Palladyne AI — Third Quarter 2026 Earnings Summary

Financial Performance:

• Revenue increased 895% year-over-year to $8.6 million for the quarter, compared to $0.9 million in Q3 2025, and rose 48% sequentially from Q2 2026.
• Operating loss widened to ($13.4) million in Q3 2026 from ($8.1) million in Q3 2025, driven by higher stock-based compensation, added headcount, and increased R&D costs for Gremlin-X development.
• GAAP net loss was ($12.0) million, or ($0.25) per share, compared to a net loss of ($3.7) million, or ($0.09) per share, in the prior year period.
• Non-GAAP net loss was ($8.2) million, or ($0.17) per share, compared to ($6.4) million, or ($0.16) per share, in the prior year period.
• Q3 2026 included a $1.1 million non-cash gain on warrant liability revaluation, down from a $3.8 million gain in the prior year period.
• Non-cash stock-based compensation expenses totaled $4.8 million in Q3 2026, up from $1.1 million in Q3 2025.
• Cash, cash equivalents, and marketable securities totaled $47.0 million as of September 30, 2026, an increase from $43.7 million as of June 30, 2026.
• Operating cash burn decreased sequentially but remained elevated due to R&D and working capital investments; full-year 2026 operating cash burn is expected to be close to or slightly above the high end of the ($32.0) – ($36.0) million range.
• First nine months of 2026 included ($1.8) million in capital expenditures.

Guidance and Future Outlook:

• Raised the low end of full-year 2026 revenue guidance to $25 million, reiterating the top end of $27 million, representing expected year-over-year growth of 377% to 415% compared to 2025 revenue of $5.2 million.
• Implied fourth-quarter 2026 revenue guidance represents growth of 329% to 449% compared to the fourth quarter of 2025.
• Backlog stood at $18.7 million as of September 30, 2026, of which $15.3 million is funded; the company expects most of this backlog to be recognized as revenue over the next 12-18 months.
• Management expects fourth-quarter cash burn to be lower than the year-to-date quarterly average due to revenue and margin improvements.
• The company believes its $47.0 million in cash and equivalents is sufficient to support operations, working capital, and capital expenditure requirements for at least the next 12 months.
• Management expects 2026 growth to extend into 2027.

Business Segments and Product Lines:

• Components business revenue increased 26% sequentially, driven by the first delivery of the next-generation BRAIN FC-1 flight computers.
• Government contract revenue increased 135% quarter-over-quarter.
• Shipped more BRAIN flight computers during the quarter than ever before, including the first units of the cost-optimized BRAIN FC-1 variant.
• Extended SwarmOS to fixed-wing aircraft with Orkid Tech and integrated SwarmOS with NORDA Dynamics' Underdog module.
• Launched joint development of SwarmShot, a counter-UAS swarm system, with Federal Ammunition and Mossberg after the quarter ended.
• BRAIN was named a finalist in the Army's FUZE xTech Apex Intercept competition.
• Strategic collaboration with FANUC America to pair FANUC's industrial robot portfolio with Palladyne AI's physical AI software across manufacturing applications.
• Integrated SwarmOS with Anduril's Lattice at the Army's Project Convergence Capstone 6, enabling multi-drone, multi-vendor autonomous operations.
• SwarmOS received the highest possible rating on all nine key performance criteria evaluated by the U.S. Army.

Market and Competitive Landscape:

• SwarmOS demonstrated capability to deliver intelligent collaborative autonomy in front of the U.S. Joint Force and allied partners.
• Collaboration with FANUC America positions software in front of manufacturing companies ranging from Fortune 500 to small and mid-sized businesses.
• The IAI partnership continues to gain visibility and attract interest from key constituents.
• Participation in Northern Strike 2026 at Camp Grayling, Michigan, continued the series of Department of War exercises.

Risks and Challenges:

• Natural timing fluctuations in backlog as customers utilize remaining funding on existing contracts before executing renewals.
• Continued uncertainty surrounding defense budgets.
• Operating cash burn remains elevated due to continued research and development across all product lines and working capital investments.
• Full-year operating cash burn is expected to be close to or slightly above the high end of the guided range, largely due to opportunistic capex purchases.

Management Commentary and Tone:

• Ben Wolff, President and CEO, stated that the company generated record revenues and is raising the low end of full-year guidance given the current trajectory.
• Management noted that SwarmOS is exceeding expectations and proving itself in the field.
• The tone reflects confidence in the ability to commercialize and scale production efficiently and cost-effectively.
• Management expressed belief that the company is well-funded to execute its growth plans.

Other Key Points:

• Expiration of all 20.5 million warrants (representing the right to purchase approximately 3.4 million shares) and all 2.3 million remaining contingent merger consideration shares on September 24, 2026, resulted in a 9% reduction of fully diluted shares.
• Signed net new contracts totaling $2.7 million during the quarter.
• Backlog decreased 24% during the quarter to $18.7 million, reflecting approximately $8.6 million of revenue recognized, partially offset by the new contract awards.
• Conference call held on November 10, 2026, at 8:00 a.m. Eastern Time to discuss results and strategy.