zSpace (ZSPC) Q2 2026 earnings summary

Executive summary

• Revenue for the quarter ended June 30, 2026, was $5.4 million, down from $7.5 million year-over-year, with declines across hardware, software, and services due to disrupted K-12 funding, elongated sales cycles, and delayed EMEA orders linked to geopolitical disruptions.

• Net income for the quarter was $0.3 million, a significant improvement from a $6.1 million loss in the prior year, driven by a $4.1 million gain on debt extinguishment and a $1.2 million gain from vendor claim settlements.

• Gross margin improved to 56% from 43% in the prior year, primarily due to reduced hardware costs and a shift toward higher-margin software and services.

• Operating expenses decreased 41% year-over-year, reflecting lower personnel, marketing, and consulting costs.

• The Board is conducting a strategic alternatives review to maximize long-term shareholder value.

Financial highlights

• Six-month revenue was $10.6 million, down 25% year-over-year, with hardware revenue at $5.7 million (53% of total), software at $4.1 million (39%), and services at $0.9 million (8%).

• Six-month net loss was $6.3 million, improved from $11.9 million loss in the prior year.

• Adjusted EBITDA for the six months was $(3.0) million, compared to $(8.8) million in the prior year; Q2 adjusted EBITDA loss was $(0.9) million vs. $(4.5) million year-over-year.

• Cash and cash equivalents were $0.9 million as of June 30, 2026.

• Operating expenses (excluding stock-based compensation) were $4.0 million vs. $7.7 million year-over-year.

Outlook and guidance

• Management expects continued challenges in K-12 markets due to funding disruptions and elongated sales cycles, but notes early signs of demand normalization as customers resume purchasing decisions.

• Margin improvements are expected to continue as software and services mix grows.

• Working capital needs are projected to increase, and there is substantial doubt about the ability to continue as a going concern without additional financing.

• Forward-looking statements caution on market uncertainties and macroeconomic risks.