Fuel Tech Q2 2026 Earnings: Revenue Rises 17% as Margins Contract

Fuel Tech (NASDAQ: FTEK) reported Q2 2026 revenue of $6.5 million, up 17% from $5.6 million, while diluted loss per share widened to $0.04 from $0.02 a year earlier. Sales increased in both operating segments, but lower gross margins, higher operating expenses, and reduced interest income contributed to a wider net loss. The quarter ended June 30, 2026.

Core Earnings Data

Revenue growth did not translate into comparable profit growth. Gross profit increased by approximately 6%, but gross margin fell five percentage points as both APC and FUEL CHEM faced segment-specific cost pressure.

Operating expenses also increased. SG&A rose to $3.6 million, although it declined as a percentage of revenue to 55.4% from 60.2%, while research and development expense increased to $646,000 from $490,000.

Interest income declined to $266,000 from $537,000. Fuel Tech attributed most of the decrease to a one-time $257,000 Employee Retention Credit collection included in the prior-year quarter.

Business and Segment Performance

Both reporting segments generated higher revenue, but their margin trends differed in degree. APC’s higher sales were accompanied by lower gross profit because of project mix, while FUEL CHEM produced higher gross profit despite added demonstration, freight, and maintenance labor costs.

APC revenue benefited from the timing of work on existing contracts and a larger backlog. Its backlog reached $14.3 million at June 30, 2026, up from $7.0 million at the end of 2025. The quarter-end amount included $10 million of recently awarded contracts associated primarily with a Midwest utility grid enhancement project.

FUEL CHEM’s growth came mainly from increased operational dispatch at legacy customer accounts. Geographically, U.S. revenue rose approximately 33% to $5.9 million, while foreign revenue fell approximately 48% to $584,000.

Profitability, Cash Flow, and Balance Sheet

Cash flow data were provided for the first six months rather than Q2 alone. Six-month operating cash flow was negative $1.7 million, compared with positive $1.5 million in the same period of 2025. The wider year-to-date net loss and changes in operating assets and liabilities contributed to the reversal, partly offset by a $1.4 million reduction in accounts receivable.

At June 30, Fuel Tech held $7.6 million in cash and cash equivalents, $12.0 million in short-term investments, and $10.0 million in long-term investments, for total cash and investments of approximately $29.6 million. That was down from approximately $31.9 million at December 31, 2025. The company reported no debt and stockholders’ equity of $37.4 million, or $1.20 per share.

Revenue Growth Did Not Offset Margin and Expense Pressure

Fuel Tech generated approximately $927,000 of additional quarterly revenue, but gross profit increased by only about $146,000 because of the five-point contraction in consolidated gross margin. Meanwhile, SG&A increased by about $247,000 and R&D expense rose by approximately $156,000, causing the operating loss to widen by $257,000.

Lower interest income added another layer of pressure below the operating line. As a result, the net loss increased by about $541,000 even though both operating segments reported double-digit revenue growth. Future improvement therefore depends not only on converting backlog into revenue, but also on project mix and control of demonstration, freight, maintenance, and corporate costs.

Management’s View

Management said it was preparing for what has historically been a stronger third quarter for FUEL CHEM and continued to expect the segment’s full-year 2026 revenue to approximate its 2025 result. For APC, management cited an effective backlog of approximately $17 million after including $3 million of recently announced contract awards, compared with the reported quarter-end backlog of $14.3 million.

The company has also begun engineering work on a large contract for a publicly owned Midwest utility. Management described business development activity across FUEL CHEM, APC, and the DGI water treatment division as encouraging.

Ramesh Nuggihalli is scheduled to succeed Vincent J. Arnone as president and CEO effective August 10, 2026. Arnone will remain on Fuel Tech’s board of directors.

Recent Insider Transactions

The supplied insider data contain a discrepancy: the six-month summary reports no purchases or sales, but the detailed list includes a March 6, 2026 purchase. The table below presents the dated transaction records without interpreting insider intent.

Risks Investors Should Monitor

• Continued margin pressure: APC’s project mix and FUEL CHEM’s demonstration, freight, and maintenance labor costs reduced both segment margins. Persistent pressure could limit the earnings benefit from higher revenue.
• Backlog conversion and project timing: APC’s growth depends partly on executing its larger backlog. The timing and mix of projects can affect quarterly revenue and gross margin.
• Ongoing losses and cash use: Fuel Tech remained unprofitable, and six-month operating cash flow turned negative. Continued cash consumption would reduce the balance-sheet cushion provided by its cash and investments.
• Uneven geographic demand: U.S. revenue increased substantially, but foreign revenue nearly halved, leaving consolidated growth more dependent on domestic activity.
• FUEL CHEM dispatch levels: The segment’s quarterly growth was driven by increased operational dispatch at legacy accounts. Changes in customer dispatch could affect revenue consistency.

Summary

Fuel Tech delivered 17% revenue growth in Q2 2026 as both APC and FUEL CHEM expanded, and APC entered the second half with a substantially larger backlog. However, lower segment margins, higher operating expenses, and reduced interest income widened the company’s net and adjusted EBITDA losses. Investors’ next focus will be whether backlog conversion and FUEL CHEM activity can support growth without further margin deterioration or sustained operating cash outflows.