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 patent license settlement with Samsung and strong license sales; adjusted EBITDA was $44.6 million, exceeding guidance.

• Record free cash flow of $35.6 million and net cash from operating activities of $37.9 million; net loss narrowed to $5.2 million from $24.3 million year-over-year.

• Gross margin expanded to 86.3% from 65.0% year-over-year, reflecting favorable revenue mix and operational efficiency.

• Advanced technology with new AI agents and xUI platform enhancements, with five major automaker programs and strong CES 2026 feedback.

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

Financial highlights

• Total revenue for Q1 FY26 was $115.1 million, up 126% year-over-year, with license revenue at $87.8 million (including $49.5 million from Samsung), connected services at $14.5 million, and professional services at $12.8 million.

• Gross margin reached 86.3%, up from 65.0% in Q1 FY25; adjusted EBITDA was $44.6 million, compared to $1.4 million in the prior year.

• Free cash flow for the quarter was $35.6 million, up from $7.9 million year-over-year.

• GAAP net loss narrowed to $5.2 million from $24.3 million year-over-year.

• Net cash from operating activities was $37.9 million, a quarterly record.

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 income projected between $(8) million and $12 million; EPS between $(0.18) and $0.25.

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

• Liquidity is considered sufficient for the next 12 months, with $94.7 million in cash, cash equivalents, and marketable securities as of quarter-end.