Smith Micro Software (SMSI) Q1 2026 earnings summary

Executive summary

• Signed a contract with a new carrier customer and made significant progress with additional carrier opportunities, positioning for growth in 2026.

• Completed executive succession plan, with new CEO and CFO in place, ensuring a seamless leadership transition.

• Strategic focus shifted to family market and operational efficiency, driving expanded opportunities and improved cost structure.

• Achieved increased focus and improved execution, resulting in higher revenue, gross margin, and lower operating expenses sequentially from Q4 2025.

• The company remains focused on expanding its Family Safety platform with Tier 1 carriers in the US and Europe and has completed development of SafePath 8.

Financial highlights

• Q1 2026 revenue was $4.2 million, down 9% year-over-year but up 6% sequentially from Q4 2025.

• Family safety revenue was $3.4 million, down 10% year-over-year but up 8% sequentially.

• CommSuite revenue reached $800,000, up $66,000 year-over-year and $3,000 sequentially.

• Gross profit for Q1 2026 was $3.3 million, down $53,000 year-over-year but up $275,000 sequentially; gross margin improved to 78.4% from 72.8% year-over-year.

• GAAP net loss for Q1 2026 was $3.9 million ($0.15/share), improved from $5.2 million ($0.28/share) year-over-year; non-GAAP net loss was $1.5 million ($0.06/share), improved from $2.9 million ($0.16/share).

Outlook and guidance

• Q2 2026 revenue expected to reach up to $5.2 million, representing 24% sequential growth, driven by new contracts and project deliveries.

• Gross margin for Q2 2026 projected at 81%-83%, moving toward a long-term goal of 85%.

• Non-GAAP operating expenses expected to decline by 8%-11% in Q2 2026 compared to Q1 2026.

• Management expects cost reduction initiatives to yield $7.2 million in annual savings for 2026.

• Anticipates consistent revenue growth, sustainable non-GAAP profitability, and free cash flow for the remainder of 2026.