CLBT — Q2 2026 Financial Report Analysis

Revenue grew 16%, but recurring revenue missed the company's own target, the CEO changed and the full-year forecast was cut

Cellebrite sells software that police, prosecutors, defence and intelligence agencies, and some companies use to pull evidence from phones, computers and, more recently, drones, then sort and analyse it. In the second quarter of 2026 (April to June) revenue rose 15.8% to $131.1 million, in the middle of the $130–133 million range the company had forecast in May. The more closely watched figure fell short. Annual recurring revenue (ARR) is the yearly value of all subscription contracts in force at quarter-end, a running gauge of how much repeat business is signed up. ARR reached $507.8 million, up 21% on a year earlier but below the company's own $510–513 million target. Management blamed "longer sales cycles and less expansion from Inseyets conversions than anticipated." Inseyets is Cellebrite's newer flagship product, which existing customers are moving onto. On the same day Shiven Ramji, who joined as President of Products and Technology in May, replaced Thomas E. Hogan as CEO. The company also cut its full-year ARR and revenue forecasts and raised its profit target.

Reported profit fell much further than revenue. Net income dropped 67% to $6.4 million and diluted earnings per share fell from $0.08 to $0.02. Almost all of that decline comes from non-cash charges and a higher tax bill, not from weaker underlying operations (see below).

At a glance

• ARR of $507.8 million, about $2–5 million short of the company's own target. Growth is still 21% a year. But the full-year ARR goal was cut by $15 million at the midpoint, so management now expects less new business than it did three months ago.
• Net income down 67%, to $6.4 million. Share-based pay (staff paid in stock), amortization of acquired technology and a tax rate that jumped from 6% to 43% explain the fall. Profit before those items, as the company measures it, was roughly flat: $29.7 million vs $30.8 million.
• Free cash flow of $14.5 million, half of last year's $29.0 million. Customers owed $38.1 million more at quarter-end than at the start of it, and the company paid $7.0 million in income tax after receiving an $8.9 million refund a year earlier.

Key figures

The company reports ARR growth as a percentage only, so the table does not show a year-ago dollar figure. Net retention rate measures how much existing customers spent over the past year compared with the year before, including upgrades and cancellations. At 117%, last year's customers are paying 17% more on average. That is a useful sign that the installed base is still expanding, though the shortfall in ARR shows the expansion was slower than planned.

Takeaway: The business still grows about 16–21% and generates real cash. But this was the quarter Cellebrite missed its own ARR target, changed CEO and lowered its full-year sales forecast. The raised profit target comes from cost discipline, not more demand. The next two quarters must show whether the newer products (Genesis, Guardian, drone forensics) can make up for slower Inseyets upgrades.

Where the growth came from

Subscription revenue has two parts. Subscription services are spread evenly over the contract life. They rose 20.9% to $97.7 million. Term licences are booked upfront when an on-premise licence is sold. They slipped 1.5% to $21.8 million. The steadier, spread-out revenue is growing; the lumpier upfront part is flat. According to the six-month review filed with the results, subscription growth came "primarily due to... continuous adoption of our solutions by existing customers, as well as the contribution from Corellium solutions following the acquisition completed in December 2025". Corellium makes virtual iPhone and Android devices for security research. The filing does not say how much Corellium added, so growth without the acquisition is lower than the headline by an amount the company doesn't disclose.

By region, first-half revenue grew fastest outside the US:

That matches the new CEO's comment about "healthy second-quarter growth in Asia-Pacific, EMEA and U.S. Federal".

Cellebrite also made two other moves into new markets this year. On March 1 it bought SCG Canada, a maker of hand-held drone-forensics tools, for $15.3 million in cash plus $1.7 million due in March 2027. In May its government cloud platform received FedRAMP High authorization, the US federal government's strictest cloud-security standard. That opens the door to selling Guardian, its cloud evidence-management product, to federal agencies, and the company says it has now signed its first significant FedRAMP deal.

Why profit fell while revenue rose

Revenue rose $17.9 million, but operating expenses rose $17.8 million and cost of revenue rose $7.5 million. Three items explain most of the gap:

• Amortization of acquired technology rose from $0.9 million to $6.9 million. When a company buys another, it books the bought technology as an asset and writes it down over several years. This charge follows the Corellium and SCG deals and is non-cash. $5.5 million of it sits in cost of revenue, which is why GAAP gross margin fell from 84.4% to 80.8%. Before that charge and stock pay, gross margin was 85.5%, slightly above last year's 85.1%.
• Share-based compensation rose 73%, from $8.8 million to $15.2 million. Employees are paid partly in shares, which costs no cash but dilutes existing shareholders. For the first half, the review attributes most of the jump in general and administrative costs (+44%) to $9.6 million more in salaries and related employee costs. R&D grew 29%, mainly from $14.3 million more in staff and subcontractor costs.
• Tax rose from $1.3 million to $4.8 million, so the effective tax rate went from 6.3% to 43.0%. The company attributes the higher six-month tax to "a decrease in deductible share-based compensation expense, which raised taxable income under local tax rules". That is a timing and rules effect, not a sign of higher underlying profit.

