Quantum's Backlog Surpasses $20M as Tape Sales Double

Date of Call: Feb 17, 2026

Financials Results

• Revenue: $74.6 million, an increase over the $62.7 million in the prior quarter and $68.7 million in the prior year third quarter
• EPS: Non-GAAP loss of $0.36 per share, compared to a loss of $0.54 per share in the prior quarter and a loss of $1.59 per share in the prior year quarter; GAAP loss of $2.03 per share, compared to a loss of $3.49 per share prior quarter and a loss of $15.35 per share in the prior year quarter
• Gross Margin: GAAP gross margin 38.8% compared to 37.6% in the prior quarter and 40.6% in the fiscal third quarter of 2025

Guidance:

• Revenue for Q4 expected to be approximately $68 million, plus or minus $2 million.
• Non-GAAP operating expenses expected to be approximately $27 million, plus or minus $2 million.
• Non-GAAP adjusted net loss per share anticipated to be negative $0.33, plus or minus $0.10 per share.
• Adjusted EBITDA expected to be breakeven, plus or minus $2 million.

Business Commentary:

Revenue and Backlog Growth:

• Quantum Corporation reported revenue of $74.6 million for Q3 FY 2026, an increase from $62.7 million in the prior quarter and $68.7 million in the prior year's third quarter.
• The company ended the quarter with a strong backlog of over $20 million, significantly above the historical run rate of $8 million to $10 million.
• This growth was driven by strong backlog execution and a conservative initial assumption related to deferred revenue contracts.

Tape Sales and Market Demand:

• Quantum's tape sales doubled quarter-over-quarter in Q3.
• This surge was driven by customers seeking cost-effective and power-efficient storage solutions amid rising costs and supply constraints of flash and disk components.

Gross Margin and Supply Chain Challenges:

• The company's GAAP gross margin increased to 38.8% from 37.6% in the prior quarter, reflecting initial improvements from restructuring.
• However, industry-wide supply chain volatility, including rising prices and extended lead times for critical components, poses a near-term headwind to achieving a 40% margin target.

Debt Reduction and Financial Strategy:

• Quantum reduced its outstanding term debt by approximately 50% through a strategic debt exchange, converting it into convertible notes, resulting in a significant decrease in its net debt position.
• This move is part of broader efforts to strengthen the company's financial foundation and achieve positive cash flow.

Services and Cost Management:

• The company acknowledges a need to improve execution and reduce discounting in its services business to align with the broader goal of financial stability.
• Efforts to enhance services revenue are part of ongoing initiatives to stabilize and improve overall financial performance.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated: 'I'm pleased with the continued progress the team is making in our sales and operating initiatives as evidenced by our third quarter results.' He also noted: 'We are off to a strong start to Q4' and highlighted 'meaningful improvement in revenue, pipeline and backlog' and that 'tape sales doubled quarter-over-quarter'.

Q&A:

• Question from Eric Martinuzzi (Lake Street Capital Markets): What's behind the 23% contraction in primary storage systems over the 9 months versus the prior year?
  Response: Management stated they started the year very slow but saw strength across all product lines going into fiscal Q3 and feel confident they are on a strong path for primary storage.

• Question from Eric Martinuzzi (Lake Street Capital Markets): Is the elevated backlog expectation driven more from demand or component availability?
  Response: Management stated demand continues to be very strong, with a healthy January, and the backlog is growing faster than anticipated, driven by both strong demand and some component shortages.

• Question from Eric Martinuzzi (Lake Street Capital Markets): Is the services business contraction nearing an end and potentially flattening out?
  Response: Management believes the issue is more about execution and discounting, not the underlying demand, and they need to improve their ability to execute and discount less.

• Question from Eric Martinuzzi (Lake Street Capital Markets): What should be expected for Q4 gross margins given rising component prices?
  Response: Management stated the supply chain environment is very challenging and volatile industry-wide, making it hard to guide margins, but staying at Q3 levels would be a good achievement.

• Question from Nehal Chokshi (Northland Capital Markets): Could you give color on where the doubled tape sales demand is coming from with respect to hyperscalers versus non-hyperscalers?
  Response: Management said tape demand is very strong across the board, driven by people running out of storage, migrating back from the cloud, and hyperscaler capacity upgrades, creating a new wave of demand.

