Airship AI reported a sharp increase in third-quarter revenue and gross profit, alongside a $28.3 million backlog of firm-price orders. The AI software and hardware company posted net income of $9.62 million, but much of that profit came from gains tied to changes in the estimated value of earnout and warrant liabilities, rather than its operating business.
Management also highlighted a roughly $215 million sales pipeline and said it expects initial customer deployments of a new agentic AI product around year-end. Its stated goal is to reach cash-flow-positive operations by the end of 2026.
Third-quarter results
- Revenue was $6.23 million, up 429% from the same quarter last year. Gross profit was $3.50 million, an increase of 481%, with a 56.2% gross margin. Airship AI attributed part of the higher margin to increased sales of its branded hardware and software.
- Operating loss was $561,000. The quarter included $555,000 in noncash stock-based compensation, as well as higher sales, marketing and research-and-development spending. The company said it was at breakeven excluding noncash expenses.
- Net income was $9.62 million, or $0.28 per basic share. Other income totaled $10.18 million, primarily reflecting a $3.23 million gain from a change in the fair value of an earnout liability and a $6.83 million gain from a change in the fair value of warrant liabilities. These valuation gains helped lift reported net income and are distinct from revenue and operating profit.
- Operating activities generated $384,000 in cash. At Sept. 30, Airship AI had $12.74 million in cash and cash equivalents and $6.28 million in accounts receivable.
Orders, pipeline and business development
- The $28.3 million backlog consists of awarded firm-fixed-price orders expected to be shipped and invoiced in coming quarters. The company cautioned that backlog is not a direct guide to quarterly revenue: about 75% of its quarterly revenue is transactional and recognized in the quarter in which it occurs.
- Airship AI put its validated sales pipeline at about $215 million, spanning single- and multiyear opportunities at different stages, with expected award timeframes over the next 18 to 24 months. It said several large opportunities had advanced and could close between the fourth quarter of 2026 and first quarter of 2027.
- Some of those opportunities are tied to funded Department of Homeland Security procurement efforts focused on homeland security and border security. The company did not provide specific award amounts or customer details, saying that restrictions on sensitive customers and contract vehicles limit what it can make public.
- Management cited orders for its Outpost AI edge appliance and demand for its Fortress AI server-side analytics platform, which processes data from large numbers of sources. The company describes the products as complementary parts of a system that can analyze data at the edge and at enterprise scale.
- Airship AI also reported continued partner adoption and pipeline growth in its commercial business, which it defines as sales made through business partners or integrators.
Priorities for 2026
- The company aims to improve gross margins and reach cash-flow-positive operations by the end of 2026. It said it plans to fund continued sales and business-development investment through cash generated by operations and the potential exercise of publicly traded warrants.
- Airship AI is developing an agentic AI product that would let users draw operational intelligence from existing video, sensor and enterprise data using natural-language requests. The company said this is now its largest area of development effort, with a first release and initial customer deployments expected around year-end.
- Other stated priorities include refining its edge and cloud analytics platforms, expanding cloud-based workflows for secure environments, and increasing marketing in new business areas.
The quarter combined strong year-over-year growth in revenue and gross profit with a small operating loss and positive operating cash flow. Reported net income was substantially higher than operating results because of the fair-value gains. The backlog represents awarded work, while the larger pipeline includes opportunities that have not yet become orders.