Accuray NASDAQ: ARAY reported fiscal third-quarter 2026 results marked by modest sequential revenue growth but pressure from geopolitical disruptions and ongoing headwinds in China, prompting the company to withdraw its financial guidance.
Quarterly results affected by Middle East disruptions and China headwinds
Net revenue for the quarter ended March 31, 2026, was $104.8 million, down 7% year-over-year and up 3% sequentially, according to Chief Financial Officer Ali Pervaiz. On a constant-currency basis, revenue declined 10% from the prior year.
President and CEO Steve La Neve said the quarter was impacted by delayed product shipments “planned to certain customers in the Middle East, North Africa, and Pakistan” that were “delayed indefinitely due to increased geopolitical disruption in the Middle East,” which also weighed on service revenue in those regions. La Neve added that Accuray’s business in China continues to face headwinds tied to “geopolitical tensions and ongoing tariff uncertainty.”
Revenue mix: product down, service steadier
Pervaiz said product revenue was $49.7 million, down 13% year-over-year (down 15% on a constant-currency basis), representing “the majority of the year-over-year decline.” Service revenue was $55.1 million, down 1% year-over-year (down 5% on a constant-currency basis).
Pervaiz attributed a $1.2 million negative impact to service revenue to Middle East tensions affecting the company’s “global install base and service network.” He also noted that Accuray’s contract capture rate—defined as the percentage of active systems covered by a service agreement—“continues to be at nearly 90% across our active install base.”
As part of Accuray’s focus on pricing, Pervaiz said the company saw $0.6 million of “price favorability within service revenues” during the quarter, tied to service contract renewals, while noting renewal pricing impacts typically span two to three years.
Margins pressured by parts consumption and tariffs
Gross margin for the quarter was 24.1%, down from 27.9% in the prior-year quarter. Pervaiz said the decline was primarily driven by service margins, which fell to 26.1% from 33.3% a year earlier.
He cited higher net parts consumption of $3.2 million, which reduced service gross margin by roughly 600 basis points. The higher service parts consumption also drove “higher than average logistics and duties costs,” Pervaiz said. In addition, tariffs adversely impacted service margins by $0.8 million, or 150 basis points.
Product gross margin was 21.9% compared with 22.7% in the prior year. Pervaiz said higher tariffs increased year-over-year costs by $2.6 million, which reduced product gross margin by approximately 530 basis points. He added that while “IEPA tariffs have been invalidated,” the company continues to monitor how tariff conditions evolve and how they affect profitability and cash flow.
Transformation plan progress and restructuring costs
La Neve reiterated that Accuray launched a strategic and operational Transformation Plan in mid-December intended to improve accountability, cost control, and execution. Actions taken included centralizing functions, outsourcing non-core activities, and reducing the workforce by approximately 15%, along with reallocating engineering resources toward higher-return programs.
La Neve said these actions were designed to improve operating profitability by about $25 million on an annualized basis, with roughly $12 million expected to benefit fiscal 2026. “As of the end of the third quarter, we have already achieved approximately $10 million of those improvements,” he said, adding the company is “well on track to exceed the $12 million” target for fiscal 2026 and continues to believe “at least $25 million” should be realized in fiscal 2027.
Pervaiz said operating expenses were $34.4 million, compared with $30.6 million in the prior-year quarter. The current quarter included $6.5 million of non-recurring restructuring expenses tied to the restructuring and transformation plans. He also noted the prior-year quarter included a $3.2 million reversal of unrealized accrued compensation from the first half of fiscal 2025. Adjusting for these discrete items, Pervaiz said operating expenses declined $6 million, or 18%, year-over-year, which he said “illustrates that the cost actions taken as part of our transformation have taken hold.”
Operating loss was $9.1 million, compared with operating income of $1.1 million a year earlier. Adjusted EBITDA was $3.8 million, down from $6.0 million in the prior-year quarter.
Guidance withdrawn amid “significant unpredictability”
La Neve said the company withdrew guidance due to the difficulty of forecasting the impacts of the current geopolitical environment on both product and service revenue, citing “the conflict involving Iran and its ripple effects across the Middle East” as well as uncertainty in China. “Given such uncertainty, we believe the responsible approach is to withdraw our financial guidance at this time,” he said, adding the company plans to update investors when it reports fiscal fourth-quarter results.
In the Q&A, BTIG’s Marie Thibault asked why the company chose to withdraw guidance rather than revise it to remove specific delayed customer installs. La Neve responded that the shipments to Middle East, North Africa, and Pakistan customers had been “delayed indefinitely,” affecting both product revenue and associated service revenue, and that “the dynamic nature of these disruptions” made it difficult to predict when installations will resume. He also noted that EMEA is Accuray’s largest region and that the Middle East and North Africa are its fastest-growing sub-regions within EMEA, adding that the company viewed withdrawing guidance as the “most prudent course of action.”
On the balance sheet, Pervaiz said cash, cash equivalents, and restricted cash totaled $44.4 million at quarter end, down from $47.9 million at the end of the prior quarter. Net accounts receivable were $64.6 million, up $3.6 million sequentially, and net inventory was $156.6 million, up $5.7 million. The company ended the quarter with $5 million outstanding on its revolving credit facility.
Looking ahead, La Neve said Accuray will focus on three priorities: driving top-line growth across product and service, executing the transformation plan to improve gross margins and EBITDA, and prioritizing innovation grounded in the voice of the customer. He said the company expects 2027 and 2028 performance to reflect benefits from actions being taken now.
About Accuray NASDAQ: ARAY
Accuray Incorporated NASDAQ: ARAY is a global medical device company that develops, manufactures and markets innovative radiation therapy solutions for the treatment of cancer. The company's flagship products include the CyberKnife® System, a robotic radiosurgery platform offering sub-millimeter precision, and the TomoTherapy® System, which combines helical computed tomography (CT) imaging with intensity-modulated radiation therapy (IMRT). More recently, Accuray introduced the Radixact® System, an advanced iteration of its TomoTherapy technology designed to enhance treatment speed and clinical workflow.
Accuray's suite of products enables clinicians to deliver highly targeted radiation doses while minimizing exposure to surrounding healthy tissue.
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