This article first appeared on GuruFocus .
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Revenue:Fiscal Q4 2026 revenue was $31.2 million, reflecting 8% year-over-year growth.
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Full-Year Revenue:Fiscal 2026 revenue was nearly $121 million, an 8% increase over fiscal 2025.
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Non-GAAP EPS:Q4 non-GAAP EPS was $0.04, a 300% increase year-over-year.
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GAAP Net Loss:Q4 GAAP net loss improved to $269,000, or $0.01 per share, compared to a loss of $2.6 million in the year-ago quarter.
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Non-GAAP Net Income:Q4 non-GAAP net income was $1.8 million, or $0.04 per share.
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Gross Margin:Q4 GAAP gross margin was 43.7%, up from 40% a year ago; non-GAAP gross margin was 44.1%.
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Operating Expenses:Q4 GAAP operating expenses were $14 million, down approximately 5% year-over-year.
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Unmanned Systems Revenue:Fiscal 2026 unmanned systems revenue reached $12.6 million.
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Embedded IoT Solutions Growth:Embedded IoT solutions, including the drone business, grew 34% year-over-year.
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IoT System Solutions Revenue:Q4 IoT system solutions contributed more than $15 million in revenue, up 16% sequentially.
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Cash Flow:Q4 operating cash flow was approximately $1.9 million; full-year operating cash flow was $9.9 million.
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Cash Balance:Year-end cash balance was more than $60 million, with the company ending the fiscal year debt-free.
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Acquisition:Acquired Vasima Networks' industrial IoT business for $11.7 million, adding approximately $5 million in annual revenue.
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Guidance:For fiscal Q1 2027, the company expects revenue in the range of $31 million to $33 million and non-GAAP EPS of $0.04 to $0.06.
Release Date: August 26, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Lantronix Inc ( NASDAQ:LTRX ) delivered strong Q4 results with 8% year-over-year revenue growth to $31.2 million and a 300% increase in non-GAAP EPS to $0.04, both within guidance.
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Embedded IoT solutions, including the drone business, grew 34% year-over-year, with unmanned systems revenue reaching $12.6 million in fiscal 2026, above the midpoint of guidance.
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The company is well-positioned to benefit from regulatory tailwinds, including the FCC's restriction on DJI and the Section 232 tariffs on foreign-made drones, which favor domestic NDAA-compliant suppliers like Lantronix.
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The acquisition of Vasima Networks' industrial IoT business adds approximately $5 million in annual revenue with high gross margins in the mid-to-high 60s, and is immediately accretive to earnings.
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Lantronix ended fiscal 2026 debt-free with over $60 million in cash, providing financial flexibility for strategic M&A and growth initiatives.
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Gross margins remained strong at approximately 44%, reflecting disciplined execution and favorable revenue mix, with expectations to maintain or slightly improve margins in fiscal 2027.
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The company is expanding its global footprint with partnerships in Europe, Ukraine, and Australia, and is seeing growing traction in commercial, industrial, and agricultural drone applications.
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The out-of-band management portfolio is gaining traction in the data center market, with a design win at SambaNova Systems for AI infrastructure racks.
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Software and services revenue mix increased to over 10% on a pro forma basis, moving towards a more predictable, higher-margin business model.
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Management expects double-digit revenue growth in fiscal 2027, with unmanned systems projected to represent 15% to 20% of total revenue.
Negative Points
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The company faces potential gross margin pressure from the growth of its module business in unmanned systems, which carries slightly lower margins than the corporate average.
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Memory availability has tightened and prices have increased due to AI infrastructure demand, which could impact costs and supply chain stability.
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The federal business experienced headwinds from government shutdowns, leading to extended procurement cycles, though conditions are improving.
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The company's guidance for fiscal 2027 relies on visibility from current engagements, which may limit upside if new opportunities take longer to materialize.
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International expansion, particularly in Eastern Europe, may result in more challenged gross margins compared to US-based business.
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The recent Section 232 tariffs could have indirect impacts on component costs, although the company currently sees minimal direct impact.
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The company's reliance on a fabless operating model and diversified manufacturing partners may expose it to supply chain disruptions, especially in a constrained memory environment.
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The acquisition of Vasima Networks' business may face integration risks, including cross-selling challenges and operational execution.
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The drone market is highly competitive, and the company's success depends on maintaining its NDAA/TAA compliance and technical edge.
