A2Z Cust2Mate Solutions NASDAQ: AZ reported sequential revenue growth in the second quarter of fiscal 2026 as Smart Cart deliveries increased and its China manufacturing facility began operations.
Revenue rose to $5.9 million in the quarter from $3.3 million in the first quarter, while Smart Cart revenue increased to $4.4 million from $2.5 million. The company delivered 950 Smart Carts during the period, compared with 500 in the prior quarter, bringing cumulative deliveries to 3,350 units.
Chief Executive Officer Gadi Graus said the quarter reflected progress in commercial adoption, manufacturing capacity and customer expansion. “These accomplishments demonstrate significant progress across our organization,” Graus said, adding that the company remains confident in its goal of delivering 10,000 Smart Carts by the end of 2026 and at least 19,000 by the end of 2027 based on current orders.
Customer Orders and International Expansion
During the first half of the year, A2Z delivered carts to Israeli supermarket operator Yochananof and home-goods retailer Hastok. Hastok operates 50 stores in Israel, according to the company, and A2Z has completed an initial partial delivery.
A2Z also expanded its relationship with supermarket chain Super Sapir, which has more than 70 stores. Super Sapir placed a follow-on order for 4,000 carts, raising its total commitment to 7,000 units. Deliveries are expected to begin in the third quarter.
Graus said A2Z expects to make deliveries to Toys R Us Israel and Red Pirate, two toy retail chains, later in the second half of 2026. The company also expects its carts to be deployed with at least two retailers outside Israel within the next six months, including customers in the Americas and Europe.
In response to analyst questions, Graus said the company is in advanced discussions with prospective international customers and sees potential for existing retail customers to increase their orders as they evaluate the carts in stores. He cited Super Sapir’s increase from an initial 3,000-cart order to a 7,000-cart commitment as an example.
Margins Improve as China Facility Begins Production
Gross profit reached $2.5 million in the second quarter, producing a gross margin of 42.6%, compared with gross profit of $100,000 and a 4.2% margin in the first quarter. Chief Financial Officer Gadi Levin attributed the improvement to higher shipment volumes and lower production costs from the company’s dedicated manufacturing facility in China.
The facility came online during the second quarter and is intended to increase production capacity, reduce lead times and lower unit costs. Levin said the company expects additional economies of scale as production ramps and believes the facility has adequate capacity to fulfill current and future orders.
Graus said the company’s newly completed Connected In-Store Commerce Platform has also supported its commercial efforts. The platform includes updated Smart Cart hardware, charging systems, fraud-detection features and an improved shopper interface, according to Graus. A2Z has restarted deliveries to Yochananof under that customer’s agreement for 5,000 carts.
Loss Narrows, Cost Reductions Planned
A2Z’s operating loss narrowed to $7.6 million in the second quarter from $8 million in the first quarter. Net loss was $7.3 million, or $0.16 per share, compared with a net loss of $8.3 million, or $0.18 per share, in the prior quarter.
The company is undertaking an organizational realignment aimed at shifting spending toward deployments, sales and marketing. Levin said A2Z plans to reduce its use of external consultants and subcontractors by internalizing previously outsourced functions. Net headcount is expected to decline by 10%.
Once fully implemented in the fourth quarter, the initiative is expected to generate approximately $7 million in annual savings, according to Levin. The company said it intends to preserve delivery capabilities as well as core technical and customer-support functions.
Balance Sheet and Second-Half Outlook
As of June 30, A2Z reported $43 million in treasury and working capital of $55 million. The company also secured a $30 million credit line with Bank Leumi, intended to finance inventory as cart deliveries grow. A2Z had drawn $2.2 million under the facility as of the end of the quarter.
The company continued its $20 million share-repurchase program, buying back 919,000 shares for $5.8 million through June 30. In July, it repurchased an additional 147,000 shares, bringing total repurchases to roughly 1.07 million shares, which have been canceled.
Levin said cart deliveries are expected to increase sequentially in each of the next two quarters, with activity weighted toward the final quarter because September is seasonally slower in Israel due to holidays. Management said it expects at least $25 million in second-half revenue from Smart Carts alone, based on anticipated deliveries, while retail-media revenue is expected to grow as the installed cart base expands.
Graus said retail-media revenue should become more valuable as additional carts generate more transaction data and advertising inventory, though Smart Cart revenue is expected to remain the primary contributor in coming quarters.
About A2Z Cust2Mate Solutions (NASDAQ:AZ)
A2Z Smart Technologies Corp., a technology company, focuses on the development and commercialization of retail smart cart solutions for grocery stores and supermarkets in Israel and internationally. The company operates through three segments: Precision Metal Parts, Advanced Engineering, and Smart Carts. It offers Cust2Mate system, which incorporates a smart cart that automatically calculates the value of the customers purchases in their smart cart without having to unload and reload their purchases at a customer checkout point.
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