Sequans Q2 2026 earnings: Product sales rise as gross margin contracts

Sequans Communications (NYSE: SQNS) reported preliminary unaudited Q2 2026 revenue of $7.5 million for the quarter ended June 30, down 8.4% from $8.1 million a year earlier, while diluted IFRS loss per ADS narrowed to $0.65 from $3.53. The revenue decline masked 83.7% growth in product sales, but gross margin contracted as the sales mix shifted away from higher-margin license and services revenue. Cash increased to $21.0 million as Bitcoin sales helped fund the redemption of convertible debt.

Core financial results

The year-over-year revenue comparison was affected by significant Qualcomm license and services revenue recorded in Q2 2025. Excluding that prior-year contribution, Sequans said Q2 2026 revenue increased 84.2%, broadly consistent with the 83.7% increase in product sales.

Profitability remained under pressure. Gross profit fell faster than revenue because product sales represented most of the current quarter’s business, while the prior-year Qualcomm transaction added 36 percentage points to Q2 2025 gross margin.

The improvement in per-ADS losses should be viewed alongside the increase in weighted average diluted ADSs to 15.0 million from 2.5 million. Total IFRS net loss increased even though the reported loss per ADS declined substantially.

Business and product performance

Product sales accounted for the vast majority of quarterly revenue and increased 39.4% from Q1 2026 as well as 83.7% year over year. This indicates that the core semiconductor business expanded despite the decline in total reported revenue caused by the difficult license-revenue comparison.

Sequans said more than 40 design-win projects are now in mass production. Those projects represent 55% of the company’s stated $300 million three-year product revenue pipeline. The company also secured its first drone customer during the quarter, extending its RF transceiver technology into drone and defense applications.

Management reported a backlog extending into 2027 and said multiple licensing discussions were active. These indicators support potential future revenue, but the pipeline and backlog are not the same as revenue already recognized.

Product mix and Bitcoin accounting shaped the profit picture

Combined research and development, sales and marketing, and general and administrative expenses were approximately $11.9 million, down from $13.7 million a year earlier. However, this cost reduction did not fully offset the $2.8 million decline in gross profit.

Before digital-asset impairment and sale activity, the operating loss was approximately $9.5 million, compared with $8.5 million in Q2 2025. The reported Q2 2026 operating loss was instead reduced to $7.2 million by a $5.3 million realized gain on Bitcoin sales, partly offset by a $3.0 million impairment charge.

Net loss still widened because the quarter included $2.4 million of net interest expense, compared with modest net interest income in Q2 2025. That interest expense was primarily non-cash and related to IFRS accounting for the convertible debt issued in July 2025.

Sequans reported a non-IFRS net loss of $4.0 million after excluding several non-cash items, including digital-asset impairment, stock compensation, derivative fair-value changes and non-cash financing costs. The disclosed reconciliation does not remove the $5.3 million realized Bitcoin gain, meaning the non-IFRS result still reflects digital-asset sale activity.

Cash increased through asset sales, not operating cash generation

Cash and equivalents rose to $21.0 million from $10.6 million at March 31. The increase was supported by the sale of digital assets rather than positive operating cash flow: operating activities used $23.0 million during the first six months of 2026, compared with $12.3 million in the prior-year period.

Sequans generated $130.1 million from digital-asset sales during the first half and used $94.5 million to repay convertible debt. No convertible debt or related embedded derivative remained on the June 30 balance sheet following the full redemption in May.

Bitcoin holdings fell to 314 coins with a quarter-end market value of $18.4 million, all unrestricted and available for sale. At March 31, the company held 1,514 Bitcoin valued at $103.2 million, including 1,217 coins pledged as collateral. The smaller position reduces the scale of exposure, although Bitcoin valuation changes can still affect reported results.

Risks investors should monitor

• Lower-margin revenue mix: Product sales are expanding, but the shift away from license and services revenue reduced gross margin. Future profitability will depend on whether product growth can generate enough gross profit to cover operating expenses.
• Pipeline conversion: The design-win pipeline and backlog are not recognized revenue. Delays or weaker conversion could limit the expected scaling of the semiconductor business.
• Operating cash consumption: First-half operating cash outflow increased to $23.0 million. The higher cash balance was supported by Bitcoin sales, making progress toward operating cash-flow break-even an important measure.
• Remaining Bitcoin exposure: Sequans still held $18.4 million of Bitcoin at quarter-end. Price changes and additional sales can create impairment charges or realized gains that complicate comparisons of operating performance.
• Preliminary accounting: The results remain preliminary and are subject to change as the company finalizes its re-evaluation of the convertible debt.

Summary

Sequans’ core product business expanded rapidly in Q2 2026, but the absence of the prior-year Qualcomm licensing contribution caused reported revenue and gross profit to decline. Cost reductions helped, while Bitcoin sale gains improved the reported operating result and funded the elimination of convertible debt. The main issues ahead are product pipeline conversion, margin performance under a product-heavy sales mix and progress in reducing operating cash burn.