CSP Inc. reported Q3 2026 revenue of $14.4 million, down 6.5% year-over-year, driven by extended hardware delivery delays and challenges in the AZT Protect business.
CSP Inc. reported Q3 2026 revenue of $14.4 million, down 6.5% from $15.4 million in the same quarter last year, missing the consensus estimate of $15.1 million. The revenue decline was primarily driven by extended hardware vendor delivery times and challenges in ramping its AZT Protect business, impacting its ability to convert order growth into revenue.
Key Takeaways
- Revenue decreased 6.5% year-over-year to $14.4 million, missing consensus estimates of $15.1 million.
- Product revenue fell 3% to $9.9 million from $10.2 million in the prior year, while service revenue dropped 15% to $4.5 million.
- Gross margin improved to 30.1%, up from 28.8% in Q3 2025, aided by better margins on product sales.
- Net loss widened to $846,000, or $0.09 per share, compared to a loss of $264,000, or $0.03 per share, in the year-ago quarter.
- Backlog grew 65% year-over-year, indicating strong order growth despite challenges in delivery and sales cycles.
Revenue Decline Driven by Delivery Challenges
CSP Inc.'s revenue for the third quarter of fiscal 2026 declined to $14.4 million, down from $15.4 million in Q3 2025. Despite a solid order growth in the technology solutions segment, management attributed the revenue shortfall to significantly extended hardware vendor delivery times, which have increased from a historical average of 30-60 days to over 200 days. This delay has severely impacted the company’s ability to convert its growing backlog into revenue.
| Metric | Q3 2026 | YoY | QoQ |
|---|---|---|---|
| Revenue | $14.4M | -6.5% | N/A |
| Product Revenue | $9.9M | -3% | N/A |
| Service Revenue | $4.5M | -15% | N/A |
| Gross Margin | 30.1% | +1.3% | N/A |
| Net Loss | $846K | N/A | N/A |
AZT Protect Business Faces Long Sales Cycles
The ramp-up of the AZT Protect business continues to face challenges, particularly with the extended sales cycles associated with larger enterprise customers. CEO Victor Delovo highlighted that the company is nearing the end of the 18 to 24-month sales cycles for several large six-figure opportunities, which have been delayed by internal customer processes and competition from existing contracts. Despite these hurdles, CSP Inc. remains optimistic about converting several significant opportunities into contracts soon.
Management noted that they have achieved a 100% renewal rate for customers reaching their one-year renewal period, reflecting strong retention in a challenging environment. Additionally, the integration of AZT Protect into OEM solutions, like that with Acronis, is expected to drive long-term recurring revenue, although the process remains lengthy.
Margin Improvement Amid Revenue Decline
Despite the revenue decline, CSP Inc. saw an improvement in its gross margin, which increased to 30.1%, up from 28.8% in the prior year's third quarter. This increase was attributed to better margins on product sales, which saw a gross margin rise to 20.7%, compared to 15.7% in Q3 2025. However, service revenue gross margin decreased slightly to 51.2%, down from 53.9% year-over-year, reflecting the impact of lower service revenue.
Financial Outlook and Guidance
Looking ahead, CSP Inc. is focused on enhancing its service offerings and leveraging its cloud and managed service practices for growth. Management remains committed to its