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The company's revenue growth is partly dependent on regulatory actions and government funding, which could change with political shifts.
Q & A Highlights
Q: What is the revenue guidance for unmanned systems in fiscal 2027, and what visibility supports this target? A: CEO Saleel Awsare stated that the guidance is based on current visibility and engagements. The company is working with over 30 vendors, has shipped to over a dozen, and is also active in counter-UAS applications. He confirmed that fiscal 2027 unmanned systems revenue should be in the $25 million-plus range, representing 15% to 20% of total revenue.
Q: What is the expected impact of the new Section 232 drone tariffs on Lantronix? A: CFO Brent Stringham noted the tariffs are a structural tailwind for the drone business as an NDAA/TAA-compliant provider, potentially supporting additional design opportunities. He clarified that the company does not anticipate a meaningful direct impact from the tariffs because its components are imported as general-purpose modules rather than specific drone components. CEO Saleel Awsare added that the company is ramping up manufacturing at its Plymouth, Minnesota facility to provide TAA/NDAA-certified products with U.S. country of origin.
Q: How will the Vasima Networks (Nero) acquisition impact the company's financial profile and strategy? A: CEO Saleel Awsare explained that the $11.7 million tuck-in acquisition adds approximately $5 million in annual revenue, with the majority coming from ARR and gross margins in the mid-to-high 60s. It is immediately accretive to earnings. The acquisition increases the software and services revenue mix to over 10% of total company revenue on a pro forma basis. The Nero platform brings an installed base of roughly 125,000 device tags, creating cross-sell opportunities for Lantronix's cellular gateways, modems, and edge compute products.
Q: What is the outlook for gross margins in fiscal 2027 given the growth in unmanned systems and the Nero acquisition? A: CFO Brent Stringham stated that while the growth in the module business related to drones may create some natural margin pressure (with margins in the low-to-mid 40s), this should be offset by growth in higher-margin businesses, including the ARR from the Nero acquisition and a return to growth in other businesses like network infrastructure. Net-net, he believes there is opportunity to grow gross margins slightly throughout fiscal 2027.
Q: How is the SLC 9000 out-of-band management product performing, and what is the market opportunity? A: CEO Saleel Awsare highlighted a design win with SambaNova Systems, where the SLC 9000 is deployed as part of their purpose-built AI infrastructure rack. He noted the product provides dedicated remote access to critical networking and compute infrastructure. He believes the TAM for this market could be over $500 million, and the product is already shipping. SambaNova selected Lantronix for its ease of use, reliability, and zero-touch provisioning capabilities.
Q: What is the revenue exposure to Ukraine, and how would a ceasefire scenario impact the business? A: CEO Saleel Awsare stated that for fiscal 2026, the majority of unmanned systems revenue was U.S.-based. For fiscal 2027, the Ukraine portion is not a meaningful portion of revenue. He does not see a measurable concern from a ceasefire because the growth is driven by the fundamental shift in how warfare is conducted, requiring unmanned systems with autonomy, which is where Lantronix fits.
Q: Is the company expanding its sales team and infrastructure to support the drone market? A: CEO Saleel Awsare confirmed that the company is expanding its go-to-market efforts. They kicked off the fiscal year with a drone summit involving all stakeholders. Resources have been added in North America and Europe, and they plan to add advocacy resources in Washington, D.C. He believes this investment will provide a strong ROI.
Q: How is the company addressing the tightening memory supply and price increases? A: CFO Brent Stringham stated that the company is working closely with customers on cost pass-through arrangements, which are generally expected in the industry. He noted that the company identified these trends early and proactively secured supply through its fabless operating model and diversified manufacturing partners.
Q: What is the growth outlook for the IoT Systems Solutions business excluding unmanned systems? A: CEO Saleel Awsare noted that the business grew 16% sequentially in Q4, recovering from federal government shutdown headwinds in the first half of fiscal 2026. He stated that quote activity for this business is doing really well and that the company expects to deliver double-digit revenue growth overall for fiscal 2027.
Q: Are there further M&A opportunities being considered for fiscal 2027? A: CEO Saleel Awsare confirmed that the company has a target list of companies and is actively engaged with some. The focus areas for M&A are unmanned systems (to increase strength and move up the drone stack) and recurring revenue. He stated the company is moving forward on this front.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