Interest and currency income also fell, from $6.4 million to $4.2 million. The review cites lower interest rates and an unfavourable currency revaluation.

Remove stock pay, amortization and deal costs, and operating profit rose 13.7% to $29.8 million, with a 22.7% operating margin against 23.2% a year earlier. Operating margin is the share of revenue left after running the business, before interest and tax. The underlying business held its margins. The GAAP collapse is mostly accounting for the acquisitions and stock pay, though stock pay is a real cost to shareholders.

What the headline numbers hide

• Cash conversion weakened this quarter. Operating cash flow was $17.6 million against $32.6 million a year earlier, even though non-GAAP profit was nearly flat. Two reasons: trade receivables (money customers owe) rose $38.1 million during the quarter, against $10.9 million in Q2 2025, and the company paid $7.0 million in income tax after receiving an $8.9 million net refund a year earlier. Over the full first half receivables rose only $5.6 million, so much of Q2's build is a reversal of Q1's collections. Still, trailing-twelve-month free cash flow fell from $158.6 million (32.0% of revenue) at the end of Q1 to $144.2 million (28.0%). The company expects "a stronger second-half free cash flow performance".
• The contract pipeline shrank since year-end. Remaining performance obligations, the value of contracted revenue not yet recognised, fell from $405.7 million at December 31 to $370.4 million at June 30. Deferred revenue (cash billed in advance) fell by $12.9 million over the half. Part of this is probably seasonal: many government contracts are billed in Q4. But the company gives no year-ago June figure to compare, so it's an open question rather than a confirmed problem.
• Adjusted vs GAAP gap is large and growing. Non-GAAP net income ($29.7M) was 4.7 times GAAP net income ($6.4M). Excluded items were stock pay of $15.2M, amortization of $6.9M, acquisition costs of $0.7M and a $0.5M tax adjustment. A year ago the ratio was 1.6 times. Amortization will keep recurring for years, and stock pay is permanent, as the company itself acknowledges.
• Share count is rising, not falling. Diluted shares grew from 249.0 million to 252.8 million. It made no share buybacks in the first half. Option exercises and its employee share plan add shares, so earnings per share fell faster (-75%) than net income (-67%).
• The balance sheet is a cushion. Cash, deposits and marketable securities total $545.7 million, and the company has no credit facilities or debt.

Guidance: what changed

For the third quarter the company expects ARR of $524–528 million (19–20% growth), revenue of $145–148 million (15–17% growth) and adjusted EBITDA of $42–45 million. Adjusted EBITDA is earnings before interest, tax, depreciation, amortization and stock pay, a rough proxy for operating cash profit. CFO David Barter said newer products are "contributing more meaningfully to net new ARR than a year ago". Ramji said the company is taking "a more measured view" of new products' near-term contribution "given elongated sales cycles and the timing of additional new product introductions anticipated for later this year".

Outlook and what to watch

The new forecast still asks a lot of the second half. First-half revenue was $259.4 million, so the full-year range implies $296–302 million in the second half, with Q3 guided at $145–148 million and roughly $148–157 million left for Q4, a step up from $131 million this quarter. ARR has to add roughly $16–20 million in Q3, slightly more than the $14.8 million added in Q2 (from $493.0M at end-Q1). Then it needs about $29 million more in Q4 to hit the midpoint. Cellebrite's year-end quarter is typically its strongest for government budgets, which makes that plausible. But it is the same kind of back-loaded plan that just fell short in Q2.

Our read: the lowered targets look more achievable than the old ones. The raised profit target suggests management is protecting margins rather than spending to chase growth. Three things will show whether the reset is enough:

1. Q3 ARR against $524–528 million. A second miss under a new CEO would point to a demand problem rather than a timing one.
2. Receivables and free cash flow. The quarter's $38.1 million receivables build needs to turn into cash, as the company's "stronger second-half free cash flow" comment implies.
3. Genesis and Guardian/FedRAMP revenue. These newer products are meant to offset slower Inseyets upgrades. So far the company describes them only as "early monetization" and "first significant" deals, with no dollar figures.

Cellebrite files as a foreign private issuer, so it furnishes results on Form 6-K rather than a 10-Q. The figures here come from its August 13, 2026 earnings release and the interim financial statements and six-month operating review furnished the same day.