Precision Optics Corporation, Inc. (POCI) FY2026 Earnings: Revenue $32M (+65.2%)
POCI — FY2026 Annual Financial Report Analysis
Full Year · Fiscal year 2026 · Published by Pham Hop
Precision Optics grew fiscal 2026 revenue 65.2% to $31.5M as device manufacturing nearly tripled and overhead held flat, narrowing the net loss to $3.6M — but gross margin slipped to 17.2% (about 15% before one-off tariff refunds and a grant) and two customers now make up 68% of sales.
Revenue
$32M
+65.2% YoY
Net income
-$3.6M
+37.2% YoY
Diluted EPS
$-0.43
+49.4% YoY
Operating margin
-11.1%
This period vs a year ago
Same period last year
This period
Revenue▲+65.2%
≈$19M
$32M
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
Precision Optics sold far more in fiscal 2026 (the year to June 30, 2026) than ever before: revenue rose 65.2% to $31.5 million, almost all of it from the production line making devices for medical-device customers. Costs outside the factory barely moved, so the net loss narrowed from $5.8 million to $3.6 million. But the gross margin — the share of each sales dollar left after paying for materials and factory labor — slipped to 17.2%, and it only stayed that high because of one-off tariff refunds and a government grant. The company is still losing money at the operating level, and it now depends on two customers for about two-thirds of its sales.
At a glance
Revenue $31.5M, up 65.2% — Systems Manufacturing (building finished devices for customers) nearly tripled to $22.6M, and now makes up 71.8% of sales versus 43.4% a year earlier.
Operating loss $3.5M, down from $5.6M — total operating expenses were flat at $8.9M, so every extra dollar of gross profit went straight to shrinking the loss.
Two customers = 68% of revenue — one customer was about 41% of sales and another 27%, up from 22% and 20% the year before.
The results
Metric
FY2026
FY2025
YoY Change
Revenue
$31.53M
$19.09M
+65.2%
Gross profit
$5.43M
$3.40M
+59.5%
Gross margin
17.2%
17.8%
-0.6 pts
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Operating loss
-$3.51M
-$5.55M
Loss narrowed 36.8%
Operating margin
-11.1%
-29.1%
+18.0 pts
Net loss
-$3.63M
-$5.78M
+37.2% (loss narrowed)
Diluted EPS
-$0.43
-$0.85
+49.4% (loss narrowed)
Operating cash flow
-$1.55M
-$3.40M
Cash burn down 54.3%
Cash at year-end
$9.84M
$1.77M
+$8.07M
Where the growth came from — and where it didn't
The company reports revenue in four lines, and they went in opposite directions:
Revenue line
FY2026
FY2025
Change
Systems Manufacturing
$22.63M
$8.29M
+172.9%
Ross Optical Industries
$4.91M
$3.73M
+31.7%
Engineering Design Services
$3.47M
$4.94M
-29.7%
MicroOptics Lab
$0.52M
$2.14M
-75.7%
Systems Manufacturing (+$14.3M) is the whole story. Management attributes it to "significant increases in customer demand and the resultant scaling of manufacturing capabilities."
Engineering Design Services fell, and part of that is the good kind of decline: the company's single-use cystoscope (a disposable camera scope used to look inside the bladder) moved from paid development work into production, so revenue that used to be booked as engineering is now booked as manufacturing. But the filing also points to two less comfortable causes: engineers spent more time on unbilled "sustaining engineering" to support the production ramp, and there were "insufficient product development engagements." New development projects are where future production contracts come from, so a thin engineering pipeline matters more than its 11% share of sales suggests.
MicroOptics Lab collapsed to $0.5M because of "delays in receiving new production orders from a defense contractor," which is the main customer for that business.
Ross Optical (+31.7%), the optical-components business in El Paso, benefited partly from tariffs: management says customers could no longer keep postponing deliveries they had held back while tariffs were uncertain, and that passing tariff costs through to customers "increased revenue." Some of that growth is higher prices covering higher costs, not more units shipped.
Why the loss shrank
Gross profit rose by $2.0M, to $5.4M, while total operating expenses were essentially unchanged at $8.94M (FY2025: $8.96M). Research and development fell $125K to $1.03M; selling, general and administrative costs rose $109K (+1.4%) to $7.91M. The MD&A text describes this as a "decrease in SG&A" driven by lower stock-based compensation and recruiting costs, partly offset by consulting and bonus expense — the table beside it shows a small increase, so read that sentence as describing the mix of changes rather than the direction. Stock-based compensation (paying staff in shares rather than cash, which is a real cost to shareholders but not a cash outflow) fell to $1.14M from $1.61M.