• Question from Nehal Chokshi (Northland Capital Markets): Is the growing number of multimillion-dollar deals referring to the pipeline or backlog?
  Response: Management confirmed they have a bunch of multimillion-dollar deals in backlog.

• Question from Nehal Chokshi (Northland Capital Markets): Is demand from enterprises and hyperscalers up year-over-year, supporting backlog growth?
  Response: Management confirmed strength across both enterprise and hyperscaler demand, with January being strong, leading to backlog growth.

• Question from Nehal Chokshi (Northland Capital Markets): Given worsening supply, would backlog continue to grow if demand sustains?
  Response: Management confirmed at the guidance level, the backlog will grow.

• Question from Nehal Chokshi (Northland Capital Markets): What long-term margin structure can be achieved?
  Response: Management believes a return to the 40% long-term margin is possible once the supply chain normalizes, but current industry-wide supply issues make near-term predictability difficult.

Contradiction Point 1

Backlog Growth Expectations and Drivers

Contradiction on whether backlog growth is sustainable and its primary driver.

What are your key takeaways from the earnings call? - Eric Martinuzzi (Lake Street Capital Markets, LLC)

2026Q3: The backlog is growing faster than anticipated. Both strong demand and component shortages are contributing factors. - Hugues Meyrath(CEO)

Is the elevated backlog of $20 million (vs. $8-10 million typical) expected to remain high due to increased demand or component shortages? - Nehal Chokshi (Northland Capital Markets)

20251114-2026 Q2: The backlog is a blended mix of customers, geographies, and product types. - Hugues Meyrath(CEO)

Contradiction Point 2

Supply Chain Impact on Shipment Ability

Contradiction on whether supply chain issues are a limiting factor for shipping backlog.

What are your thoughts on the recent earnings results? - Nehal Chokshi (Northland Capital Markets, Research Division)

2026Q3: At the current guidance level, yes, the backlog is expected to continue growing. - Hugues Meyrath(CEO)

With the backlog growing faster than expected and strong demand from enterprise and hyperscaler customers, if supply constraints worsen, will the backlog continue to grow beyond its current level? - Nehal Chokshi (Northland Capital Markets)

20251114-2026 Q2: There are still some supply chain challenges, particularly in manufacturing tape libraries, which have limited the ability to ship some product. - Hugues Meyrath(CEO)

Contradiction Point 3

Nature and Concentration of Backlog Components

Contradiction on whether the backlog is concentrated with a few large customers or is a broad-based mix.

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2026Q3: There are several multimillion-dollar deals in the backlog. Hyperscaler deals are typically multimillion-dollar. - Hugues Meyrath(CEO)

Are the growing multimillion-dollar deals part of the pipeline or backlog? - Nehal Chokshi (Northland Capital Markets)

20251114-2026 Q2: The backlog is not concentrated with a single customer or hyperscaler. The Library of Congress project is in the backlog but is not the largest component. - Hugues Meyrath(CEO) & Laura Nash(CFO)

Contradiction Point 4

Backlog Composition and Size

Contradiction on whether backlog includes services and its stated size.

What is Eric Martinuzzi's question for the company? - Eric Martinuzzi (Lake Street Capital Markets, LLC)

2026Q3: The backlog is elevated at $20 million (vs. $8-10 million typical). Is this expected to stay high... - Eric Martinuzzi(Lake Street Capital Markets)

Is the elevated backlog of $20 million (vs. $8-10 million typical) expected to remain high due to increased demand or component shortages? - Nehal Chokshi (Northland Capital Markets)

2026Q2: The backlog is product only. The backlog is record backlog of over $25 million across all product lines... - Nehal Chokshi(Northland Capital Markets)

Contradiction Point 5

Gross Margin Outlook

Contradiction on near-term gross margin guidance certainty.

What are your thoughts on the latest earnings results? - Eric Martinuzzi (Lake Street Capital Markets, LLC)

2026Q3: It is very hard to guide margins. Staying at the Q3 gross margin level would be a significant achievement given these conditions. - Hugues Meyrath(CEO)

Will Q4 gross margins increase sequentially or retrace based on mix? - Nehal Chokshi (Northland Capital Markets)

2026Q2: Product gross margin is still down year-over-year. Can you explain why, and do you expect improvement? - Nehal Chokshi(Northland Capital Markets)