Sign in

You're signed outSign in or to get full access.

AA

Airship AI Holdings, Inc. (AISP)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue fell sharply on federal contracting delays and a government shutdown, while net income was positive due to large non‑cash fair value gains; revenue $1.18M, gross margin 51%, operating loss $(2.87)M, net income $6.41M; diluted EPS $0.15 .
  • Mix skewed to third‑party hardware pressured margins vs Q2 but improved vs Q1; management emphasized Outpost AI as a core component in recent awards and turnkey solutions strategy .
  • Backlog rose to ~$11M and validated pipeline expanded to ~$166M, with additional macro tailwinds anticipated from new border security funding; cash was $5.76M at quarter‑end, plus ~$9.7M gross proceeds from post‑quarter warrant exercises .
  • Consensus estimates were unavailable via S&P Global for Q3 2025; comparisons to Wall Street expectations could not be made (values retrieved from S&P Global).

What Went Well and What Went Wrong

  • What Went Well

    • Backlog and pipeline strength: ~$11M backlog and ~$166M validated pipeline exiting Q3, supporting awards expected to ship in Q4 2025 and early 2026 .
    • Strategic positioning: Management highlighted Outpost AI as central to recent awards and a shift toward integrated turnkey systems combining edge AI, backend software, and services .
    • Balance sheet flexibility: ~$9.7M gross proceeds from warrant exercises post‑quarter enhanced liquidity for working capital and general corporate needs .

  • What Went Wrong

    • Revenue headwinds: Federal acquisition process changes and shutdown slowed contracting, driving revenue down to $1.18M from $2.15M in Q2 and $2.87M in Q3 2024 .
    • Margin mix: Increased solution sales with more third‑party hardware compressed margins vs Q2; gross margin was 51% (vs higher levels in prior periods) .
    • Operating performance: Operating loss widened to $(2.87)M on increased investments in sales and marketing, despite gross profit of $0.60M .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$2.87 $5.50 $2.15 $1.18
Gross Profit ($USD Millions)$2.15 $2.24 $1.53 $0.60
Gross Margin %~75.1% (2.15/2.87) 40% ~71.4% (1.53/2.15) 51%
Operating Income ($USD Millions)$(1.59) $(1.71) $(2.02) $(2.87)
Net Income ($USD Millions)$6.21 $23.71 $(23.76) $6.41
EPS Basic ($USD)$0.25 $0.75 $(0.75) $0.20
EPS Diluted ($USD)$0.17 $0.61 $(0.75) $0.15

Segment revenue mix

Metric ($USD Millions)Q3 2024Q1 2025Q2 2025Q3 2025
Product$1.73 $4.50 $0.73 $0.22
Post Contract Support (PCS)$1.14 $1.00 $1.38 $0.96
Other Services$0.00 $0.01 $0.04 $0.00

KPIs and balance sheet snapshots

KPI / MetricQ1 2025Q2 2025Q3 2025
Backlog ($USD Millions)$2.0 —~$11.0
Validated Pipeline ($USD Millions)~$135 —~$166
Cash & Cash Equivalents ($USD Millions)$8.81 $6.31 $5.76
Subsequent Warrant Exercise Proceeds ($USD Millions)——~$9.73 gross (Oct 8, 2025)

Notes:

