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- **Software-Driven Growth**: Q4 2025 software/services revenue at 57% of total, driving 850bps gross margin expansion to 49.1%. New zStylus One and AI translation tools accelerate adoption.
- **Customer Wins**: 36-station AR/VR lab at Mayfair HS, dental program upgrade in PA, and 10-year partnership with Atlanta Public Schools highlight K-12/Career Ed demand.
- **Cost Restructuring**: 2026 OpEx target of $19M (down 33% from 2025) and 7% gross margin expansion target to achieve breakeven EBITDA if revenue mirrors 2025 levels.
- **Risks & Opportunities**: Middle East expansion paused due to conflict, but Planet One investment and AI-driven global reach offer long-term growth paths.

**【CEO Summary Section】**
- Software and services revenue comprised 57% of total Q4 2025 revenue, driving an 850 basis point gross margin expansion to 49.1%. This reflects strong customer renewals and adoption of AI-enabled tools like zStylus One, which eliminates external sensors for AR deployment.
- Key wins include a 36-station AR/VR lab at Mayfair High School, a dental program upgrade at Greater Altoona Career & Technical Center, and a decade-long partnership with Atlanta Public Schools. These highlight demand for immersive learning solutions across K-12 and CTE.
- The company launched zStylus One, featuring embedded AI sensors, and expanded AI-driven language translation to over 50 languages, broadening global reach despite Middle East delays due to regional conflict.
- 2026 outlook: Cautious optimism amid U.S. education funding uncertainty and $1 million cash position, with focus on software-driven margin expansion and cost control.

**【CFO Financial Commentary】**
- FY2025 revenue: $27.9M (-27% YoY), with software/services down 15% but comprising 49% of total (vs. 42% in 2024). Gross margin improved 6.7pts to 47.6%, driven by software mix, hardware cost reductions, and first-party content.
- Q4 2025: $4.8M revenue (-43% YoY), 49.1% gross margin. Operating expenses reduced 11% YoY to $28.3M (excluding stock-based comp), with Q4 run rate now $19M post-December restructuring.
- 2026 outlook: Target breakeven adjusted EBITDA if revenue mirrors 2025 levels, via 7% gross margin expansion and $19M OpEx. Cash position: $1M as of Q4 2025.

**【Q&A Highlights】**
- **Funding Outlook (2026):** Federal K-12 funding uncertainty persists, but 10% of zSpace's K-12 revenue comes from federal sources. Q1 2026 bookings show mixed progress, with Middle East deals delayed by conflict.
- **Cost Structure:** CFO Erick DeOliveira notes 2026 OpEx target of $19M (excluding stock-based comp), down from $28.3M in 2025. Restructuring reduced FTEs by 50% and Board size from 7 to 5.
- **Planet One Investment:** $3M convertible preferred round in January 2026, with potential for international expansion via joint ventures. Progress on Middle East deals paused due to regional conflict.
- **EBITDA Breakeven:** If 2026 revenue mirrors 2025 ($27.9M), zSpace expects to achieve breakeven adjusted EBITDA via margin expansion and cost control. 2025 gross margin expansion of 6.7pts and 2026 target of 7pts are key levers.


zSpace, Inc. (ZSPC) Q4 2025 Earnings Call Transcript

- **Revenue resilience amid U.S. funding uncertainty**: Q3 revenue up 18% sequentially, with software/services at 57% of total and 640bps gross margin expansion.
- **Global expansion success**: Career Explorer app and AI-powered language translation enable 50+ language support, driving wins in UAE, Italy, Bulgaria, Poland.
- **Customer retention strength**: 77% net dollar retention (excluding 2 macro-impacted customers), with 94% retention across stable base.
- **Hardware innovation on horizon**: New stylus device set to improve user experience and reduce costs, supporting margin expansion.

**【CEO Summary Section】**
- Q3 2025 revenue of $8.8 million, down 38% YoY but up 18% sequentially, driven by strong customer renewals and software adoption. Software/services revenue comprised 57% of total, up 11pts YoY, contributing to 640bps gross margin expansion.
- Launched Career Explorer (AI-powered career exploration app) and expanded global reach via AI-driven language translation, enabling use in over 50 languages. Secured international wins in UAE, Italy, Bulgaria, Poland, and Middle East, including GEMS Education partnership in Dubai.
- U.S. K-12 funding uncertainty persists, with 2 large customers reducing renewals due to macro factors. However, 70% of devices retained, preserving long-term upsell opportunity.
- Cautious optimism for Q4 despite government shutdown delaying funding access, with 77% net dollar retention (excluding 2 customers) and stable renewal rates across broader base.

