SideChannel (SDCH) Q2 2026 earnings summary

Executive summary

• Q2 FY 2026 revenue declined 16.8% year-over-year to $1.6 million, reflecting a strategic shift from services to platform models and targeted investments in scaling the Enclave platform.

• vCISO services revenue dropped 28.4% year-over-year due to client migration to fixed retainer and platform-based engagements.

• Gross margin expanded by 380 basis points to 53.5% in Q2 FY 2026, demonstrating operational leverage from the platform transition.

• Net loss for the six months was $840,000, with Q2 net loss widening to $444,000 due to increased operating expenses.

• Focused on expanding Enclave adoption, securing new vCISO clients, and adding advanced cybersecurity offerings.

Financial highlights

• Six-month revenue was $3.4 million, down 11.9% year-over-year; Q2 revenue was $1.6 million, down from $1.89 million in Q2 FY 2025.

• Gross margin improved to 53.5% for Q2 and 52.3% for the six months, up from 49.7% and 47.7% respectively year-over-year.

• Net loss for the six months was $840,000; operating expenses increased 24.9% year-over-year to $2.6 million.

• Cash, cash equivalents, and short-term investments declined by $854,000 to $311,000 as of March 31, 2026.

• Software and services category revenue grew 12.5% year-over-year to $2.3 million.

Outlook and guidance

• Management is focused on converting Enclave pipeline into recurring revenue and maintaining operating discipline to support margin expansion.

• Q3 and Q4 FY 2026 are critical for proving operational success of phase II and accelerating Enclave adoption.

• Current liquidity is insufficient to fund operations for the next twelve months without additional capital or significant operational changes.

• Actively exploring financing and cost structure adjustments; substantial doubt remains about ability to continue as a going concern.

• Channel partners are increasingly embedding Enclave and co-selling services, signaling future growth.