Duos Technologies Group Q1 Earnings Call Highlights

Key Points

• Duos Technologies is pivoting away from legacy rail and APR-related businesses toward a data center and edge AI infrastructure model, which drove lower first-quarter revenue but management says should power future growth.
• The company ended Q1 with $33 million in cash after a $65 million capital raise and said it had about $43.5 million in expected 2026 revenue bookings, with a large share of revenue anticipated in the second half of the year.
• Management highlighted its Hydra Host GPU-as-a-Service deal as a major catalyst, citing 2,304 NVIDIA GPUs, about $176 million in total contract revenue over 36 months, and strong margins, while also noting new colocation wins and plans to reach 25 megawatts of capacity this year.

Duos Technologies Group NASDAQ: DUOT reported lower first-quarter revenue as management said the company continued shifting away from legacy rail operations and toward a data center-focused business model centered on edge AI infrastructure.

Chief Executive Officer Doug Recker said the quarter reflected the company’s “strategic transformation towards a data center-focused platform,” with Duos Edge AI and Duos Technology Solutions emerging as the company’s primary growth drivers. He said the planned wind down of the New APR Energy Asset Management Agreement was the primary factor behind first-quarter revenue trends.

Despite the transition, Recker said Duos remains on track to exceed its $50 million revenue target for 2026, supported by its partnership with Hydra Host and a growing pipeline of AI infrastructure deployments.

Revenue Falls as Legacy Businesses Wind Down

Chief Financial Officer Leah Brown said total consolidated revenue was approximately $2.7 million in the first quarter of 2026, down from $4.9 million in the first quarter of 2025.

Brown said first-quarter revenue included approximately:

• $44,000 of technology systems revenue
• $562,000 of technology solutions revenue
• $532,000 in services and consulting revenue
• $1.5 million from related-party services and consulting agreements
• $30,000 of hosting revenue

The company generated gross profit of $1.6 million, representing a gross margin of about 59%, which Brown said was a significant year-over-year improvement tied to lower cost of goods sold and the transition of the APR asset management agreement.

Duos reported a net loss of approximately $3.5 million for the quarter, compared with a net loss of $2.1 million in the prior-year period. Adjusted EBITDA was negative $1.5 million. Brown said the company expects profitability to improve as revenue ramps in coming quarters and reiterated that a significant portion of 2026 revenue is expected to be recognized in the second half of the year.

Data Center Strategy Drives 2026 Outlook

Management said Duos ended the quarter with $33 million in cash and cash equivalents, helped by a $65 million capital raise completed in March. Brown said the financing strengthened liquidity and enhanced the company’s ability to fund planned investments tied to the Hydra Host agreement.

Brown said bookings at the end of the first quarter represented approximately $43.5 million in revenue expected to be recognized during 2026, including contracted backlog and near-term anticipated awards. She also said about $1.1 million of contracted technology solutions deferred revenue recorded in 2025 is expected to be recognized in 2026.

In bridging the company’s first-quarter revenue to its full-year target, Brown said GPU-as-a-Service is expected to contribute approximately $26 million, primarily in the second half of the year. She also cited expected contributions from technology solutions backlog, deferred revenue, colocation, infrastructure services, customer expansions and new hosting deployments.

Recker said Duos Technology Solutions signed eight new large data center operators during the quarter and increased backlog to approximately $14 million, all of which is expected to ship and be invoiced in 2026. He described the division as an asset-light revenue stream intended to reduce procurement costs for Duos’ own deployments while serving enterprise, hyperscaler and contractor customers.

Hydra Host Agreement and Edge AI Deployments

Recker said the company expects to deploy 2,304 NVIDIA GPUs across its edge data center platform under its GPU-as-a-Service agreement with Hydra Host. He said the contract represents approximately $176 million in total revenue over a 36-month term and is expected to generate margins above 80% and about $40 million in EBITDA.

Recker also said the Hydra Host partnership is expected to generate approximately $25 million of incremental colocation revenue over the term. The company has received a $15 million down payment, with an additional $3 million deposit pending, according to management.

During the question-and-answer session, Recker said NVIDIA and Supermicro had received the equipment for the initial Hydra Host deployment and that Supermicro was completing rack-and-stack work. He said the process could reduce lead time by about three weeks and potentially allow revenue to begin around July 1 rather than August.

Separately, Recker said Duos was awarded a high-power colocation contract to deliver 4.8 megawatts of critical compute capacity for a hyperscaler high-density GPU cluster. He said Duos currently has 10 megawatts contracted and an additional 15 megawatts planned for deployment in 2026.

Rail Divestiture, APR Agreement and Capital Spending

Recker said Duos continues to make progress on the planned divestiture of its rail technology division. The company is going through a fairness opinion process on the value of the rail division, which Recker said is expected to extend into the second quarter.

He said the divestiture is intended to help Duos redeploy capital, reduce selling, general and administrative expenses, and focus on higher-growth opportunities.

Recker also said the New APR Energy Asset Management Agreement will conclude later this year, though Duos will retain a 5% equity stake in the parent of APR Energy. In the first quarter, Duos Energy reported $1.55 million in revenue and cost of goods sold of approximately $544,000, which Recker said reflected a step down that is expected to continue in coming quarters.

On capital spending, Recker said the company expects approximately $30 million over the next two quarters to deploy additional capacity, with another roughly $30 million toward the end of the year to remain on track. He said the company is “well-funded” to reach its goal of 25 megawatts this year.

Management Highlights Demand for Modular Data Centers

In response to analyst questions, Recker said Duos is seeing strong demand for 5- to 10-megawatt modular deployments, particularly for AI inference and customers seeking faster deployment of GPUs. He said Duos is focused on U.S. expansion despite receiving international inquiries, including from South America and Europe.

Recker said the company is looking for “stranded” power in secondary markets and has identified opportunities in regions including Maryland, Iowa, Georgia and Texas. He also said Duos is evaluating new power partnerships, including natural gas-based solutions that could support faster deployments without relying directly on the local grid.

Recker said the company’s strategy is aligned with rising AI workloads, demand for high-density infrastructure, available power in secondary markets and the broader shift toward modular, faster-deployed data center capacity.

About Duos Technologies Group NASDAQ: DUOT

Duos Technologies Group, Inc provides advanced non-intrusive security and inspection solutions utilizing motion-based and artificial intelligence technologies. The company's core offerings include intelligent video analytics, RFID checkpoint systems, and specialized screening devices designed to detect security threats and contraband across transportation, logistics and critical infrastructure environments. Duos integrates proprietary hardware with software to deliver automated inspection and monitoring tools that enhance safety and operational efficiency.

Among its primary products are automated gate-entry systems, railcar inspection portals and portable screening devices that use AI-driven image recognition and sensor fusion to identify objects such as unauthorized materials, pipeline anomalies or vehicle defects.

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