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AI

Artificial Intelligence Technology Solutions Inc. (AITX)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 FY2026 revenue rose 41% year over year to $1.89M and 2% quarter over quarter, with gross profit up 34% YoY; the company reported net income of $0.76M driven by a $4.37M gain on debt settlement, not core operations .
  • Management confirmed profitability for the quarter, citing debt extinguishment and cost controls, while reiterating pipeline strength in RAD hardware and SARA software solutions .
  • The operational positive cash flow target was pushed out: previous expectation “during or shortly after Q3 FY2026” (Sep–Nov 2025) now updated to April/May 2026, reflecting recurring revenue trends and SARA monetization timing .
  • Total debt and accrued interest fell ~$7.3M in the first six months of FY2026, with estimated annual interest savings of ~$0.64M; however, operating cash flow remained negative and the 10-Q flagged going concern risk—key watch items despite balance sheet progress .

What Went Well and What Went Wrong

What Went Well

  • Revenue mix and pricing improved: device rentals drove most growth; Q2 device rental revenue hit $1.70M vs $1.07M last year, supporting a higher gross profit trajectory .
  • Debt settlement catalyzed profitability: $4.37M gain on debt settlement enabled quarterly net income of $0.76M; management emphasized “decisive debt restructuring and disciplined cost controls” .
  • Strategic pipeline and product updates: management highlighted a robust Fortune 500 pipeline and anticipated second-half order intake for RAD hardware and SARA software; “we anticipate a strong second half…order intake of both RAD hardware and SARA software solutions” .

What Went Wrong

  • Profit quality: profitability was non-operating; loss from operations remained ($2.31M) and interest expense stayed high at $1.30M—core operations still negative .
  • Cash flow slippage: the operational positive cash flow timeline moved from Q3 FY2026 to April/May 2026; operating cash flow was negative $5.40M in the first half, reflecting cash burn and working capital needs .
  • Going concern and leverage: management disclosed substantial doubt about going concern and heavy reliance on debt/equity financing, prompting continued dilution and financing sensitivity .

Financial Results

MetricQ3 FY2025Q1 FY2026Q2 FY2026
Revenue ($USD)$1,750,968 $1,854,837 $1,888,749
Net Income ($USD)$(3,703,974) $(4,594,018) $763,064
Diluted EPS ($USD)$0.00 $0.00 $0.00
Gross Profit ($USD)$1,173,830 $1,233,501 $1,344,865
Gross Margin (%)67.0% 66.5% 71.2%
Total Operating Expenses ($USD)$3,476,728 $4,412,170 $3,654,024
Loss from Operations ($USD)$(2,302,898) $(3,178,669) $(2,309,159)
Interest Expense ($USD)$(1,401,076) $(1,415,349) $(1,297,962)

Segment revenue breakdown:

SegmentQ3 FY2025Q1 FY2026Q2 FY2026
Device Rental Activities ($USD)$1,429,112 $1,627,286 $1,695,471
Direct Sales of Goods & Services ($USD)$321,856 $227,551 $193,278
Total Revenue ($USD)$1,750,968 $1,854,837 $1,888,749

Selected KPIs and capital structure indicators:

KPIQ3 FY2025Q1 FY2026Q2 FY2026
Weighted Avg Shares – Diluted (shares)12,161,286,427 15,517,671,159 18,469,442,118
Inventory Turnover (YTD, times)——0.88x (six months)
Net Cash from Operating Activities ($USD)$(8,894,284) (nine months) $(3,321,185) (three months) $(5,400,554) (six months)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operational Positive Cash FlowTimelineDuring or shortly after Q3 FY2026 (Sep–Nov 2025) April or May 2026 Pushed out
FY RevenueFY2026$12M–$18M target (Apr 3, 2025) “Possibly break the eight-figure revenue milestone” (implied ≥$10M) Maintained directionally (range not formally updated)
Debt Reduction Plan12–18 months—Target reduction of substantially all debt within 12–18 months New explicit timeline

Earnings Call Themes & Trends

No earnings call transcript found for Q2 FY2026; themes synthesized from 10-Qs and 8-K press releases.

TopicPrevious Mentions (Q3 FY2025)Previous Mentions (Q1 FY2026)Current Period (Q2 FY2026)Trend
AI/Technology initiatives (SARA, RAD)Gen4 rollout; strong rental mix SARA central to recurring revenue strategy SARA revenue streams to be turned on and contribute in H1 CY2026 Strengthening adoption pipeline
Revenue mix/device rentalsRentals drove 243% YoY growth Rentals up 66% YoY Rentals +59% YoY; mix favorable Sustained rental-led growth
Operational cash flow outlookNot yet positive; cash burn Target near Q3 FY2026 Updated to April/May 2026 Delayed timeline
Debt/leverage & interestHeavy debt; interest burden Leverage still high; equity issuance Debt reduced via settlement; annual interest savings ~$640k Improving structurally
R&D executionElevated R&D R&D +34% YoY R&D +36% YoY Investment maintained
Legal/regulatoryPredatory lending claim—later settled $65k settlement accrued SOC 2 Type 2 validation reiterated Compliance credibility up; legal resolved

Management Commentary

  • “We’re proud to present these results… with the addition of ROAMEO and SARA, we’re looking to finish with positive operational cash flow and possibly break the eight-figure revenue milestone.” — Steve Reinharz, CEO/CTO .
  • “We are very pleased to confirm profitability for the quarter. The decisive debt restructuring and disciplined cost controls we implemented delivered the results we anticipated.” — Steve Reinharz, CEO/CTO .
  • “This debt settlement is a crucial step in strengthening our financial foundation… our management team remains laser‑focused on generating consistent, long‑term operational profitability.” — Steve Reinharz, CEO/CTO .

Q&A Highlights

  • No Q2 FY2026 earnings call transcript available; no Q&A published in company documents [earnings-call-transcript: none].

Estimates Context

  • Wall Street consensus (S&P Global) for EPS and revenue was unavailable for AITX; no consensus estimates were found for Q2 FY2026. As a result, no beat/miss analysis versus Street can be provided [GetEstimates returned none].

Key Takeaways for Investors

  • Profitability was driven by a one-time $4.37M debt settlement gain; core operations remain loss-making, with loss from operations at $(2.31)M and interest expense at $(1.30)M—focus on the path to sustainable operating profitability .
  • Revenue growth durability: rentals continue to drive mix and margins; Q2 gross margin improved to ~71%, supported by higher-value deployments and cost efficiencies .
  • Cash flow risk: operational cash flow positivity shifted to April/May 2026; operating cash flow YTD remains negative—monitor burn, working capital, and conversion of pipeline to RMR .
  • Balance sheet progress vs financing needs: $7.3M debt and interest reduction and ~$0.64M annual interest savings are constructive, but going concern language and ongoing equity issuance/dilution require caution in position sizing .
  • Strategic catalysts: SARA monetization and RAD deployments into logistics/healthcare/critical infrastructure could support RMR scaling in 2026—watch dealer network throughput and deployment cadence .
  • Guidance assessment: revenue commentary (“eight-figure milestone”) aligns with prior FY2026 range; primary change is the pushout of the operational cash flow timeline—update models accordingly .
  • Trading lens: near-term moves likely tied to contract wins, deployment updates, and financing terms; medium-term thesis depends on converting pipeline to recurring, achieving op cash profitability, and managing dilution/leverage .

Sources

  • Q2 FY2026 10-Q and press releases:
  • Prior quarters: Q1 FY2026 10-Q ; Q3 FY2025 10-Q
  • Guidance/prior-year context: FY2025 results and FY2026 revenue target ; updated operational cash flow timeline .