Arq Posts Record Q3 Revenue, Raises 2026 EBITDA Guidance

Arq Inc. (Nasdaq: ARQ) reported record quarterly revenue and a return to GAAP profitability in the third quarter of 2026, driven by higher powder activated carbon volumes and stronger PAC economics. The environmental technology company also increased its full-year Adjusted EBITDA guidance to $19 million to $20 million, from an original target of $17 million to $20 million.

Revenue rose 9% year over year to $38.2 million from $35.1 million, reflecting continued improvement in PAC sales volumes. Net income was $2.5 million, compared with a $0.9 million loss in the third quarter of 2025.

Gross margin reached 39.7%, up about 1,100 basis points from 28.8% a year earlier and the highest level in 11 quarters. Arq attributed the expansion to improved PAC profitability. Research and development expense declined by $1.8 million as the company streamlined its focus.

Adjusted EBITDA, a non-GAAP measure, increased 71% to $8.8 million from $5.2 million. The result marked Arq’s 10th consecutive quarter of positive Adjusted EBITDA.

Cash Position Strengthens

Cash and restricted cash totaled $19.1 million at September 30, up 23% from $15.5 million a year earlier and 57% from the second quarter of 2026. Unrestricted cash increased to $7.8 million from $0.9 million at June 30.

For full-year 2026, Arq expects revenue of $120 million to $125 million and Adjusted EBITDA of $19 million to $20 million, compared with $13.2 million of Adjusted EBITDA in 2025. The outlook assumes PAC volumes of 122 million to 125 million pounds, versus 117 million pounds in 2025, and an average PAC selling price of $0.88 to $0.91 per pound. Non-PAC products and other chemicals are expected to represent 13% to 15% of revenue.

The company is targeting an Adjusted EBITDA exit run rate of $30 million by the end of 2027 from its PAC business. Arq said expected 2027 growth drivers include operational efficiencies, higher throughput and sales expansion, though the target remains subject to execution and market conditions.

PFAS Product Testing Continues

Arq is testing a specialized PAC product designed to remove low levels of per- and polyfluoroalkyl substances, or PFAS, from water. Trials are underway with multiple customers, and patent protection is pending. Testing is expected to continue through the fourth quarter of 2026, with no material contribution anticipated this year and initial sales expected in 2027.

The product is intended primarily for utilities near the U.S. Environmental Protection Agency’s four-parts-per-trillion compliance threshold. Arq said it can be used with existing PAC infrastructure, potentially allowing certain customers to address PFAS without major capital investment. Testing volumes have been sold at prices materially above those of traditional PAC products, according to the presentation.

The company estimates an initial addressable market of approximately 160 million pounds in 2029. However, Arq noted that PAC is not suitable for all PFAS contamination levels. Granular activated carbon, or GAC, remains a potential solution for higher-contamination applications.

Arq’s review of its GAC operations is effectively complete, but the company does not expect GAC production in 2027. Its potential GAC plan would require an estimated $40 million to $60 million of capital and an approximately 18-month financing, construction and commissioning period. The timing and viability of that project depend on financing, facility modifications and successful execution.

Core Markets and Risks

Arq continues to rely on recurring demand from power generation and water utilities while expanding into water purification and other applications. The company said it reduced volumes sold into coal-fired power generation by 36% between 2022 and 2025 as part of its effort to diversify end-market exposure.

Management expects PFAS-related monitoring and compliance requirements to support demand for activated carbon. Initial monitoring and public reporting are scheduled to begin in April 2027, while affected water systems face compliance deadlines between 2029 and 2031 under the regulatory framework described in the presentation.

The outlook remains exposed to regulatory changes or legal challenges, shifts in coal-fired power generation, competition, input-cost inflation, tariffs, facility disruptions and technical or startup difficulties. Arq also identified risks involving debt refinancing, access to additional financing, commercialization of new products and its ability to correct design issues or fund modifications at its GAC facility.