That is operating leverage — when sales grow but overhead doesn't, the loss shrinks fast. The problem is the other half: at a 17.2% gross margin, the company keeps only about 17 cents of each sales dollar to pay for its $8.9M of overhead. At that margin it would need roughly $52M of revenue just to break even at the operating level, even if overhead didn't grow at all.
What the headline numbers hide
The gross margin was propped up by one-off credits. After the U.S. Supreme Court ruled in February 2026 that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were unlawful, the company booked an $880,598 tariff refund receivable as a reduction to cost of goods sold. It also decided to refund $558,266 of tariff surcharges it had charged customers, which it recorded as a cut to revenue. Separately, a $224,544 government grant was booked as a reduction to cost of goods sold. Net of each other, these items added about $547K to gross profit. Take them out and gross profit would have been about $4.88M on about $32.09M of revenue — a gross margin of roughly 15.2% instead of 17.2%, and an operating loss of about $4.06M instead of $3.51M. Neither the tariff refund nor the grant should be expected to recur at this size.
Cash burn was smaller than the loss, but not because the business made cash. Operating cash flow was -$1.55M against a -$3.63M net loss. The gap came from non-cash stock compensation ($1.14M), higher customer advances (+$0.68M — customers paying before delivery), higher accounts payable (+$0.67M — paying suppliers later) and higher accrued liabilities (+$0.99M, which includes the $558K owed back to customers for tariff surcharges). That last item will reverse into a cash outflow when the refunds are paid. On the other side, receivables rose $1.61M, but $843K of the year-end balance is the still-uncollected tariff refund and $225K is the grant.
Receivables and inventory are not a warning sign. Accounts receivable rose 37.1% to $5.94M and inventory 7.5% to $3.83M, both slower than the 65.2% sales growth. Excluding the tariff-refund and grant receivables, trade receivables grew only about 12.5%.
EPS improved faster than the loss because of dilution. The net loss narrowed 37.2%, but loss per share improved 49.4% (-$0.85 to -$0.43), because the loss was spread over more shares: the average share count rose 25.6% to 8.53 million after share sales, and 10.97 million shares were outstanding at year-end versus 7.71 million a year earlier (+42%). The March 2026 public offering raised $10.63M net — that, not operations, is why cash went from $1.77M to $9.84M.
The bank covenant was missed again. The company did not meet its 1.2x debt service coverage ratio (a test of whether operating earnings cover loan payments) for the third year running. On September 25, 2026 the lender waived it and replaced it with a requirement to keep at least $2.0M of liquidity, with $750K available on the revolving credit line (rising to $1.25M once the coverage ratio reaches 1.2x). Debt is small — $1.29M of term loans, nothing drawn on the revolver — so this is a sign of thin profitability rather than a solvency problem.
Takeaway: Precision Optics has found real production demand — manufacturing revenue nearly tripled and overhead held flat — but at a gross margin of about 15% before one-off tariff and grant credits, it is still converting that growth into losses, and two customers now account for 68% of sales.
What to watch in fiscal 2027
The 10-K gives no revenue or margin guidance, so the outlook rests on what the filing does disclose:
Gross margin without the credits. The key question is whether higher production volume lifts the margin from roughly 15% underlying toward a level that covers overhead. The FY2026 figure won't have tariff refunds or (necessarily) grant income to lean on next year.
A new cost step-up. The company moved into a 19,590 sq ft facility in Littleton, Massachusetts, with the lease starting October 1, 2025 and base rent waived for the first six months. FY2027 carries a full year of rent: minimum lease payments are $555K for FY2027, and total lease liabilities on the balance sheet rose to $2.77M from $0.14M.
Customer concentration. With 41% and 27% of revenue from two customers (and 34.4% and 22.8% of receivables), a change in ordering by either one would swing the whole year. The filing itself calls this "a significant increase in customer concentration compared to prior years."
Refilling the pipeline. Engineering revenue and the MicroOptics Lab both shrank; new development programs are what feed future production, and the defense orders behind MicroOptics are described in the filing as delayed rather than lost.
Cash runway. $9.84M of cash against roughly $2.6M of combined operating cash burn, capital spending and debt repayments in FY2026 gives room, and management says cash, operations, the credit line and access to capital markets cover at least the next 12 months. The company has repeatedly funded itself by selling shares (August 2024, February 2025, March 2026), so shareholders should expect further dilution if losses don't close.
Our read: this was the year the manufacturing ramp arrived, and the flat cost base shows what happens when it does. Profitability now depends on margin, not volume — and on the reported numbers, that problem isn't solved yet.