N-able's second quarter of 2026 was characterized by a strategic shift, marked by changes in go-to-market leadership and evolving dynamics within the Unified Endpoint Management (UEM) and Endpoint Detection and Response (EDR) markets. Despite a reported total revenue of $138.2 million and an Annual Recurring Revenue (ARR) of $544.5 million, the company revised its full-year guidance downwards. This adjustment is primarily attributed to renewal rates in the UEM and EDR sectors falling below expectations and the transition of its Chief Revenue Officer. In response, N-able is implementing a 6% reduction in its workforce and undertaking an organizational realignment to sharpen its focus on high-growth opportunities such as data protection and security operations, while also leveraging artificial intelligence for enhanced productivity.
N-able's Strategic Realignment and Financial Performance in Q2 2026
On Monday, August 10, 2026, at 8:30 a.m. ET, N-able, a leading provider of IT management and security solutions, held its second-quarter 2026 earnings call. The call featured key executives, including Griffin Gyr, Director of Investor Relations; John Pagliuca, President and Chief Executive Officer; and Tim O'Brien, Executive Vice President and Chief Financial Officer, who discussed the company's financial results and strategic adjustments.
N-able reported a total revenue of $138.2 million, marking a 5.9% year-over-year increase, primarily driven by a 6.1% growth in subscription services. Subscription revenue accounted for approximately 99% of the total, reaching $137.1 million. The total ARR grew to $544.5 million, up 5.7% on a constant currency basis, fueled by expansions in data protection and security operations. Adjusted EBITDA stood at $39.9 million, representing a 28.9% margin, while the non-GAAP gross margin was 80.2%, slightly down from 82% in the previous year due to lower renewal rates in specific product categories. GAAP net income returned to profitability at $1.8 million, or $0.01 per diluted share, a significant improvement from a loss in the prior year. Non-GAAP net income reached $18.7 million, or $0.10 per diluted share.
The company's large customer count, defined as partners with over $50,000 in ARR, increased by 7% to 2,706, contributing 63% to total ARR, up from 60% a year ago. However, the constant currency net revenue retention was 103%, impacted by pricing pressures and lower-than-expected renewal rates in UEM and EDR. International revenue constituted 46% of the total. Unlevered free cash flow was $22.9 million, influenced by seasonal factors and investments in product development, with a net debt leverage of 1.8x. Cove Data Protection ARR reached $200 million, outperforming the company average and driving net new ARR growth. Notably, 47% of committed code was generated using AI tools, significantly accelerating feature releases.
N-able is undertaking an organizational realignment, including a 6% headcount reduction, expected to generate $11 million to $13 million in annualized operating expense savings. Restructuring charges of $4 million to $6 million are anticipated in the second half of 2026. The company also revised its first-quarter 2026 revenue downwards by $1.3 million due to previously disclosed filings.
Looking ahead to Q3 2026, N-able projects total revenue between $134.5 million and $135.5 million, representing 3% to 4% growth on a constant currency basis, and adjusted EBITDA of $41 million to $42 million, with a margin of 30% to 31%. For the full year 2026, the revenue guidance is $539 million to $542 million, ARR guidance is $562 million to $565 million, and adjusted EBITDA guidance is $158 million to $161 million, with an unlevered free cash flow of $116 million to $120 million.
The leadership team acknowledged challenges such as below-expected renewal rates in UEM and EDR, citing pricing pressure in the EDR market and some customers opting for lower price points or competitor services. To address these issues, N-able appointed Russell Rosa as Chief Revenue Officer to accelerate its full channel strategy, deepen upmarket motion, and enhance operational excellence. The company also amended its partnership with SentinelOne to expand its security product suite and offer pricing protection, introducing FedRAMP-certified EDR and cloud-native security capabilities. N-able launched Disaster Recovery as a Service (DRaaS) in July, allowing customers to restore operations rapidly without dedicated hardware, and integrated Shadow AI Visibility in UEM and security operations to detect unauthorized AI tool usage. Omdia recognized N-able as a leader in backup and Disaster Recovery for the third consecutive year.
This quarter underscores N-able's commitment to adapting to a rapidly changing cybersecurity landscape, emphasizing AI integration, strategic realignments, and product innovation to sustain long-term profitable growth amidst market pressures.
The latest financial report from N-able highlights a fascinating intersection of market dynamics, technological innovation, and organizational strategy. As a journalist covering the tech industry, I'm particularly struck by how the company is navigating the dual pressures of market shifts and the rapid advancement of AI. The decision to reduce headcount while simultaneously investing heavily in AI-generated code and new AI-driven products is a bold move. It signals a clear vision for the future, where efficiency and cutting-edge technology are paramount. However, it also raises questions about the human element in an increasingly automated world. While AI promises increased productivity and faster feature releases, the impact on employee morale and the long-term implications for skill sets within the company bear watching. Furthermore, the challenges in UEM and EDR renewal rates, despite overall growth, indicate that customer loyalty is not guaranteed and requires continuous innovation and value delivery. N-able's strategic pivot towards strengthening its channel strategy and targeting the mid-market with its expanded security offerings appears to be a sensible response to these competitive pressures. It will be compelling to observe how these tactical changes translate into sustained growth and profitability in the coming quarters, especially as the company aims for accelerated growth in 2027.