**【CFO Financial Commentary】**
- Year-to-date (YTD) revenue $23M (-22% YoY), gross profit $10.9M (-10% YoY), gross margin 47.3% (+6.4pts YoY). Q3 gross margin 51.2% (+6.4pts YoY), driven by software mix shift and new hardware innovations.
- Bookings $22.7M (-35% YoY), with CTE customers (49% of Q3 bookings) leading growth. Adjusted EBITDA loss narrowed to <$2M Q3, down from prior quarters, reflecting cost control.
- Cash position $4.3M, up from $3.0M YoY. Tariffs impacted gross margin by ~1%, but treated as pass-through with minimal compression.
- New stylus hardware release expected to improve user experience and reduce logistics complexity, supporting margin expansion.

**【Q&A Key Highlights】**
- **Government Shutdown Impact**: Delays in federal funding access caused by shutdown, but state/local funding (80% of K-12 budget) continues flowing. Schools preserved zSpace devices but reduced software renewals.
- **Danbury Schools Win**: Largest high school district in CT deployed Career Explorer in 12,000-student district, focusing on middle/high schools. GEMS Education in UAE plans broader rollout post-pilot.
- **Customer Retention**: 77% net dollar retention (excluding 2 customers), with 94% retention across stable base. Largest customer reduced renewal by 33% but retained all 800 devices.
- **Hardware Innovation**: New stylus simplifies interaction, reduces peripherals, and lowers shipping costs. Expected to drive step-change margin improvement.

zSpace, Inc. (ZSPC) Q3 2025 Earnings Call Transcript

- **Revenue Struggles**: Q2 bookings down 54% YoY, driven by U.S. funding delays and China volatility.
- **Margin Improvement**: Gross margin up 2.1ppts to 42.6%, sustained by new hardware and owned software.
- **China Surge**: H1 bookings +88% YoY, offsetting U.S. K-12 decline.
- **AI Innovation**: Career Explorer combines AR/VR with AI; zSpace AI assistant coming soon.
- **Tariff Mitigation**: 30% of hardware now sourced from Thailand, reducing 20% tariff impact.
- **Cautious Outlook**: No formal guidance, but 2024 federal funding unfreeze may unlock Q4 growth.

**【CEO Opening Remarks】**
- Highlighted challenges from U.S. education funding uncertainty and global trade dynamics.
- Focused on 4 policy trends: decentralization of federal funding, school choice expansion, state innovation freedom, and block grants for STEM/CTE.
- Announced successful integration of Second Avenue acquisition, launching Career Explorer for CTE.
- Emphasized AI-driven education with zSpace AI assistant for personalized learning.
- Showcased wins: Northwell Health Sciences deployment and Mendota Unified School District expansion.

**【CFO Financial Commentary】**
- Q2 2025 revenue: $7.5M (flat YoY), bookings $7.1M (-54% YoY).
- Gross margin: 42.6% (up 2.1ppts YoY), driven by software mix and new hardware (Inspire 2, Imagine).
- Non-GAAP metrics: ACV $10.9M (+11% YoY), NDRR 131% for >$50K ACV customers.
- Tariffs impacted margins by ~0.5ppts, but 30% of hardware now sourced from Thailand to mitigate.
- China bookings surged 88% YoY in H1, offsetting U.S. decline.

**【Q&A Highlights】**
- **Federal Funding**: CEO cautious optimism on $6.8B unfreeze, but delays persist.
- **AI Strategy**: Career Explorer combines AR/VR with AI for career exploration; zSpace AI assistant in development.
- **Gross Margin Sustainability**: CFO expects 6%+ margin expansion from new hardware and owned software.
- **Tariffs**: 20% current impact, moving 30% of production to Thailand to reduce exposure.
- **China Growth**: Partner-driven wins in government RFPs, no direct zSpace investment.
- **Sales Team**: 11 quota-carrying reps (vs. 8 in 2024), focused on K-12 and CTE pipeline.


Actual	-0.145	-0.26	-0.27	-0.21
Forecast	-0.1	-0.165	-0.22	-0.21	-0.18
Surprise	-45.00%	-57.58%	-22.73%	0.00%	0.00%

Actual	8.54M	6.76M	7.46M	8.79M	--
Forecast	9.61M	5.03M	7.59M	7.88M	6.20M
Surprise	-11.15%	+34.46%	-1.76%	+11.61%	0.00%

ZSPC

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ZSPC Q4 2025 Earnings Preview

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ZSPC

ZSPC fundamentals

ZSPC Q4 2025 Earnings Preview

Earnings Call

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