SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” second-quarter 2026 investor letter. A copy of the letter can be downloaded here. The second quarter of 2026 was driven by the AI boom and the Iran War, affecting interest rates, oil, commodities, and consumer sentiment. The riskiest market segments performed robustly in the quarter, primarily driven by technology and industrial firms linked to the AI arms race. Some portfolio companies linked to high-value consumer purchases faced pressure but still aligned with positive earnings and trends. The Small Cap Composite returned +10.79% on a gross basis +10.58% net) in the second quarter versus the Russell 2000®, which returned 21.49%, and the Russell 2000® Value, which returned 17.19%, over the same period. The composite returned 27.10% on a gross basis (26.13% net) versus 40.78% and 43.01% for the indexes. The fund underperformed the index due to the underweight position in speculative growth. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its Q2 2026 investor letter, SouthernSun Small Cap Strategy highlighted Extreme Networks, Inc. (NASDAQ:EXTR) as a notable conrtibutor. Extreme Networks, Inc. (NASDAQ:EXTR) is a cloud-driven enterprise networking company that develops and markets network infrastructure equipment and related software. On July 23, 2026, Extreme Networks, Inc. (NASDAQ:EXTR) closed at $29.73 per share, reflecting a market capitalization of $3.89 billion. Extreme Networks, Inc. (NASDAQ:EXTR) posted a one-month return of -6.33%, while its shares gained 66.55% over the past 52 weeks.
SouthernSun Small Cap Strategy stated the following regarding Extreme Networks, Inc. (NASDAQ:EXTR) in its Q2 2026 investor update:
“Extreme Networks, Inc. (NASDAQ:EXTR) was a top contributor in the second quarter, delivering its fifth consecutive quarter of double-digit revenue growth. For the fiscal third quarter ended March 31, 2026, the company reported net revenues of $316.9 million, up 11.4% year-over-year, and non-GAAP diluted EPS of $0.26, both ahead of consensus expectations. SaaS Annual Recurring Revenue grew 28.6% year-over-year to $236.4 million, reflecting deepening adoption of the company’s AI-driven cloud networking platform, and recurring revenue reached 36% of total revenue. Non-GAAP operating margin expanded to 15.2% from 14.1% in the prior-year period, and management raised fourth quarter revenue guidance to $330 $335 million. In our opinion, investor enthusiasm during the quarter was driven by tangible evidence that the company’s transition to a subscription-based model is gaining durable momentum, as Platform ONE adoption accelerated across enterprise customers and EMEA delivered particularly strong growth. We believe the ongoing Wi-Fi 7 hardware refresh cycle, continued SaaS ARR compounding, and management’s proactive resolution of supply chain constraints position Extreme well for continued share gains.”
Extreme Networks, Inc. (NASDAQ:EXTR) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 41 hedge fund portfolios held Extreme Networks, Inc. (NASDAQ:EXTR) at the end of the first quarter, up from 37 in the previous quarter. While we acknowledge the risk and potential of Extreme Networks, Inc. (NASDAQ:EXTR) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Extreme Networks, Inc. (NASDAQ:EXTR) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Extreme Networks, Inc. (NASDAQ:EXTR) and shared Madison Small Cap Fund’s insights on the company. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
