Cerence (CRNC) Q1 2026 earnings summary

Executive summary

• Q1 FY26 revenue reached $115.1 million, up 126% year-over-year, driven by a $49.5 million one-time Samsung patent license and strong license sales.

• Adjusted EBITDA rose to $44.6 million from $1.4 million, exceeding guidance; net loss narrowed to $5.2 million from $24.3 million.

• Record free cash flow of $35.6 million and net cash from operating activities of $37.9 million were achieved.

• Major technology advancements included the launch and customer adoption of xUI and new AI agents, with five major automaker programs and strong CES 2026 feedback.

• Cost discipline, debt reduction, and a stronger balance sheet supported reaffirmed full-year FY26 guidance.

Financial highlights

• Total revenue for Q1 FY26 was $115.1 million, up from $50.9 million in Q1 FY25; license revenue rose to $87.8 million, including the Samsung settlement.

• Gross margin improved to 86.3% from 65.0% year-over-year, driven by favorable license revenue mix.

• Adjusted EBITDA margin was 39%, up from 3% in the prior year; GAAP net loss narrowed to $5.2 million.

• Free cash flow for the quarter was $35.6 million, a company record.

• Connected services revenue was $14.5 million, up 6% year-over-year; professional services revenue declined to $12.8 million.

Outlook and guidance

• Q2 FY26 revenue expected between $58 million–$62 million; gross margin 71%–72%; adjusted EBITDA $2 million–$6 million.

• Full-year FY26 guidance reaffirmed: revenue $300 million–$320 million, adjusted EBITDA $50 million–$70 million, free cash flow $56 million–$66 million, gross margin 79%–80%.

• FY26 net (loss)/income projected between $(8) million and $12 million; EPS between $(0.18) and $0.25.

• PPU metric and customer adoption expected to increase by end of fiscal 2026.

• Management expects continued revenue volatility due to timing of large IP license deals and market challenges.