Palladyne AI NASDAQ: PDYN reported first-quarter fiscal 2026 revenue of $3.5 million, up 107% year-over-year, and reiterated its full-year 2026 revenue guidance of $24 million to $27 million as management pointed to a growing contract backlog and increased defense program activity.
Revenue grew 107% as shutdown delayed some defense work
President and CEO Ben Wolff said first-quarter revenue rose to $3.5 million and was “in line with our internal expectations,” while noting that a federal government shutdown temporarily delayed activity across several defense contracts. Wolff emphasized the disruption was “a revenue timing issue but not a demand issue,” adding that the affected work was not canceled and “remains in backlog.”
Chief Financial Officer Trevor Thatcher said the year-over-year increase was driven by the inclusion of post-acquisition revenue from businesses acquired in November 2025, marking the first full quarter with those contributions. Thatcher broke out revenue into $1.7 million of product revenue (primarily from the company’s manufacturing business) and $1.8 million of engineering services revenue, which includes GuideTech.
Thatcher added Palladyne “did not recognize meaningful product development contract revenue” in the quarter, but said the company expects that category to “pick up beginning in the second quarter” as awarded business becomes signed contracts, recently signed work is executed, and existing contracts are extended through options.
Backlog expanded to $17 million; guidance reiterated
Wolff said Palladyne entered the quarter with about $13.5 million of backlog, recognized $3.5 million in revenue, and exited the quarter with about $17 million. He said the company added approximately $7 million in new contract awards during the quarter, net of revenue recognized, calling it “a meaningful bookings number.”
Based on that visibility, Wolff reiterated the company’s 2026 revenue outlook of $24 million to $27 million, which he said implies “approximately 357%-415% growth compared to 2025.” He said the company expects sequential revenue growth each quarter, with acceleration in the second half as backlog converts and new awards are secured.
During the Q&A, Wolff said management was “highly confident” in the guidance given backlog and what he described as “go-gets” in the pipeline, though he declined to quantify pipeline totals beyond contractually committed backlog.
Margins and cash usage influenced by first-article costs and inventory build
Thatcher reported consolidated gross margin of approximately 30%, reflecting the quarter’s revenue mix. He said product margins in manufacturing were “compressed by low capacity utilization and first article costs,” and that margins should improve as utilization and revenue ramp. He added that software products are expected to carry the highest margins “when they begin generating meaningful revenue.”
On expenses, Thatcher reported:
- R&D expense of $3.9 million, up from $2.9 million a year earlier, reflecting investment in autonomy software, avionics, and product development, including Gremlin-X and SwarmStrike.
- G&A expense of $6.9 million, up from $4.2 million, reflecting added overhead from acquired businesses and selective hiring.
- Sales and marketing expense of $1.9 million, up from $1.2 million, reflecting expanded marketing and business development.
Operating loss was $11.9 million, compared to $6.9 million in the prior-year quarter. GAAP net loss was $12.6 million, or $0.28 per share, while non-GAAP net loss was $10.2 million, or $0.23 per share. Thatcher said a key difference between GAAP and non-GAAP results was a $1.0 million non-cash loss tied to changes in the fair value of warrant liabilities.
Wolff said operating cash usage in the quarter came in “modestly above” the company’s guided range of $8 million to $9 million per quarter, driven by three factors: an inventory build for BRAIN flight computer production, accelerated hiring “based on the strength of new opportunities,” and manufacturing costs tied to first-article development that had not yet transitioned to full-rate production in part due to the shutdown. Thatcher said the company used approximately $10.2 million in operating cash during the quarter and raised $6.5 million in net proceeds through its ATM program. In response to an analyst question, Thatcher said the company sold “just under 890,000 shares” at an average price of about $7.35 per share.
Liquidity at March 31 totaled $43.7 million in cash, cash equivalents, and marketable securities. Thatcher reiterated expected 2026 cash burn (CapEx and OpEx) of $32 million to $36 million, or approximately $8 million to $9 million per quarter on average for the remainder of the year.
Operational updates: heterogeneous swarming demo, new space work, and commercialization steps
Wolff highlighted a first-quarter demonstration of “true heterogeneous autonomous swarming,” including a test flight of Gremlin-X (previously known as Project Banshee) running IntelliSwarm alongside multiple Red Cat platforms running SwarmOS. He contrasted the demonstration with what he described as pre-programmed coordination often labeled “swarming,” saying Palladyne’s approach involved independent perception and decentralized collaboration without scripts or a centralized controller.
Wolff said the company progressed development of BRAIN flight computer variants, including a scaled-down version of the commercialized X2 called FC1, and noted a $500,000 first order from a defense tech company for the BRAIN X2.
He also discussed partnerships and contracts, including lab simulation work with Draganfly and upcoming integration and flight testing. In the Q&A, Wolff said he expects demonstrations on the Draganfly platform to begin in the second quarter, with additional demonstrations planned for the third quarter with government customers.
In the space domain, Wolff pointed to two engagements: work under the U.S. Air Force Research Lab’s HANGTIME award to integrate SwarmOS with a space-based satellite sensor grid, and a contract with Portal Space Systems to support maneuverable spacecraft development with navigation, guidance, modeling, embedded software, and avionics support. Wolff said Palladyne could potentially expand the Portal relationship to include autonomy capabilities over time, while later noting space efforts are being pursued with a “rifle shot approach” compared with the company’s broader focus on terrestrial UAV efforts.
Defense programs and business model: pricing SwarmOS as a platform layer
Wolff described an expanding set of defense priorities—such as collaborative autonomy, counter-UAS, missile defense, and long-range precision fires—as increasingly aligned with Palladyne’s offerings. He said Palladyne has been invited to participate in Northern Strike 26-2 in August, where the company plans to demonstrate SwarmOS on four distinct UAV platforms from four OEMs, including Gremlin-X, managed by a single operator through a single ATAK interface.
Wolff also highlighted GuideTech’s selection for the Air Force Research Lab’s Relentless Wolfpack Industry Day shortly after quarter end, saying GuideTech’s submission combined SwarmStrike with SwarmOS. He said Palladyne is “targeting a cost of less than $150,000 per SwarmStrike,” and that SwarmStrike has completed its initial flight test. Wolff additionally said a separate defense prime in the same cohort independently chose to incorporate SwarmOS into its own submission, which he described as an early sign of SwarmOS becoming an autonomy layer that others build on.
Asked about monetization, Wolff said Palladyne’s expectation is to price software at roughly 10% of the underlying UAV platform cost, structured as “a 1-time upfront license fee.” He said this approach has resonated with government customers and framed it as a “value pricing proposition.”
On the commercial and industrial side, Wolff said Palladyne is in active deployment with its first IQ 2.0 customer on a non-contact surface treatment application, with initial integration underway. He characterized the deployment as a “land and expand opportunity,” beginning with one robot and expanding as confidence grows. He also said the quarter included the transition of Matt Muta from the board to an operating role as President of Commercial and Industrial, with a focus on converting the IQ pipeline into customers.
About Palladyne AI NASDAQ: PDYN
Palladyne AI Corp., a software company, focuses on delivering software that enhances the utility and functionality of third-party stationary and mobile robotic systems in the United States. Its Artificial Intelligence (AI)/ Machine Learning (ML) software platform enables robots to observe, learn, reason, and act in structured and unstructured environments. The company's software platform enables robotic systems to perceive their environment and quickly adapt to changing circumstances by generalizing from their experience using dynamic real-time operations without extensive programming and with minimal robot training.
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