NetSol Technologies reported first‑quarter 2026 results with total net revenues of $15 million, a 2.8% year‑over‑year increase. Subscription and support revenue rose 9.4% to $9 million, reflecting the company’s continued shift toward a recurring‑revenue model. Gross profit reached $5.9 million, giving a gross margin of 39.4%, down from 45% in the same period a year earlier. The company posted an operating loss of $1.8 million and a GAAP net loss of $2.4 million, while cash and cash equivalents climbed to $22.7 million.
The revenue mix shift explains the margin compression. Subscription and support revenue grew strongly, but services revenue declined, and operating expenses increased to 51.6% of sales from 50.2% a year earlier. The higher cost of services and the investment in technology and expansion contributed to the 5.6‑percentage‑point drop in gross margin. The company’s focus on building a subscription business is evident, yet the higher operating costs are eroding profitability in the short term.
Comparing to the prior quarter, NetSol’s operating loss widened from $760,000 in Q1 FY2025 to $1.8 million in Q1 FY2026, and the company moved from a $71,000 net income to a $2.4 million net loss. A foreign‑currency loss of $287,000 in the current quarter, versus a gain in the previous year, also weighed on results. These figures underscore the company’s investment‑heavy strategy and the associated short‑term financial pressure.
CEO and Chairman Najeeb Ghauri highlighted the growth in recurring revenue, noting that subscription and support revenue increased 9.4% year‑over‑year. He emphasized that the company’s cash position of $22.7 million provides ample liquidity to support ongoing growth initiatives, while acknowledging near‑term pressures. Ghauri stated that the business fundamentals remain solid and that the company is executing a clear strategy for growth, innovation, and customer success.
Investors reacted negatively to the earnings, citing the GAAP net loss of $2.4 million ($0.20 per diluted share) and the rise in selling and marketing costs. The market’s concern centers on the company’s ability to translate its recurring‑revenue growth into profitability amid rising costs and margin compression.
NetSol did not provide new guidance, signaling caution as it evaluates the impact of its current investments and market conditions. The company’s focus remains on expanding its subscription portfolio while managing costs, a strategy that will determine whether it can achieve profitability in the coming quarters.
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