zSpace Reports First Quarter 2026 Financial Results
Rhea-AI Summary
zSpace (OTC: ZSPC) reported first quarter 2026 revenue of $5.3 million, down from $6.8 million a year ago, as EMEA orders were delayed or returned due to the Iran war. Gross margin rose to 53%, up 570 bps, and adjusted EBITDA loss improved to ($2.1) million.
Operating expenses (ex‑stock comp) fell to $5.2 million from $7.6 million, while net loss was ($5.9)–($6.9) million. Software and services were 47% of revenue, ACV was $10.1 million, and cash stood at $2.9 million. The Board launched a strategic alternatives review, potentially including partnerships, combinations, or a sale.
AI-generated analysis. Not financial advice.
Positive
- Gross margin increased to 53%, up 570 basis points year-over-year
- Adjusted EBITDA loss improved to ($2.1) million from ($4.4) million
- Operating expenses ex-stock comp declined to $5.2 million from $7.6 million
- Cash, cash equivalents and restricted cash rose to $2.9 million from $1.1 million
- Software and services mix increased to 47% of revenue from 43%
- Board initiated a strategic alternatives review to explore value-maximizing transactions
Negative
- Revenue declined to $5.3 million from $6.8 million year-over-year
- Net loss was between ($5.9) million and ($6.9) million, versus ($5.8) million
- Annualized renewable software ACV fell 13% year-over-year to $10.1 million
- Net dollar revenue retention was 65% for large customers, or 82% normalized
- Bookings were $6.1 million, down 8% year-over-year
- Backlog of unfulfilled orders was $3.8 million, indicating execution and timing risk
Key Figures
Market Reality Check
Peers on Argus
ZSPC was down 9.09% into the print, while key hardware/software peers like TACT, KTCC, EBON, and SCKT were lower by roughly low‑single to mid‑single digits. Only one loosely related peer (UAVS) showed scanner momentum, so the move appears stock‑specific ahead of earnings and the strategic review.
Previous Earnings Reports
| Date | Event | Sentiment | Move | Catalyst |
|---|---|---|---|---|
| Mar 30 | Q4/FY25 earnings | Negative | +0.3% | Margin improvement but sharp revenue and cash declines in Q4 and 2025. |
| Nov 13 | Q3 2025 earnings | Negative | +3.3% | Revenue drop and funding uncertainty despite better gross margin and deployments. |
| Aug 14 | Q2 2025 earnings | Negative | -11.8% | Flat revenue, higher net loss, bookings and cash pressure despite ACV growth. |
| May 14 | Q1 2025 earnings | Neutral | -10.1% | Revenue decline but margin gains and improved net loss with new initiatives. |
| Mar 27 | Q4/FY24 earnings | Negative | -19.6% | Lower revenue and wider net loss despite IPO and major school deal. |
Earnings releases have often coincided with downside moves, especially when they highlight revenue pressure despite margin gains.
Over the past year, zSpace’s earnings reports have consistently shown revenue declines alongside improving gross margins and growing software focus. Events on Mar 27, 2025 and May 14, 2025 highlighted falling sales and wider losses, followed by Q2 and Q3 2025 updates that maintained margin progress but underscored bookings and cash pressure. The Q4 2025 release on Mar 30, 2026 again emphasized margin gains amid sizable revenue and cash declines. Today’s Q1 2026 results continue that theme while adding a formal strategic alternatives review.
Historical Comparison
Past year’s earnings headlines moved ZSPC about -7.57% on average, often on revenue pressure paired with margin gains. The latest Q1 2026 update fits that mixed pattern, now layered with a formal strategic alternatives review.
Earnings updates show a progression of declining revenue and widening losses from 2024 into 2025, offset by steady gross margin improvement and rising software ACV focus. Financing actions and now a strategic alternatives review signal ongoing efforts to address funding needs and monetize the AR/VR platform.
Market Pulse Summary
This announcement combines Q1 2026 results with news of a formal strategic alternatives review. Revenue declined to $5.3M, but gross margin improved to 53% and Adjusted EBITDA loss narrowed to ($2.1M). Software ACV stood at $10.1M, and backlog reached $3.8M. Historically, earnings have featured similar trade‑offs between growth and profitability. Investors may focus on future revenue trajectory, ACV stabilization, cash of $2.9M, and any outcomes from the Board’s process as key metrics and milestones to monitor.
Key Terms
annualized contract value financial
net dollar revenue retention financial
adjusted ebitda financial
strategic alternatives financial
AI-generated analysis. Not financial advice.
Board of Directors Launches Strategic Alternatives Review to Unlock Shareholder Value
SAN JOSE, Calif., May 14, 2026 (GLOBE NEWSWIRE) -- zSpace, Inc. (OTC: ZSPC) (“zSpace” or the “Company”), a leading provider of augmented and virtual reality (AR/VR) solutions for education and workforce development, is announcing its financial results for the three months ended March 31, 2026.
“Our first quarter results reflect solid execution and early signs of stabilization across the education market following a disruptive 2025, as customers continue to recognize the value of our platform through both new wins and strong software renewals,” said Paul Kellenberger, CEO of zSpace. “First quarter bookings increased over
First Quarter 2026 Financial Summary vs. Same Year-Ago Period
- Revenue of
$5.3 million vs.$6.8 million - Software and services comprised
47% of revenue vs.43% - Gross margin of
53% vs.47% - Net loss between (
$5.9) million and ($6.9) million vs. ($5.8) million - Adjusted EBITDA of (
$2.1) million vs. ($4.4) million
Recent Business Highlights
- On April 1, 2026, zSpace highlighted its partnership with Kansas WorkforceONE, expanding immersive career exploration and workforce development across nearly all 96 counties in Kansas by deploying and scaling mobile zSpace Inspire laptops for K-12 students and adult learners with hands-on career awareness, reskilling and job transition support.
