Key Highlights

  • Third quarter Revenue reached a record USD 8.56 million against an estimated USD 7.54 million, up 48% sequentially.
  • Loss per share of USD 0.25 matched the estimate, while consolidated gross Margin rose to 44% from 29%.
  • The company raised the low end of 2026 revenue guidance to USD 25 million, keeping the USD 27 million top.
  • Backlog ended the quarter at USD 18.7 million, with USD 15.3 million funded, and cash stood at USD 47 million.

Palladyne AI (NASDAQ:PDYN) reported record third quarter 2026 revenue of USD 8.56 million, ahead of the USD 7.54 million estimate. Loss per share was USD 0.25, in line with the estimate. Revenue rose 48% from the second quarter, which was itself a record, and was up 895% from about USD 0.9 million a year earlier.

Compared with the second quarter, components revenue grew 26%, helped by the first deliveries of the company's BRAIN FC1 flight computers, while revenue from government contracts increased 135%.

Product revenue, which comes mainly from precision Manufacturing and the BRAIN avionics product, was USD 3.4 million. Engineering services revenue was USD 2.4 million and AI product development contract revenue was USD 2.8 million. Cost of revenue was USD 4.8 million, and consolidated gross margin was 44%, up from 29% in the second quarter.

Research and development expense was USD 4.0 million, up from USD 3.1 million a year earlier, mainly on labor costs tied to the Gremlin-X unmanned aerial vehicle. General and administrative expense was USD 10.1 million, against USD 4.1 million a year earlier, driven by higher stock-based compensation, headcount added through acquisitions in November 2025 and hiring for new opportunities. Stock-based compensation was USD 4.8 million, compared with USD 1.1 million a year ago.

Backlog, Cash and Capital Structure

Backlog ended the quarter at USD 18.7 million, of which USD 15.3 million is funded. Because the quarter's USD 8.6 million of recognized revenue drew Backlog down, and net new contracts were USD 2.7 million, backlog did not grow at the pace it did in the second quarter.

Cash, cash equivalents and marketable securities were USD 47.0 million at September 30, nearly unchanged from USD 47.1 million at year end, and the company reports no long-term debt. The quarterly filing shows an accumulated Deficit of about USD 517.7 million and Working Capital of USD 47.3 million. In September, warrants covering about 3.4 million shares and about 2.3 million contingent Merger consideration shares expired, reducing the fully diluted share count by more than 9%.

Guidance and Strategic Items

The company raised the low end of its full-year 2026 revenue guidance to USD 25 million and reiterated the USD 27 million top end. Management said it plans to finalize its 2027 budget with the board early next year and that it anticipates 2026 growth extending into 2027.

Management described the BRAIN system as delivering guidance, navigation and control at roughly one tenth the weight and cost of legacy avionics. It also cautioned that contracting cycles for larger unmanned aircraft programs have historically run two to four years, and that none of its large corporate opportunities has produced revenue yet. During the quarter it announced a strategic collaboration with Fanuc, an industrial automation company with more than 40 million robots installed worldwide.

The filing's risk summary describes the company as early stage with a history of losses.

What the Numbers Leave to Track

Backlog conversion, the cadence of new contract awards, gross margin after the jump to 44% and quarterly cash use are the figures to watch against the full-year revenue range. Progress on the Fanuc collaboration and the Gremlin-X program are the strategic items.