmistakable earnings leverage. Yet that uncertainty is precisely what has created the opportunity. It is unusual to find a company growing revenue more than 20%, expanding its platform footprint, generating positive cash flow, carrying a strong balance sheet, and trading at valuations normally reserved for far slower-growing businesses. The market is still debating the transition. The numbers increasingly suggest it is already happening.
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To Sum It All Up
Calix is increasingly positioning itself at the center of broadband’s next phase – where connectivity providers must compete through software, automation, subscriber experience, and operating efficiency, not speed alone. What began as a broadband equipment business is evolving into an AI-native platform that helps communications service providers run networks, engage subscribers, launch services, and expand revenue through one operating layer. The completed Calix One migration gives the company a cleaner foundation for agentic workflows, private-cloud deployments, and deeper customer expansion. Near-term margin noise may keep the stock volatile, but the strategic direction is clear. Calix is moving up the broadband value stack, but the market is still pricing the company as if that transition remains unproven. As proof builds, CALX has a credible path to renewed recognition as a software-driven infrastructure growth story.
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Smart Growth Portfolio
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***Vistance Networks (VISN) apparent stock-price decline is not a real economic loss. Shares plunged nearly 50% on April 27 because they began trading ex-dividend after a $10 special cash distribution, meaning value was mechanically transferred from the stock price to shareholders as cash. Since then, VISN is up about 25%, reflecting strong investor confidence in the remaining business. Another similar value-transfer event is likely ahead: Vistance agreed to sell RUCKUS to Belden for $1.846 billion, with most of the roughly $1.7 billion in net proceeds expected to be distributed to shareholders after closing.
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Disclaimer
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