AudioEye Q2 2026 Earnings: Adjusted EBITDA Reaches a Record $3.0 Million

AudioEye (Nasdaq: AEYE) reported fiscal Q2 2026 revenue of $10.7 million, up 9% from $9.9 million a year earlier, while GAAP diluted EPS was $(0.07) versus $(0.00). Adjusted EBITDA reached a record $3.0 million and ARR increased 11% to $42.3 million, but higher litigation expense and the absence of a prior-year valuation gain contributed to a $0.9 million GAAP net loss.

Core Earnings Data

The quarter ended June 30, 2026 marked AudioEye’s 42nd consecutive period of sequential revenue growth. Cost of revenue increased only slightly to $2.3 million as revenue expanded, lifting GAAP gross margin by two percentage points to 79%.

Operating expenses rose 23% to $9.0 million. The comparison was affected by a $1.4 million contingent-consideration revaluation gain recorded in the prior-year quarter, while current-period general and administrative expenses increased primarily because of higher litigation costs.

ARR and Customer Growth

Annual recurring revenue reached $42.3 million, up from $41.2 million at the end of March 2026 and 11% above its June 2025 level. ARR represents annualized recurring fees from active Enterprise and Partner and Marketplace customers and excludes non-recurring services.

AudioEye had approximately 129,000 customers at quarter-end, an increase of 9,000 from a year earlier. The company attributed the expansion to its Partner and Marketplace channel, although it did not provide revenue or profitability figures by channel.

Adjusted Profitability Rose While GAAP Earnings Remained Negative

The divergence between adjusted EBITDA and GAAP earnings is central to interpreting the quarter. AudioEye reconciled its $0.9 million GAAP net loss to nearly $3.0 million of adjusted EBITDA mainly by excluding $1.1 million of stock-based compensation, $1.1 million of litigation expense, $1.0 million of depreciation and amortization, and $0.3 million of severance expense, among other items.

Litigation expense increased from $0.6 million to $1.1 million and was the principal reason cited for higher general and administrative costs. Meanwhile, the prior-year GAAP result benefited from a $1.4 million contingent-consideration gain that did not recur. AudioEye said that after removing this prior-year benefit, the underlying net-loss comparison improved because of higher gross profit.

Balance Sheet

Cash and cash equivalents were $8.7 million at June 30, up approximately $0.1 million from March 31 and from $5.3 million at the end of 2025. Current and long-term term-loan balances totaled approximately $16.4 million, compared with approximately $13.0 million at December 31, 2025, meaning the first-half increase in cash occurred alongside higher borrowings.

Earnings Guidance

AudioEye raised its full-year adjusted EBITDA guidance to at least $12.7 million, which would represent 40% year-over-year growth. The release did not provide the previous guidance figure, so the size of the increase cannot be quantified.

Management also expects to exceed a $15 million annualized adjusted EBITDA run rate by year-end and generate meaningful free cash flow during the second half of 2026. The company is evaluating potential uses of excess cash, including share repurchases and dividends, but did not announce an authorization, amount, or timetable.

Risks Investors Need to Watch

• Litigation costs: Litigation expense increased to $1.1 million and pressured general and administrative expenses. Continued elevated legal spending could weigh on GAAP earnings and cash generation.
• GAAP and non-GAAP divergence: AudioEye remained unprofitable under GAAP, while adjusted EBITDA excluded several substantial expenses. Investors need to track whether adjusted profitability increasingly translates into GAAP earnings and free cash flow.
• Higher debt: Term-loan balances rose to approximately $16.4 million by quarter-end, exceeding the company’s $8.7 million cash balance.
• ARR conversion risk: Some contracts included in ARR can be terminated before their expected terms, so reported ARR may not fully convert into future revenue.
• Dependence on second-half cash generation: Potential capital returns depend on free cash flow scaling as management expects; no specific buyback or dividend commitment has been made.

Summary

AudioEye’s Q2 2026 results combined continued revenue, ARR, customer, and adjusted EBITDA growth with an ongoing GAAP loss. Gross-margin expansion supported better underlying profitability, but litigation costs and the prior-year valuation gain complicated the reported comparison. The next points to monitor are execution against the raised adjusted EBITDA outlook, conversion of recurring revenue into cash flow, and progress toward GAAP profitability.