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AudioEye (AEYE) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 13, 2026

Source: earnings call transcript

Executive summary

AudioEye Q2 FY26 — Record Revenue, Strong Adjusted EBITDA Growth, and Positive Free Cash Flow

AudioEye delivered a strong second quarter, extending its streak of sequential revenue growth to 42 quarters, driven by solid ARR expansion and improved profitability. The company is seeing early momentum in the EU market due to increasing enforcement of accessibility regulations and is leveraging its proprietary data and AI tools to enhance its offerings and internal efficiencies. Management anticipates continued free cash flow generation and is evaluating capital deployment options.

Highlights

5

  • Q2 marked the 42nd consecutive quarter of sequential revenue growth.

  • Revenue came in at $10.7 million, a 9% increase from the comparable prior year quarter.

  • Adjusted EBITDA reached a record $3 million, representing 28% adjusted EBITDA margin, a 54% increase from Q2 2025.

  • Annual Recurring Revenue (ARR) grew $1.1 million sequentially to $42.3 million as of June 30, 2026.

  • Adjusted free cash flow was $2.6 million in Q2 2026, an improvement of $1.2 million from Q2 2025.

Concerns

2

  • Net loss in the second quarter of 2026 was $0.9 million or $0.07 per share compared to breakeven in the same year ago period.

  • Litigation expense, while expected to trend down, remains a factor in cash generation.

Guidance & targets

CategoryTargetConfidence
Revenue
$10.85 million and $11.05 million
high materiality
High
Sequential Revenue Growth
further acceleration
medium materiality
High
Full Year 2026 Revenue
$43.5 million and $44 million
high materiality
High
Adjusted EBITDA
$3.4 million and $3.6 million
high materiality
High
Adjusted EPS
$0.26 and $0.28 per share
high materiality
High
Full Year 2026 Adjusted EBITDA
at least $12.7 million
high materiality
High
Full Year 2026 Adjusted EPS
at least $0.98
high materiality
High
Run Rate Adjusted EBITDA
over $15 million
high materiality
High
Free Cash Flow Generation
meaningful
medium materiality
High
Adjusted Free Cash Flow
$3.1 million
high materiality
High
Adjusted Free Cash Flow
accelerate further
medium materiality
High
Litigation Expense
come down
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Enterprise
Lower nonrecurring revenue offset by increased recurring revenue. Enterprise ARR represented approximately 41% of total ARR as of June 30, 2026.
Enterprise ARR: 41% of total ARREnterprise ARR growth YoY: 5%Enterprise ARR growth sequential annualized: 17%
flatflat——
Partner and Marketplace
Contributed meaningfully to ARR growth in the quarter. Accounted for approximately 59% of ARR as of June 30, 2026. Saw solid expansion from state and local government partners.
Partner and Marketplace ARR: 59% of total ARR
—16%——

Orderbook & backlog

Annual Recurring Revenue (ARR) $42.3 million June 30, 2026

up $1.1 million sequentially

Up from $41.2 million as of March 31, 2026. Reflects low double-digit year-over-year ARR growth; 11% annualized sequential ARR growth; 11% YoY growth.

Product announcements

ProductTypeDetails
Digital Accessibility Indexmilestone

Risks & headwinds

Increasing Web Inaccessibility due to AI Ongoing

WebAIM study found 95.9% of top homepages had detectable failures, averaging 56.1 errors per page, up 10% YoY.

Mitigation:AudioEye's automation finds and fixes far more issues automatically in real time across every page; custom fixes handle remaining issues scalably.

Litigation Risk from Interior Pages Ongoing

Interior pages averaged 10% more issues than homepages and accounted for roughly 60% of accessibility claims filed last year.

Mitigation:AudioEye's solution is built to scale across all pages, not just homepages.

Litigation Expense impacting cash generation Expected to trend down in H2 2026

Q2 litigation expense came down 40% from Q1.

Mitigation:Management expects significant additional cash generation as litigation expense trends down.

Net loss in Q2 FY26 Q2 FY26

$0.9 million net loss, or $0.07 per share

Mitigation:Primarily due to a non-recurring $1.4 million benefit in the prior year's comparable quarter; net loss improved excluding this impact, mainly due to higher gross profit.

What to watch in Q3 FY26

Sequential Revenue Acceleration

Q4 FY26
Current Q2 revenue $10.7 million
Target further acceleration

Why it matters

Indicates continued business momentum and growth trajectory.

We expect further acceleration of sequential revenues in Q4.

Find out whether AEYE delivers this. Inve re-checks your case every morning.

Q&A highlights

How will AudioEye accelerate sales investments in Europe given increasing EAA enforcement, and how quickly can sales support scale?

Management is strategically investing in a multichannel approach in the EU, has resources there, and is ready to capitalize on the anticipated inflection point in enforcement, making inroads now.

“We are being strategic in investments in the EU. We do have resources in the EU and are investing in a multichannel approach. So I think we're ready when we've said -- we still view it as early innings, but at some point, it will hit an inflection point, and we're ready to capitalize that and making inroads now to do that.”

asked by Joshua Reilly · answered by Kelly Georgevich

2 min read 5 chapters

Detailed narrative

Digital Accessibility Market Trends and AI Impact

The internet is becoming increasingly inaccessible, with WebAIM's latest study showing 95.9% of top homepages having detectable accessibility failures, averaging 56.1 errors per page, a 10% increase year-over-year. This marks the first increase after six years of improvement, primarily driven by third-party frameworks and AI assistant code, as LLMs were not built with accessibility in mind. AudioEye's solution is designed to scale and address these issues, finding and fixing more problems automatically than competitors.

European Accessibility Act (EAA) Enforcement

The EAA is transitioning from a compliance deadline to active enforcement, though still in "early innings." Sweden and the Netherlands have escalated market surveillance, and Germany has issued warning letters. A notable French court ruling in June rejected partial compliance (71% conformance) as sufficient, stating digital accessibility is an "obligation of results" requiring full accessibility within six months or daily penalties. These cases signal future enforcement, contributing to AudioEye's strongest EU ARR growth to date.

Proprietary Data and AI Strategy

AudioEye leverages its unique proprietary dataset, built from millions of human reviews and billions of real-world fixes over 10 years, to enhance its offerings. This data is being used to simplify client reporting, streamline fixes, and integrate seamlessly with developer environments. The company plans to further utilize this data in new and exciting ways in the coming months, differentiating itself from competitors whose AI tools are trained on inaccessible internet data.

Operating Model Scalability and Cash Deployment

AudioEye has demonstrated a highly scalable operating model, with adjusted EBITDA growing at a 42% CAGR over the last two years. The company expects continued growth of cash flow in 2027 and is evaluating options to deploy excess cash, including potential share buybacks and dividends. This flexibility is supported by anticipated significant free cash flow generation in the second half of 2026, partly due to expected reductions in litigation expenses.

Enterprise vs. Partner & Marketplace Channel Dynamics

Enterprise channel revenue was flat year-over-year in Q2 2026, primarily due to a shift from non-recurring to recurring revenue. However, enterprise ARR grew 5% year-over-year and 17% sequentially on an annualized basis. The partner and marketplace channel saw 16% year-over-year revenue growth and contributed meaningfully to ARR growth, driven by expansion with existing partners, particularly in state and local government.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.