  • Q3 2025 net income was primarily driven by non‑cash gains from changes in fair value of earnout and warrant liabilities (earnout +$3.89M; warrant +$5.33M) .
  • PCS contributed the majority of Q3 2025 revenue (~$0.96M of $1.18M total), reflecting higher recurring/support mix amid lower product shipments .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue Growth YoYFY 2025“30% revenue growth and positive cash flow” (Q1 outlook) No quantitative revenue guidance reiterated in Q3; qualitative outlook provided Not updated
Operating Cash FlowFY 2025“Positive cash flow” target (Q1) “Return to positive operational cash flow” emphasized (Q3 commentary) Maintained qualitative objective
Gross Margin DirectionFY 2025“Improving gross profit margins” (Q1) “Drive continued margin expansion” (Q3 outlook) Maintained
OpEx, OI&E, Tax Rate, DividendsFY 2025Not guidedNot guidedNo guidance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025 and Q2 2025)Current Period (Q3 2025)Trend
AI/Technology InitiativesQ1: “AI Factory” and plan to launch advanced computer vision analytics and a Generative AI app in 2025 ; Q2: focus on edge AI models and Outpost AI/Acropolis offerings Outpost AI cited as central to recent awards and turnkey solutions strategy Continued build‑out; productization of edge AI
Supply ChainQ1: proactive inventory management; limited tariff impact on core software; hardware risk managed ; Q2: geopolitical constraints risk (Taiwan) flagged Outlook includes improving sourcing, supply chain management, and production efficiencies Risk acknowledged; operational improvements underway
Tariffs/MacroQ1: monitoring tariffs; minimal impact on core ; Q2: potential tariffs could pressure costs/margins New supplemental funding (“Big Beautiful Bill”) cited: ~$70B for CBP over 4 years, including $6.2B for border security tech; ~$46.6B for barriers/cameras/sensors; ~$5B for facility upgrades Macro tailwinds for federal demand
Product/Commercial TractionQ1: expanding into commercial via partner model; customer events focused on southern border use cases Ongoing pilots with enterprise customers; success with flagship accounts; partner‑driven GTM showing progress Strengthening partner ecosystem and pilots
Regulatory/Legal/TaxQ2/Q3: effective tax rate 0% due to valuation allowance ; OBBB Act enacted; no material impact given valuation allowance Maintained stance; no change to tax outlook Stable
R&D ExecutionQ2: R&D investments ongoing ; Q3: added development/QA/ops resources to support anticipated awards Capacity additions aligned to pipeline fulfillment Scaling for delivery

Management Commentary

  • “The third quarter of 2025 presented a number of challenges as recent changes in the federal acquisition process under the new administration, along with the government shutdown, slowed the pace of planned contracting activity, particularly within the Department of Homeland Security.” — Paul Allen, President .
  • “With funding from the Big Beautiful Bill expected to flow down to agencies and components… the legislation includes more than $70 billion… including $6.2 billion earmarked for border security technology… $46.6 billion for physical barriers, cameras, sensors… and $5 billion for CBP facility upgrades.” — Paul Allen .
  • “Our recent awards and our expanding pipeline feature our edge AI platform, Outpost AI, as a central component of proposed and deployed solutions… positioning us to pursue broader, higher‑value opportunities.” — Paul Allen .
  • “Looking ahead, we remain disciplined… including a return to positive operational cash flow… encouraged by the momentum in our pipeline and the progress toward several large opportunities expected to advance this quarter.” — Paul Allen .

Q&A Highlights

  • No Q3 2025 earnings call transcript was available in our document corpus or via targeted searches; Q&A highlights cannot be provided. This recap relies on the Q3 2025 press release and the Q3 2025 10‑Q for commentary and disclosures .

Estimates Context

  • S&P Global consensus estimates for Q3 2025 (Revenue, EPS) were unavailable; therefore, comparisons to Street expectations could not be made (values retrieved from S&P Global).
  • Any observed upside in net income vs sequential period was driven by non‑cash fair value gains (earnout and warrant liabilities), not by operating outperformance .

Key Takeaways for Investors

  • Revenue softness in Q3 reflects temporary federal procurement dislocations and the shutdown; near‑term visibility may improve as agencies enter a new fiscal year with supplemental border funding .
  • Profitability optics are distorted by non‑cash fair value gains; operating loss and cash burn persisted (net cash used in operating activities), underscoring the importance of backlog conversion and product mix shift toward software/subscription .
  • Backlog ($11M) and a sizable pipeline ($166M) provide medium‑term opportunity set; execution against turnkey Outpost AI solutions and partner‑driven GTM is a core narrative to watch .
  • Liquidity improved post‑quarter via ~$9.7M warrant proceeds, offering runway to invest in sales, development, and fulfillment capacity ahead of anticipated awards .
  • Margin path depends on mix; management aims for margin expansion via sourcing and process efficiencies, but elevated third‑party hardware content can cap margin until software/cloud delivery scales .
  • With no quantitative FY25 revenue guidance reaffirmed in Q3, monitor subsequent disclosures for awards timing, PCS growth, and conversion of pipeline to shipments/invoicing .
  • Risk factors include tariff/supply‑chain dynamics (Taiwan sourcing) and continued dependence on large federal customers, which can drive revenue concentration and timing volatility .