Executive Summary

Q1 FY2026 delivered strong top-line and gross profit momentum: revenue rose 57% YoY to $1.85M and gross profit rose 80% YoY to $1.23M, driven by a higher mix of rental deployments; loss from operations widened modestly given higher R&D and G&A as the company scales .
Mix shift continued: device rental revenue grew 66% YoY to $1.63M and represented the vast majority of sales, while direct sales were $0.23M (+11% YoY) .
Profitability path accelerated by a favorable debt settlement expected to yield a ~$4.37M gain in Q2 FY2026; management reaffirmed expectations for Q2 net profitability and operational positive cash flow in or shortly after Q3 (Sep–Nov 2025) . Q2 was subsequently reported at ~$0.76M net profit, primarily due to the settlement gain .
No Wall Street consensus estimates were available from S&P Global for Q1 FY2026 or FY2026, so no beat/miss analysis vs estimates is possible (S&P Global consensus unavailable).

What Went Well and What Went Wrong

What Went Well
- Higher-value rental deployments drove outsized growth: rental revenue +66% YoY to $1.63M; device rental mix supported record gross profit and a gross margin in the high-60s .
- Execution on deleveraging: negotiated settlement to eliminate ~$4.79M of debt, with an expected ~$4.37M gain recognized in Q2; this underpinned management’s confident profitability outlook .
- Management tone confident on scaling: “we are consistently producing improved results… making progress reducing debt… expect to show an overall net profit [in Q2]… laser focused on increased sales [to] achieve… operational positive cash flow” — Steve Reinharz, CEO .
What Went Wrong
- Bottom line still negative in Q1: net loss of $(4.59)M vs $(4.19)M YoY as operating expenses (G&A and R&D) rose with growth initiatives; loss from operations $(3.18)M vs $(2.83)M YoY .
- Cash burn persists: Q1 cash used in operations was $(3.32)M; working capital deficit widened to $(3.75)M; going concern risk reiterated .
- Customer and financing concentration risks remain: three customers = 53% of AR; ~87% of loans payable concentrated with entities controlled by one individual .

Financial Results

Metric	Q1 FY2025 (May 2024)	Q3 FY2025 (Nov 2024)	Q1 FY2026 (May 2025)
Revenue ($)	$1,182,800	$1,750,968	$1,854,837
Gross Profit ($)	$685,334	$1,173,830	$1,233,501
Gross Margin %	58%	67%	67%
Loss from Operations ($)	$(2,833,256)	$(2,309,159)	$(3,178,669)
Net Income (Loss) ($)	$(4,194,359)	$(3,703,974)	$(4,594,018)
Diluted EPS ($)	$0.00	$0.00	$0.00

Segment revenue mix:

Revenue Mix	Q1 FY2025	Q3 FY2025	Q1 FY2026
Device rental activities ($)	$980,536	$1,429,112	$1,627,286
Direct sales of goods/services ($)	$202,264	$321,856	$227,551

KPIs and operating items:

KPI / Item	Q1 FY2025	Q3 FY2025	Q1 FY2026
Unit deployments (devices)	—	—	76
Recurring monthly revenue (RMR) adds (next qtr outlook)	—	—	+$120k–$200k expected in Q2
Debt settlement gain (next qtr)	—	—	~$4.37M expected in Q2

Notes:
— “—” indicates not disclosed in the cited filings.
— Q2 FY2026 (post-quarter) was subsequently reported at ~$763k net profit, primarily due to the ~$4.37M debt settlement gain .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net income	Q2 FY2026	Expect net profit (prior disclosures)	Confirmed expectation; later reported ~$0.76M net profit	Raised/Confirmed
Operating cash flow	Q3 FY2026 (Sep–Nov 2025)	Anticipated positive op. cash flow in or shortly after Q3	Reaffirmed timing (Q3 window)	Maintained
RMR additions	Q2 FY2026	—	Add ~$120k–$200k new RMR in Q2	New/Initiated

Earnings Call Themes & Trends

No earnings call transcript was available for Q1 FY2026; themes below reflect filings and press releases.

