zSpace (ZSPC) Q1 2026 earnings summary

Executive summary

• Q1 2026 showed early signs of stabilization after a challenging 2025, with improved customer engagement, sequential growth in bookings and revenue, and a rebuilding sales pipeline despite ongoing macroeconomic and geopolitical challenges.

• The board initiated a formal review of strategic alternatives, including potential partnerships, business combinations, or a sale, to maximize shareholder value.

• New customer additions and steady software renewal rates indicate continued relevance in instructional technology despite budget pressures.

• Net loss for Q1 2026 ranged from $5.9 million to $6.9 million, compared to $5.8 million in Q1 2025, reflecting ongoing operating losses and negative cash flows from operations.

• There is substantial doubt about the company’s ability to continue as a going concern due to recurring losses, negative cash flows, and the need for additional financing.

Financial highlights

• Q1 2026 revenue was $5.3 million, down 22% year-over-year but up 8% sequentially from Q4 2025, mainly due to delayed EMEA orders linked to geopolitical events.

• Gross margin improved to 53%, up from 47% in Q1 2025, driven by lower hardware costs and a favorable product mix.

• Operating expenses (excluding stock-based compensation) were $4.9–$5.2 million, down significantly year-over-year.

• Adjusted EBITDA loss improved to $(2.1) million from $(4.4) million in Q1 2025.

• Cash and equivalents stood at $2.9 million as of March 31, 2026, up from $1.0–$1.1 million a year earlier.

Outlook and guidance

• No formal guidance provided, but management targets EBITDA breakeven for 2026 if current trends continue.

• Sequential gross margin expansion and cost discipline are expected to support breakeven performance by year-end.

• Management remains cautious due to unpredictable customer supply chains, macroeconomic volatility, and funding disruptions in the K-12 market.

• There is substantial doubt about the company’s ability to continue as a going concern without additional capital.

• Management anticipates software revenue to grow faster than hardware and services, focusing on renewable software revenue.