AudioEye, Inc. (AEYE) Q2 2026 Earnings: Revenue $11M (+8.7%)
AEYE — Q2 2026 Financial Report Analysis
Q2 · Fiscal year 2026 · Published by Pham Hop
AudioEye grew Q2 2026 revenue 8.7% to $10.7M and lifted adjusted EBITDA 54% to $3.0M on staff cuts, but posted a $0.9M GAAP net loss as legal costs climbed; full-year profit guidance was raised.
Revenue
$11M
+8.7% YoY
Net income
-$865K
Diluted EPS
$-0.07
Operating margin
-5.6%
This period vs a year ago
Same period last year
This period
Revenue▲+8.7%
≈$9.9M
$11M
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
Overview
AudioEye sells software that makes websites usable by people with disabilities: people who navigate with a screen reader, a keyboard instead of a mouse, or who need higher contrast or captions. Its product scans a customer's site against WCAG (the Web Content Accessibility Guidelines, the technical standard courts and regulators point to), fixes many issues automatically, and adds human testing and legal support on top. Demand is driven largely by legal risk: US businesses are regularly sued under the Americans with Disabilities Act over inaccessible websites, and the European Accessibility Act began applying to many consumer-facing businesses in June 2025. Most of AudioEye's revenue is subscription-based.
In Q2 2026 (quarter ended June 30), revenue rose 8.7% to $10.7 million and adjusted EBITDA rose 54% to a record $3.0 million, but AudioEye still posted a GAAP net loss of $0.9 million ($0.07 per share), versus roughly breakeven a year ago. The two headlines point in opposite directions for identifiable reasons: last year's quarter was flattered by a $1.36 million one-time accounting gain, and this year's was weighed down by $1.07 million of legal costs, which management excludes from its adjusted figures. Stripping out both, the business became more profitable, mainly because it cut research and marketing staff while revenue kept growing.
At a glance
Adjusted EBITDA margin 28% vs 20% a year ago — most of the improvement came from cost cuts (R&D expense down 29%), not faster growth; revenue growth was a steady 8.7%.
Annual recurring revenue (ARR) $42.3 million, up 11% — ARR is the yearly value of active subscriptions; it is growing faster than reported revenue, which points to revenue growth holding up in coming quarters.
Legal costs of $2.9 million in the first half, more than double last year's $1.3 million — the company calls this "non-recurring," but its bank just agreed to let it keep excluding up to $5.0 million of it for covenant purposes.
Results
Metric
Q2 2026
Q2 2025
YoY Change
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Revenue
$10.72M
$9.86M
+8.7%
Gross margin
78.8%
77.3%
+1.5 pts
Operating income (loss)
$(0.60)M
$0.24M
n/m
Operating margin
-5.6%
2.5%
-8.0 pts
Net loss
$(0.87)M
$(0.00)M
n/m
Diluted EPS
$(0.07)
$(0.00)
n/m
Adjusted EBITDA (non-GAAP)
$2.98M
$1.93M
+54%
Adjusted EPS (non-GAAP)
$0.23
$0.15
+53%
ARR (period-end)
$42.3M
~$38.1M (implied)
+11%
Customers (period-end)
~129,000
~120,000
+7%
n/m = not meaningful (sign change or near-zero base). The year-ago ARR figure is implied from the company's stated 11% growth rate.
For the first half, revenue was $21.27 million (+8.6%), the net loss widened to $2.98 million from $1.47 million, and adjusted EBITDA rose to $5.34 million from $3.84 million.
Where the growth came from
AudioEye sells through two channels, and they are moving very differently:
Channel
Q2 2026 revenue
Q2 2025 revenue
YoY
Share of ARR
Partner and Marketplace
$6.24M
$5.40M
+16%
~59%
Enterprise
$4.47M
$4.46M
flat
~41%
Partner and Marketplace serves small and mid-sized businesses that buy AudioEye through a web-hosting platform, reseller or content-management-system partner. The 10-Q attributes its 16% growth "primarily due to continued expansion with existing partners," and the 10-Q attributes the increase of about 9,000 customers to this channel.
Enterprise (large companies and government agencies buying directly) was flat. The 10-Q says growth in recurring revenue "was mostly offset by attrition of customers added through acquisition and a reduction in non-recurring revenue" — meaning some customers AudioEye bought in its 2025 acquisitions are leaving, and one-off work such as PDF remediation shrank. The company still reports Enterprise ARR as growing, so the flat revenue is partly a mix shift away from one-time services rather than lost subscriptions, but the filing doesn't quantify the split.
Where the margin came from
Gross profit rose $0.83 million on $0.86 million of extra revenue: cost of revenue was essentially flat (+1%), which the 10-Q credits to "a reduction in employee headcount as a result of efficiency gains from newly implemented AI tools and automation." The same explanation is given for:
Research and development expense down 29% to $0.85 million (and total R&D spending, including capitalized software, down 27%). R&D is now 12% of revenue including capitalized costs.
Selling and marketing down 4% to $3.65 million, from fewer marketing staff, partly offset by more third-party marketing spend.
Against that, general and administrative expense rose 22% to $4.55 million, "due primarily to an increase in litigation expense, as well as higher severance cost associated with a reduction in headcount and amortization expense."
