Executive Summary

Soft quarter with mixed results: revenue $93.9M (-7% YoY) modestly above consensus, but EPS of -$0.18 missed; gross margin fell to 28.3% on weak product mix, tariffs, and a one-time obsolescence charge . Versus estimates: Revenue beat by ~$2.6M while EPS missed by ~$0.13; EBITDA also missed consensus as mix/tariffs weighed (details below)*.
Services remained resilient and is the strategic focus: service revenue grew 7% YoY to $56.8M with contract revenue +10% YoY; management emphasized pricing and cost-to-serve actions to expand service margins over time .
Orders/backlog softened near term: gross orders $39.6M (book-to-bill 1.1) and backlog $395.7M, both below recent run-rate, reflecting delays in EMEA/China; management expects more shipments/order conversion in 2H (40%/60% revenue split) and maintained FY26 guidance (Revenue $471–$485M; Adj. EBITDA $31–$35M) .
New CEO set a transformation agenda: targets high single-digit adjusted EBITDA margin run-rate within 12 months and double-digit medium-term; Q2 product margin headwinds likely persist before improving in 2H as mix skews to developed markets .

What Went Well and What Went Wrong

What Went Well

Service growth and pricing gains: service revenue +7% YoY to $56.8M with contract revenue +10% YoY; pricing actions “are taking effect” .
Product launch momentum: introduced Accuray Stellar (premium helical solution) at ASTRO with “overwhelmingly positive” reception; strong inbound interest from existing and new customers .
Clear transformation roadmap and margin ambition: CEO La Neve aims for high single-digit adj. EBITDA margin run-rate within 12 months and double-digit over time; reaffirmed FY26 guidance despite a slow start .

Selected quote:

“In the near term… we expect to reach a high single-digit adjusted EBITDA margin… within 12 months. [We] will enable us to expand… to double digits over the medium to long term.” — Steve La Neve, CEO

What Went Wrong

Product shortfall and gross margin compression: product revenue $37.2M (-23% YoY) and product GM 20.3% vs. 32.9% prior year due to geography/product mix (-7.8 pts), tariffs (-3 pts; ~$1.1M), and a one-time obsolescence charge (-1.7 pts; ~$0.7M) .
Orders and backlog below expectations: gross orders ~$40M were “lower than expectation” due to timing in China/the Americas; backlog fell to ~$395.7M (≈16% below prior-year Q1) .
Profitability under pressure: adjusted EBITDA loss of $4.1M vs. $3.1M profit a year ago, reflecting weaker product mix and tariff costs; restructuring/post-financing costs raised OpEx (though guidance maintained) .

Financial Results

Core P&L vs prior quarters (oldest → newest)

Metric	Q3 2025	Q4 2025	Q1 2026
Revenue ($M)	113.243	127.543	93.942
Gross Margin %	27.9%	30.6%	28.3%
Adjusted EBITDA ($M)	6.048	9.448	(4.110)
Net Income ($M)	(1.297)	1.123	(21.678)
Diluted EPS ($)	(0.01)	0.01	(0.18)

Notes: Q1 2026 YoY: revenue -7%, product -23%, service +7% per the release .

Revenue mix

Metric	Q3 2025	Q4 2025	Q1 2026
Product Revenue ($M)	57.320	70.702	37.161
Service Revenue ($M)	55.923	56.841	56.781

KPIs and balance sheet items

KPI	Q3 2025	Q4 2025	Q1 2026
Gross Orders ($M)	71.167	84.741	39.570
Book-to-Bill (x)	1.2	1.2	1.1
Backlog ($M)	452.392	426.972	395.726
Cash + ST Restricted ($M)	78.8	58.0	63.9

Additional Q1 2026 margin context: product GM 20.3% (vs. 32.9% prior-year) and service GM 33.5% (down 1.4 pts YoY) per CFO; net JV margin deferral ~$1.1M implies pro forma GM 29.4% .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Net Revenue	FY 2026	$471–$485M	$471–$485M	Maintained
Adjusted EBITDA	FY 2026	$31–$35M	$31–$35M	Maintained
Revenue Phasing	FY 2026 (H1/H2)	~45% / 55% (prior commentary)	~40% / 60% (updated)	Lowered H1 weight

