Digimarc (DMRC) Q1 2026 earnings summary

Executive summary

• Achieved first commercial order for secure gift card solution, covering six brands and advancing rollout with 15 North American retailers, including 8 of the top 20 by sales.

• Secured upsells with three anti-counterfeiting customers and a six-figure upsell in digital trust with a global technology company.

• Added key talent in go-to-market functions, including experienced sales leaders, to support growth.

• Revenue for Q1 2026 was $7.6M, down 19% year-over-year, driven by the expiration of two major contracts and lower service revenue from completed recycling projects.

• Net loss narrowed to $7.0M from $11.7M in Q1 2025, with a basic and diluted loss per share of $0.32, compared to $0.55 in the prior year.

Financial highlights

• Ending ARR for Q1 2026 was $15.0M, down from $20.0M year-over-year due to the loss of two major contracts; excluding these, ARR grew $1.8M year-over-year.

• Sequential ARR growth was 9%.

• Subscription revenue was $4.4M (down 18% year-over-year); service revenue was $3.2M (down 21%).

• Subscription gross margin rose to 90%, up 4 points year-over-year; service gross margin was 57%, down 8 points.

• Non-GAAP net loss was $1.6M or ($0.07) per diluted share, improved from $8.5M or ($0.40) per diluted share.

Outlook and guidance

• Significant ARR growth expected in 2026, though composition has shifted due to scanner rollout delays affecting gift card contributions.

• Management expects current cash and investments to cover working capital and capital expenditures for at least the next 12 months.

• Positioned to benefit from AI-driven demand and ongoing digital transformation.