What the headline numbers hide
The year-ago profit wasn't real operating profit. Q2 2025 operating income of $0.24 million included a $1.36 million gain from revaluing contingent consideration — a reduction in the estimated earn-out owed on an acquisition. Without it, last year's operating loss was about $1.1 million, so this year's $0.6 million loss is an improvement of roughly $0.5 million, not a deterioration.
Adjusted EBITDA adds back $3.8 million to a $0.9 million loss. The Q2 add-backs are stock-based compensation ($1.14 million), litigation ($1.07 million), depreciation and amortization ($0.96 million), severance ($0.34 million), interest ($0.27 million) and small acquisition costs. Stock compensation alone equals 11% of revenue and is a real cost to shareholders through dilution, even though it isn't paid in cash.
"Non-recurring" litigation keeps recurring. Litigation add-backs were $0.61 million in Q2 2025, $1.07 million in Q2 2026 and $2.91 million for the first half of 2026 — equal to more than half of the company's first-half adjusted EBITDA of $5.34 million. The 10-Q describes these only as "legal expenses related primarily to non-recurring litigation" and doesn't name the matters. On September 18, 2026, AudioEye amended its Western Alliance Bank loan so it can add back up to $5.0 million of litigation expense (trailing twelve months) through 2026 and up to $3.0 million through 2027 when calculating its covenant EBITDA. A bank amendment sized that way suggests both sides expect meaningful legal spending to continue into 2027.
Cash conversion is better than the GAAP loss suggests, but thinner than adjusted EBITDA. First-half operating cash flow was $2.28 million against a $2.98 million net loss, helped by deferred revenue (customers paying upfront) rising $0.77 million. After $0.9 million of capitalized software, equipment and patent spending, free cash flow was about $1.4 million, roughly a quarter of the $5.3 million of adjusted EBITDA. The 10-Q credits the year-over-year improvement in operating cash flow to "the timing of customer payments."
Cash went up because of borrowing. Cash rose $3.4 million in the first half to $8.7 million, but $3.6 million of that came from drawing the rest of the term loan in Q1. Cash grew only $0.1 million in Q2. Debt principal is $16.8 million, so net debt is about $8.1 million, and quarterly principal repayments began in April 2026. Shareholders' equity is only $3.2 million.
Receivables are fine. Accounts receivable grew 2.5% since December, slower than revenue.
No EPS help from buybacks this quarter. AudioEye bought back $0.48 million of stock in Q1 and none in Q2; the weighted share count rose slightly (12.49 million vs 12.45 million).
Guidance
Q2 came in at the top half of management's own May guidance: revenue of $10.72 million against $10.65–10.75 million guided, and adjusted EBITDA of $2.98 million against $2.6–2.7 million.
Guidance item
Previous (May 2026)
Current (Aug 2026)
Q3 2026 revenue
—
$10.85–11.05M
Q3 2026 adjusted EBITDA
—
$3.4–3.6M
Q3 2026 adjusted EPS
—
$0.26–0.28
FY2026 revenue
$43.25–44.25M
$43.5–44.0M
FY2026 adjusted EBITDA
at least $12.0M
at least $12.7M (+40% YoY)
FY2026 adjusted EPS
at least $0.96
at least $0.98
The revenue range was narrowed around an unchanged $43.75 million midpoint; the profit guidance was raised. Management also said it expects an annualized adjusted EBITDA run rate above $15 million by year-end (about $3.75 million a quarter), "meaningful free cash flow generation in the second half," and that it is evaluating buybacks and dividends. On leadership, CFO Kelly Georgevich became CEO in May 2026 and Matthew Domeyer joined as CFO in July.
Takeaway: AudioEye's profit improvement is real on an operating basis — revenue grew 8.7% while headcount-driven costs fell — but the gap between its 28% adjusted EBITDA margin and its GAAP loss is mostly stock compensation and legal bills that the company labels one-off and its bank now expects to continue. The cleaner test is cash: free cash flow was about $1.4 million in the first half, and management has promised a meaningful step up in the second.
Outlook: what to watch
Implied second-half ramp. Full-year guidance of at least $12.7 million adjusted EBITDA means at least $7.4 million in the second half, versus $5.3 million in the first. Q3 guidance of $3.4–3.6 million implies Q4 of roughly $3.8 million or more. That is achievable if the lower cost base holds, since revenue only needs to grow about 2% a quarter.
Free cash flow vs the promise. With $16.8 million of debt, quarterly principal payments, and litigation spending that is still running at more than $1 million a quarter, second-half free cash flow is the number that decides whether buybacks or dividends are realistic. Buyback room is also limited by the bank: the September amendment caps permitted repurchases at $7.0 million in total across 2025–2027, and AudioEye has already used $5.05 million of its $12.5 million board authorization — so if the bank counts the same purchases, only about $2 million of room is left through 2027.
Enterprise channel. Flat Enterprise revenue alongside churn from acquired customers is the weak spot. If ARR keeps growing 11% while Enterprise revenue stays flat, revenue growth will depend increasingly on the smaller-ticket partner channel.
Legal costs. Watch whether the litigation add-back falls in Q3; if it stays above $1 million a quarter, the "non-recurring" label becomes hard to defend.
Our read: steady high-single-digit revenue growth with rising operating profitability, carried by cost cuts more than by acceleration. The next report should show whether that turns into cash the company can keep after debt service and legal bills.