- On April 21, 2026, zSpace showcased the launch of a mobile learning lab in partnership with Colorado River BOCES and Briggs & Stratton, bringing a branded CTE trailer powered by immersive AR/VR technology to students across western Colorado, enabling interactive, industry-aligned career exploration in mechanics, power equipment, agriculture and industrial technology.
- On April 28, 2026, zSpace announced the expansion of its immersive learning deployment across Danbury Public Schools, scaling from a pilot to full classroom sets of 30 devices per school and extending access into alternative and expulsion programs to deepen equitable STEM and career-connected learning while integrating AI-driven career insights.
- On May 5, 2026, zSpace expanded its international footprint in Poland, opening a new immersive 3D STEM laboratory at Bieruń High School, equipping the school with zSpace Inspire 2 AR/VR laptops, enabling interactive, inquiry-based STEM exploration.
First Quarter 2026 Financial Results
Revenue in the first quarter of 2026 was
Gross margins increased 570 basis points to
Annualized Contract Value (“ACV”) of renewable software at March 31, 2026, was
Net Dollar Revenue Retention (NDRR) at March 31, 2026, was
Bookings in the first quarter of 2026 were
Operating expenses, excluding stock-based compensation expense, in the first quarter of 2026 were
Net loss in the first quarter of 2026 was between (
Adjusted EBITDA loss was (
Balance Sheet
As of March 31, 2026, zSpace had approximately
Strategic Review
The Company’s Board of Directors has initiated a formal review of strategic alternatives to ensure shareholders realize the full value of the business. This review will consider a broad range of potential strategic opportunities, which may include, among other things, strategic partnerships, business combinations, the sale of all or part of the company, or other strategic or financial transactions. There is no deadline or definitive timetable for the review, and there can be no assurance that the process will result in any specific transaction or outcome. In authorizing this process, the Board of Directors plans to work with independent financial and legal advisors. The Company does not intend to provide additional updates unless and until the Board approves a definitive course of action or determines that further disclosure is warranted.
Conference Call
zSpace will host a conference call at 5:00 p.m. ET / 2:00 p.m. PT on Thursday, May 14, 2026, with the Company’s Chief Executive Officer, Paul Kellenberger, and the Company’s Chief Financial Officer, Erick DeOliveira. A live webcast of the call will be available on the Events and Presentations section of zSpace’s investor relations website.
To access the call by phone, please use this registration link and you will be provided with dial-in details.
To avoid delays, participants are encouraged to dial into the conference call 15 minutes ahead of the scheduled start time. A replay of the webcast will also be available for a limited time on the Company’s website.
About zSpace
zSpace, Inc. (OTC: ZSPC) delivers innovative augmented and virtual reality (AR/VR) experiences that drive achievement in STEM, CTE, and career readiness programs. Trusted by over 3,500 school districts, technical centers, community colleges, and universities, zSpace enables hands-on "learning by doing" experiences proven to improve engagement and student outcomes. Headquartered in San Jose, California, zSpace holds more than 80 patents, with research published in the Journal of Computer Assisted Learning (2021) validating the impact of 3D virtual reality technologies on student knowledge gains.
Key Metric Definitions
We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions. The calculation of the key metrics discussed below may differ significantly from other similarly titled metrics used by other companies, analysts, investors and other industry participants.
We reference bookings in this press release, which is an internal operational measure of the business. Bookings represent customer orders that have hardware, software and service components. Bookings indicate future revenue, which lags based on product shipping date, monthly recognition of certain subscription revenue and service delivery completion.
We reference Annualized Contract Value (ACV) in this press release, which is an internal operational measure of the business. To monitor our ability to retain and grow our customer base for our software we monitor the annualized contract value of active renewable software licenses.
We reference Net Dollar Revenue Retention (NDRR) in this press release, which is an internal operational measure of the business. We calculate our NDRR as of a given period end by starting with the ACV from all customers with contracts of at least
We reference Adjusted EBITDA in this press release, which we calculate Adjusted EBITDA as GAAP net loss adjusted for interest expense, depreciation and amortization expense, stock-based compensation, change in fair value of convertible debt, loss on debt extinguishment and income tax expense. We believe this measure provides our management and investors with consistency and comparability with our past financial performance and is an important indicator of the performance and profitability of our business.
Bookings, ACV, and NDRR are non-GAAP financial measures (U.S. generally accepted accounting principles). These non-GAAP measures may not be comparable to similarly titled measures being disclosed by other companies. Management believes that presenting these non-GAAP financial measures provide investors with additional analytical tools which are useful in evaluating our operating results and the ongoing performance of our underlying businesses because they (i) provide meaningful supplemental information regarding financial performance by excluding impact of one-time items and other items affecting comparability between periods, (ii) permit investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate our core operating performance across periods, and (iii) otherwise provide supplemental information that may be useful to investors in evaluating our financial results. We do not, nor do we suggest that investors, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
Forward-Looking Statements
Certain statements contained in this press release about future expectations, plans and prospects, as well as any other statements regarding matters that are not historical facts, may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements relating to the stabilization of the education market, the long-term potential of our business, and ability to execute with discipline. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "will," "would" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including the uncertainties related to market conditions and other factors discussed in the "Risk Factors" section of the Company's filings with the SEC. For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Any forward-looking statements contained in this press release speak only as of the date hereof, and zSpace, Inc. specifically disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.
Contacts
Press Contact:
Amanda Austin
press@zspace.com
408-498-4050
Investor Relations Contact:
Gateway Group
Cody Slach, Greg Robles
949.574.3860
ZSPC@gateway-grp.com
