Earnings call transcript: Digimarc beats Q2 2026 estimates but shares fall

Digimarc reported a narrower-than-expected loss for the second quarter of 2026, with an adjusted loss of $0.08 per share, beating analysts' expectations of a $0.33 loss. Revenue rose to $7.4 million, exceeding the forecast of $7.32 million. However, the company's stock fell sharply after disclosing that recurring revenue remained under pressure due to contract losses, and meaningful growth in its gift-card business would likely not occur until late 2026 and early 2027.

Revenue fell to $7.4 million from $8.0 million a year earlier, with subscriptions down 19.6% to $3.7 million and service revenue up 8.8% to $3.6 million. The company's ending annual recurring revenue was $11.6 million, down 27% from the same period last year, largely due to contract expirations. Despite the revenue decline, Digimarc highlighted improved operating efficiency, with subscription and service gross margins rising to 89% and 60%, respectively, and overall gross profit margin at 75%.

Management attributed the decline to two large contract losses and the lack of significant ARR growth by year-end 2026. Chief Executive Paul Carreiro expressed confidence in the company's undervalued status and its digital link business in consumer packaged goods, while CFO Charles Beck emphasized the impact of contract losses on the quarter's results.