Madison Small Cap Fund, managed by Madison Funds, released its Q2 2026 investor letter. A copy of the letter can be downloaded fhere. The small-cap market showed exceptional strength in Q2, largely due to anticipated peace in the Middle East. The Russell 2000 Index began to rally, propelled by Information Technology, Health Care, and Industrials. The Madison Small Cap Fund (Class I) returned 12.7% in the quarter, underperforming the Russell 2000’s 21.5% and Russell 2500’s 20.2%. While strong gains were seen in Info Tech investments, recent investments in underperforming software companies negatively impacted overall performance. Nevertheless, confidence in the long-term potential of these software investments remains high. The firm is optimistic about small caps, noting their recent outperformance over large caps, recovery in certain software sectors, and improvements in some housing stocks toward the end of the second quarter. Please review the Fund’s top five holdings to gain insights into their key selections for 2026.
In its Q2 2026 investor letter, Madison Small Cap Fund highlighted Extreme Networks, Inc. (NASDAQ:EXTR). Extreme Networks, Inc. (NASDAQ:EXTR) is a cloud driven enterprise networking company that develops and markets network infrastructure equipment and related software. On July 16, 2026, Extreme Networks, Inc. (NASDAQ:EXTR) closed at $29.76 per share, reflecting a market capitalization of $3.93 billion. Extreme Networks, Inc. (NASDAQ:EXTR) posted a one-month return of -3.92%, while its shares gained 71.86% over the past 52 weeks.
Madison Small Cap Fund stated the following regarding Extreme Networks, Inc. (NASDAQ:EXTR) in its Q2 2026 investor update:
“Extreme Networks, Inc. (NASDAQ:EXTR) (market capitalization of ~$4 billion) is a global provider of cloud driven enterprise networking solutions. The company designs and manufactures wired and wireless LAN (local area network) hardware, software-defined networking (SDN) fabric, and cloud-native management tools. They enable critical connectivity for high density, high-security environments, including professional sports stadiums, healthcare systems, and large-scale government and private enterprises. Extreme has successfully pivoted from a legacy hardware vendor to a cloud-managed, software-defined platform, creating deep “stickiness” within its customer base. In enterprise networking, the “specification moat” is significant. Once an organization builds its network fabric and security policies within Extreme’s cloud dashboard, the operational risk and cost of migrating to a competitor are prohibitively high. Their strategy of offering superior simplicity and faster deployment times allows them to aggressively take market share from slower-moving, larger incumbents like Cisco and Juniper. The current industry-wide transition to Wi-Fi 7 is a catalyst, as these new hardware deployments inherently drive higher attach rates for Extreme’s cloud-management software. We also believe that as enterprises begin deploying AI at scale, Extreme’s hardware could become the hardware foundation. Our intrinsic value estimate is $40.”
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 a bullish thesis 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.
