CSP (CSPI) Q1 2026 earnings summary

Executive summary

• Q1 fiscal 2026 revenue was $12 million, down from $15.7 million year-over-year, primarily due to the absence of large one-time product deals in the prior year.

• Service revenue grew 14.6% to $5.3 million, driven by technology solutions, managed services, and strong customer retention.

• Gross margin improved to 39.3% from 29.1% year-over-year, reflecting a higher mix of services and favorable product mix.

• Net income was $91,000 ($0.01 per diluted share), down from $472,000 ($0.05 per share) in the prior year period.

• Strong customer retention, new wins in cybersecurity (AZT PROTECT), and managed services underpin confidence in fiscal 2026 growth.

Financial highlights

• Product revenue declined to $6.7 million from $11 million year-over-year, while services revenue rose to $5.3 million from $4.7 million.

• Gross profit increased to $4.7 million from $4.6 million year-over-year, despite lower total revenue.

• Operating loss narrowed to $112,000 from $354,000 year-over-year.

• Cash and cash equivalents stood at $24.9 million as of December 31, 2025, down $2.5 million during the quarter.

• R&D expenses rose 9.2% to support AZT PROTECT customization and OEM development.

Outlook and guidance

• Management expects steady, profitable improvements and substantial operating leverage as revenue grows in fiscal 2026.

• Service segment momentum is expected to continue, with new managed service customers generating nearly $100,000 in additional monthly revenue.

• AZT PROTECT pipeline and OEM integrations (notably with Acronis) are anticipated to drive long-term scalable growth.

• Management expects available cash, cash from operations, and line of credit to be sufficient for at least 12 months.

• No material impact from recent tax legislation is expected on the effective tax rate in future periods.