Topic	Previous Mentions (Q3 FY2025)	Previous Mentions (Q1 FY2026)	Current Period / Next	Trend
Deleveraging and interest savings	Heavy debt load; interest expense pressure	Settlement agreed to eliminate ~$4.79M with ~$4.37M gain in Q2	Q2 recorded ~$7.3M debt/interest reduction in H1 and ~ $640k annual interest savings	Improving
Rental revenue mix and margins	Revenue $1.75M, GM ~67% as rentals scale	Rental rev $1.63M (+66% YoY), GM 67%	Continued focus on higher-value RIO/RADCam/SARA deployments	Positive mix
Profitability trajectory	Net loss $(3.70)M; going concern risks	Reaffirmed Q2 profitability, Q3 op. cash flow target	Q2 net profit ~$0.76M achieved; cash burn improved H1	Positive inflection
Product momentum (RIO, ROAMEO, SARA)	Scaling rentals; adds to margin	RIO 360 highlighted; higher-value deployments	Multi-vertical adoption; dealer network driving order intake	Building
Compliance and enterprise readiness	—	SOC 2 Type 2 completed	SOC 2 Type 2 emphasized for enterprise/govt clients	Stable

Management Commentary

“I’m pleased that we are consistently producing improved results… making progress reducing debt… expect to show an overall net profit [in Q2]… laser focused on increased sales so we can achieve… operational positive cash flow.” — Steve Reinharz, CEO/CTO .
“Our growth in recurring revenue reflects the trust our clients are placing in RAD solutions… We’re closing in on a critical milestone and remain focused on executing our strategy.” — Steve Reinharz, on expected +$120k–$200k Q2 RMR additions .
Outlook reiterated: expansion in healthcare, education, logistics, critical infrastructure; entering calendar 2026 with “strong financial momentum” .

Q&A Highlights

No Q1 FY2026 earnings call transcript was available; therefore, no Q&A themes to report [ListDocuments: no transcripts found].

Estimates Context

S&P Global consensus estimates: Unavailable for AITX for Q1 FY2026 and FY2026 (no estimates returned).
Implication: No beat/miss vs Street analysis is possible; investors should instead track realized momentum (rental mix, gross margin durability) and execution against profitability and cash flow milestones [GetEstimates: empty].

Key Takeaways for Investors

Rental-led growth is intact: device rental revenue +66% YoY and GM ~67% underscore the strategy of scaling higher-value, recurring deployments .
Profitability path is nearer-term tactical, not only operational: the ~$4.37M debt settlement gain catalyzed Q2 profitability; sustaining profitability will require continued revenue scale and OpEx discipline .
Cash flow catalyst: management reaffirmed operational positive cash flow in/after Q3 (Sep–Nov 2025); delivery on this timeline would be a strong stock narrative driver .
Watch concentration/financing dependencies: AR/customer concentration and debt holder concentration (~87% of loans) remain key diligence items .
Sales execution signals: expected Q2 RMR adds ($120k–$200k) and highlighted wins (RIO 360 in healthcare, RADCam, SARA) suggest a strengthening funnel; monitor conversion to deployments and RMR run-rate growth .
Margin durability: high-60s gross margin has repeated across multiple quarters due to mix; sustained rental growth should support margins, while OpEx scale is the swing factor for sustained bottom-line profitability .
Risk management: going concern language persists; capital access and execution vs working capital needs warrant close monitoring .

Sources

Q1 FY2026 10-Q: financial statements, revenue mix, margins, cash flows and risk disclosures .
Q1 FY2026 8-K press release: revenue/gross profit growth, unit deployments, debt settlement and outlook .
Q1-related press release: Q2 RMR adds and op cash flow timing .
Q3 FY2025 10-Q: prior-quarter trends and margins .
Q2 FY2026 8-K/10-Q references: confirmed ~ $0.76M net profit; six-month debt/interest reductions; operating commentary .

Artificial Intelligence Technology Solutions Inc. (AITX)·Q1 2026 Earnings Summary