Cerence (CRNC) Q2 2026 earnings summary

Executive summary

• Q2 FY26 revenue was $64.2 million, exceeding guidance but down from $78.0 million in Q2 FY25; adjusted EBITDA was $7.2 million, net income was $1.7 million, and free cash flow was $13.6 million.

• Strong performance was driven by disciplined execution, stability in the core automotive business, and momentum in AI-powered solutions, with major new customer wins including BYD and a significant Japanese automaker.

• xUI platform adoption ramped up, with production starting at BYD and additional OEMs expected to follow; generative AI and Audio AI solutions saw broader adoption among global OEMs.

• Non-automotive verticals and IP enforcement are being developed as future growth drivers, with a notable $49.5 million one-time IP license payment from Samsung in Q1 FY26.

• Cash and equivalents at quarter-end were $108.3 million, with strong cash generation supporting debt reduction and strategic flexibility.

Financial highlights

• Q2 FY26 revenue was $64.2 million, above guidance but down year-over-year; adjusted EBITDA was $7.2 million; free cash flow was $13.6 million.

• Variable license revenue was $31.8 million, fixed license revenue $5.8 million, and connected services revenue $15.3 million; professional services revenue declined to $11.3 million.

• Gross margin for Q2 FY26 was 73.7%, down from 77.1% in Q2 FY25.

• Q2 FY26 net income was $1.7 million, diluted EPS $0.04; cash and equivalents at quarter-end were $108.3 million.

• Six-month revenue rose 39.1% to $179.3 million, driven by the Samsung IP deal; cash from operations for the six months was $52.0 million, up 110.4% year-over-year.

Outlook and guidance

• Q3 FY26 revenue expected between $68 million and $72 million; adjusted EBITDA between $8 million and $12 million; gross margin projected at 75%-76%.

• Full-year FY26 revenue guidance raised to $305 million-$320 million; adjusted EBITDA to $60 million-$70 million; free cash flow guidance increased to $66 million-$76 million.

• Gross margin for the year reaffirmed at 79%-80%; net income guidance narrowed to -$3 million to +$7 million.

• FY26 operating cash flow guidance raised to $72 million-$78 million.

• Management expects continued revenue volatility due to automotive production delays, macroeconomic uncertainty, and evolving customer demand.