zSpace, Inc.

Q1 2026 revenue was $5.3 million, down 22% year over year and up 8% sequentially. Gross profit was $2.8 million, down 13% year over year, while gross margin improved to 53%, up 5.6 percentage points from Q1 2025 and 3.9 points from Q4 2025. Bookings were $6.1 million, down 8% year over year but up 81% sequentially. Annualized contract value of renewable software was $10.1 million, down 13% year over year, and net dollar revenue retention for customers with at least $50,000 of ACV was 65%; normalized for two large customers, ACV would have been $11.2 million and NDRR 82%. Operating expenses excluding stock-based compensation were $4.9 million, down 35%, and cash, cash equivalents and restricted cash totaled approximately $2.9 million as of March 31, 2026. Management did not provide formal financial guidance, but said it believes the company could deliver performance close to EBITDA breakeven in 2026 if margins continue to expand modestly and current expense levels hold.

Paul Kellenberger framed Q1 as an early sign of stabilization after a difficult 2025, pointing to a rebuilding pipeline, stronger customer engagement, better software renewals, and new customer additions. He emphasized new product momentum with zStylus One and the latest zSpace Studio release, along with expanded deployments at customers like Danbury Public Schools and Kansas WorkforceONE. He also said the board believes the market is undervaluing the business and has started a formal review of strategic alternatives, while stressing there is no assurance of a transaction.

Erick DeOliveira said the company is operating with a much leaner cost structure after December restructuring, and highlighted sequential improvement in demand, gross margin, and spend management. He cited Q1 revenue of $5.3 million, gross margin of 53%, bookings of $6.1 million, operating expenses of $4.9 million excluding stock-based compensation, and cash of about $2.9 million. He said the cost reductions imply an annual run rate of about $19 million in operating expenses excluding stock-based comp and suggested the current expense base plus modest margin gains could support breakeven through year-end, though he did not issue formal guidance.

There was no traditional analyst Q&A in the transcript. The main points management addressed proactively were the weak software retention metrics, which they said were driven by two large customers that expanded in 2024 but could not fully renew because of macro factors, and that those impacts should be lapped in Q3. They also explained the March slowdown in bookings was tied to delayed orders from Qatar and Dubai amid the Iranian war and a returned Bahrain Airport order, while noting early Q2 trends were closer to the stronger January-February pace.