NETSOL Technologies NTWK reported a solid second-quarter fiscal 2026, highlighted by double-digit year-over-year revenue growth, improved margins and a return to operating profitability. Strength in implementation activity and steady subscription growth drove the results, while management raised its full-year revenue outlook.
Q2 Revenues Climb 21% on Implementation Strength
Total net revenues for the fiscal second quarter ended Dec. 31, 2025, rose 21.1% to $18.8 million from $15.5 million in the prior-year period.
The rally was primarily fueled by service revenues, which jumped 40.9% to $9.6 million, reflecting active implementations and project timing. Recurring subscription and support revenues increased 5.1% to $9.1 million.
Subscription and support revenues accounted for 48.3% of the total revenues in the quarter compared with 55.6% in the prior year, as services made up a larger portion of the revenue mix.
Margin Expansion Drives Operating Turnaround
Gross profit improved to $9 million, representing 48% of net revenues, from 44.5% in the year-ago quarter. Cost of sales increased to $9.8 million, primarily reflecting higher salaries and travel expenses, but operating leverage more than offset the higher cost base.
Income from operations totaled $1.3 million against a loss of $0.5 million in the prior-year quarter.
On the bottom line, GAAP net income attributable to NETSOL was $0.2 million, or 2 cents per diluted share, against a loss of $1.1 million, or 10 cents per diluted share, a year ago.
Non-GAAP EBITDA improved to $1.7 million from a loss of $0.8 million in the prior-year period.
H1 Performance Reflects Revenue Growth, GAAP Loss
For the six months ended Dec. 31, 2025, total net revenues rose to $33.8 million from $30.1 million in the prior-year period.
Recurring subscription and support revenues increased 7.2% year over year to $18 million, while service revenues climbed 17.9% to $15.6 million.
Gross profit for the first half was $14.9 million, or 44.2% of revenues. Despite improved operating trends, GAAP net loss attributable to NETSOL widened to $2.1 million, or 18 cents per diluted share, from a loss of $1.1 million, or 9 cents per diluted share, in the prior-year period.
Solid Balance Sheet Supports Growth Strategy
NETSOL ended the quarter with cash and cash equivalents of $18.1 million, up from $17.4 million at June 30, 2025. Working capital stood at $26.4 million, while total stockholders’ equity was $35.9 million, or $3.04 per diluted share.
Management highlighted a current ratio of 2.3, underscoring balance sheet strength and liquidity flexibility.
AI Expansion & Contract Wins
Management emphasized implementation activity as a leading indicator of future recurring revenue growth. In the quarter, the company launched “Check,” an AI-enabled credit decisioning engine embedded within its loan origination platform.
NETSOL also secured a $50-million, four-year contract extension with a Tier 1 global auto captive, reinforcing long-term revenue visibility.
Executives stated that AI investments are being deployed both within the product portfolio and across internal operations to enhance efficiency and scalability.
FY26 Outlook Raised
Encouraged by first-half execution and pipeline visibility, management raised its fiscal 2026 revenue guidance to $73 million or better.
Leadership cited multi-year contracts, recurring revenue base expansion and continued investment in its AI-enabled Transcend platform as key drivers supporting the upgraded outlook.
Takeaway
NETSOL’s second-quarter fiscal 2026 reflected a meaningful shift toward operating profitability, supported by strong services growth and an improved gross margin. While subscription growth was more moderate, implementation momentum, AI-driven product expansion and a strengthened revenue outlook suggest management is positioning the company for sustained top-line expansion and margin improvement in the second half of fiscal 2026.
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NetSol Technologies Inc. (NTWK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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