Color: Management expects Q2 product margin headwinds to persist, improving in 2H as mix shifts to developed markets; potential tariff mitigation via duty drawback and exploring foreign trade zone status remains ongoing .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2025, Q4 2025)	Current Period (Q1 2026)	Trend
Tariffs/Macro	Q3: Estimated $10–$15M Q4 product revenue headwind; mitigation via duty drawback, FTZ, dual-sourcing . Q4: ~$4M cash tariffs with ~50% mitigated; FTZ targeted for 2H FY26 (assumed in guidance) .	Tariffs added ~$1.1M cost in Q1 impacting product GM by ~3 pts; duty drawback program “very active”; FTZ under evaluation .	Headwind persists near term; mitigation ongoing.
Product Performance/Launches	Q3: Strong product revenue +16% YoY . Q4: Product revenue $70.7M; China/EMEA volatility .	Product revenue $37.2M (-23% YoY) on EMEA/China softness; launched “Stellar” at ASTRO with strong reception .	Near-term softness; pipeline supported by new launch.
Service Growth & Margin	Q3: Service +9% YoY; strategy to expand margins . Q4: Service GM up sharply YoY; pricing, parts efficiency .	Service +7% YoY; contract +10%; aiming to reduce cost-to-serve and expand margin .	Structural positive; ongoing focus.
China JV/Deferred Margin	Q3: Higher JV deferrals pressured product margin . Q4: $1.7M higher deferrals; expected release in FY26 .	Net JV margin deferral ~$1.1M; GM ex-JV deferral 29.4% .	Timing issue; releases expected with shipments.
Regional Trends	Q3: Strength in APAC/Non-China APAC; U.S. improving; EMEA mixed . Q4: APAC +22%, Americas +24%; EMEA down on ME tensions .	EMEA/China slower; APAC continues to grow; U.S. “feel okay” .	Mixed; 2H skew expected.
R&D/AI & Operations	Q4: “Accuray Care” initiative leveraging data/AI, predictive analytics to reduce downtime/parts .	Continued emphasis on adaptive radiotherapy (Stellar), collaboration with UW on online adaptive .	Execution ongoing; ecosystem build-out.
Transformation/Margins	Q4: Focus on process efficiency, pricing, GenAI tools .	New CEO/Board sponsor; high single-digit adj. EBITDA run-rate in 12 months; double-digit longer term .	Stepped-up transformation with explicit targets.

Management Commentary

Strategy & margin ambition: “We expect to reach a high single-digit adjusted EBITDA margin… within 12 months… [and] expand… to double digits over the medium to long term” — Steve La Neve, CEO .
Product/market momentum: “Stellar represents our commitment to adaptive radiotherapy… reception at ASTRO was overwhelmingly positive… strong interest from existing and new customers” — Ali Pervaiz, CFO .
Mix/tariff impact on margins: Product GM fell to 20.3%; mix (-7.8 pts), tariffs (~$1.1M; -3 pts), and obsolescence (-1.7 pts) were key drivers — Ali Pervaiz .
Phasing: “We do expect first half revenue to be closer to about 40%… and second half… about 60%” — Ali Pervaiz .

Q&A Highlights

Capital equipment demand: Regional variability; EMEA/China slower; U.S. stable; APAC growing .
Orders and backlog quality: Gross orders ~~$40M below expectations on timing; cancellation of one unit (~~$2M) to maintain backlog quality; age-outs not out of norm .
Tariff mitigation: Duty drawback active; FTZ under evaluation; situation remains fluid .
Phasing and margins: 40%/60% revenue split H1/H2; product gross margin pressure to persist in Q2 given emerging market mix, improving in 2H as mix shifts to developed markets; service growth/margin expansion to continue .

Estimates Context

Metric	Q1 2026 Consensus	Q1 2026 Actual	Result
Revenue ($M)	91.35*	93.94	Beat
EPS (Primary) ($)	-0.05*	-0.18	Miss
EBITDA ($M)	1.65*	(6.84)*	Miss

Company-reported adjusted EBITDA was -$4.11M (non-GAAP) .
Management reaffirmed FY26 guidance ($471–$485M revenue; $31–$35M adjusted EBITDA) despite a slower start, implying a 2H-weighted year .

Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

Services is the ballast: Durable 7% YoY growth with pricing power and cost actions; strategic pivot toward service should support margin resilience through macro/tariff volatility .
Product headwinds near term; 2H setup improving: EMEA/China softness and emerging market mix depress Q2, but management expects developed market mix and backlog execution to improve margins/revenue in 2H (40/60 split) .
Tariff risk monitored with mitigations: Duty drawback and potential FTZ designation are tangible levers; near-term P&L still absorbs some tariff costs .
Transformation catalyst under new CEO: Explicit adj. EBITDA margin targets (high single-digit run-rate in 12 months) and double-digit longer-term potential could be a medium-term re-rating catalyst if execution follows .
Orders/backlog watch: Q1 orders/backlog dipped; tracking gross orders trajectory and China/EMEA timing will be key for confidence in 2H ramp (book-to-bill 1.1; backlog $395.7M) .
Estimate resets: EPS/EBITDA miss vs consensus likely drives near-term pressure, but reaffirmed FY26 guide and 2H skew can anchor models; expect consensus to recalibrate phasing/GM assumptions*.
Tactical: Near-term, sentiment hinges on Q2 margin/mix trajectory and tariff headlines; medium-term, proof points on Stellar uptake, service margin expansion, and transformation milestones are likely stock catalysts .

Additional Detail

Q1 2026 headline results: revenue $93.9M (-7% YoY), product $37.2M (-23% YoY), service $56.8M (+7% YoY), GM 28.3%, adj. EBITDA $(4.1)M, net loss $(21.7)M, EPS $(0.18), gross orders $39.6M, book-to-bill 1.1, backlog $395.7M .
Margin drivers: product GM 20.3% vs. 32.9% PY; mix (-7.8 pts), tariffs (~$1.1M; -3 pts), obsolescence (-1.7 pts) .
Cash: cash/cash equivalents/ST restricted $63.9M, up $5.9M q/q on primary working capital; inventory $155.5M as manufacturing ramps; A/R $54.4M .
Guidance maintained: FY26 revenue $471–$485M; adj. EBITDA $31–$35M; H1/H2 revenue ~40%/60% as product demand shifts to 2H; Q2 headwinds expected to persist before improving .

Footnotes: Values marked with * are retrieved from S&P Global.

ACCURAY INC (ARAY)·Q1 2026 Earnings Summary