zSpace 2025 Q3 Earnings Net Loss Widens 2924% Amid Revenue Decline

zSpace (ZSPC) reported fiscal 2025 Q3 earnings on Nov 14, 2025, with results underscoring persistent financial challenges. The company’s revenue dropped 38.2% year-over-year to $8.79 million, while net losses expanded to $6.17 million—a 2924% increase from the prior year. Despite these setbacks, management highlighted strategic progress in software and services revenue, which now accounts for over half of total revenue. The company refrained from issuing formal Q4 guidance due to uncertainties in U.S. education funding and government shutdown impacts.

Revenue

zSpace’s total revenue for Q3 2025 fell to $8.79 million, a 38.2% decline from $14.22 million in Q3 2024. Hardware revenue stood at $3.77 million, with Software contributing $4.32 million and Services adding $706,000. Software and services collectively accounted for 57% of total revenue, up from 46% in the prior year, reflecting the company’s strategic shift toward higher-margin offerings. This segment mix drove a 640-basis-point gross margin expansion, though overall revenue contraction highlighted ongoing market headwinds.

Earnings/Net Income

The company swung to a net loss of $6.17 million in Q3 2025, a 2924% increase from a $204,000 loss in Q3 2024. Earnings per share turned negative at $0.26, a stark contrast to the $235.81 profit per share recorded in the prior-year period. The EPS decline reflects a 100.1% negative change, underscoring the severity of financial deterioration.

Price Action

zSpace’s stock price exhibited mixed short-term performance, rising 12.67% on the latest trading day but declining 6.75% for the week and 38.03% month-to-date. The volatility aligns with the company’s earnings-driven price swings and broader market uncertainty.

Post-Earnings Price Action Review

The strategy of buying zSpace shares on revenue raise dates and holding for 30 days yielded an annualized return of 8.5% over three years, albeit with significant volatility. Quarterly variability was pronounced, with sharp post-earnings rallies followed by prolonged underperformance. A 35% peak-to-trough drawdown during low-growth quarters highlighted the risks of high-volatility investing. While the approach showed moderate long-term potential, investors must weigh the need for rigorous risk management and market monitoring.

CEO Commentary

CEO Paul Kellenberger emphasized progress in software and services revenue, which now exceeds 50% of total revenue, driving gross margin expansion. He cited 18% sequential revenue growth and international deployments in the UAE, Italy, and Bulgaria as key achievements. Despite U.S. funding challenges, Kellenberger expressed cautious optimism, noting sustained customer demand and strategic AI-driven innovations like the Career Explorer application and language translation tools.

Guidance

zSpace declined to provide formal Q4 2025 guidance, citing uncertainties from the U.S. government shutdown and education funding delays. However, management remains focused on improving revenue quality, gross margins, and path to profitability through software expansion and cost discipline.

Additional News

Recent developments include international partnerships and product launches. zSpace deployed solutions with GEMS Education in Dubai, marking a regional first in AR/VR learning integration for K-12 education. The company also announced the Career Explorer application, developed via the Second Avenue Learning acquisition, to enhance global accessibility through AI-powered language translation. Additionally, zSpace expanded deployments in Italy, Bulgaria, and Poland, leveraging EU-funded STEM projects. These initiatives underscore the company’s commitment to international growth and AI integration in education.