Audinate Earnings Call: Growth Momentum vs Cost Pressures

Audinate Group Ltd. ((AU:AD8)) has held its Q2 earnings call. Read on for the main highlights of the call.

Audinate Group’s latest earnings call struck a cautiously upbeat note, with management highlighting solid double-digit revenue growth, exceptionally high gross margins and strong bookings momentum. These positives were tempered by sharply higher operating costs, a swing to an underlying EBIT loss and negative free cash flow, as the company leans into its platform strategy and absorbs early Iris investment.

Revenue Growth and Premium Margins Underpin the Story

Revenue in the first half reached USD 21.1 million (AUD 32.2 million), up 12% year over year and comfortably ahead of typical audio‑visual industry growth. Gross margin held at a lofty 82.5–82.6%, supported by a richer mix of higher‑margin software, reinforcing the capital‑light economics of the Dante platform.

Adapters and Software Drive Product Portfolio Momentum

Hardware adapters were a standout, with revenue jumping 51%, helped by strong uptake of the new Dante AVIO Pro S1‑based range. Embedded software grew 17% and platform software rose 9%, signalling rising OEM adoption and early traction for offerings such as DVS Pro and the newly introduced Dante Director.

Design Wins and Ecosystem Expansion Deepen Network Effects

Design wins increased 8% to 66 in the half, broadening the future revenue pipeline across pro‑audio and video equipment. A further 344 Dante‑enabled products hit the market, lifting the catalogue to 4,947 products from 516 manufacturers currently shipping and 723 manufacturers signed in total.

Installed Base and Training Cement Dante’s Market Position

The Dante protocol is now embedded in roughly seven million installed devices, underscoring its role as a de facto standard in networked AV. Training remains a key moat, with around 4,000 AV professionals certified each month and more than 300,000 trained and Dante‑certified globally.

Iris Acquisition and Launch Strengthen the Platform Vision

The Iris acquisition closed and was commercially launched in December 2025 as a cloud‑first camera control platform that extends Audinate’s video and control capabilities. While first‑half revenue contribution was only USD 100,000, Iris is designed to enable cross‑selling and accelerate the broader Dante platform roadmap.

Bookings Strength and Pipeline Visibility Support Outlook

Management reported strong first‑half bookings that underpin confidence in the FY26 growth trajectory. With roughly three to four months of sales pipeline visibility, the company sees good line of sight on converting current opportunities into second‑half revenue.

Balance Sheet Remains Solid Despite Iris Spend

Cash on hand stood at AUD 70.9 million after funding the Iris acquisition, down from AUD 109.9 million at 30 June 2025 but still providing material strategic flexibility. Intangible assets rose to AUD 68.7 million as platform and product investments were capitalized, giving Audinate capacity to keep investing prudently in growth.

Cost Discipline: Operating Spend Growth Dialed Back

Following recent organisational changes, management trimmed FY26 operating cost growth guidance from 25% to about 20% over FY25, signalling a shift from aggressive build‑out to tighter cost control. The move aims to balance continued innovation with a clearer path back toward profitability and improved cash generation.

Rising Operating and Employment Costs Pressure Earnings

Operating expenses surged 26% to AUD 28.8 million in the half, reflecting higher investment in people, products and the Iris integration. Employment expenses alone climbed 29% to AUD 21.5 million, driven by added headcount, variable incentives and the cost base of the newly acquired business.

Underlying EBIT Swings to a Loss

The heavier cost load pushed underlying EBIT to a loss of AUD 2.3 million, compared with a profit of AUD 0.8 million in the prior period. Management framed this as an intentional trade‑off, accepting short‑term margin compression to build out the Dante and Iris platforms for longer‑term value.

Negative Free Cash Flow and Lower Cash Balance

Operating cash flow slipped into a small outflow of AUD 0.4 million versus an inflow a year earlier. Free cash flow remained negative at AUD 8.1 million, slightly better than the prior period’s AUD 9.0 million outflow, while the overall cash balance fell largely due to roughly AUD 31 million spent on Iris.

Structural Shift Hits Chips, Cards and Modules

Units shipped for chips, cards and modules dropped from 243,000 in H2 2025 to 205,000 in H1 2026, a decline of about 15.6%. Segment revenue fell 4%, as demand for legacy Brooklyn and Ultimo hardware softened with customers increasingly adopting embedded software implementations instead.

Iris: Early Revenue, Heavy Investment Phase

Iris delivered only USD 100,000 of revenue in the half but incurred approximately AUD 800,000–900,000 of associated costs, reflecting its early stage. Management plans further investment and go‑to‑market build‑out, with headcount expected to rise from 10 to around 15, implying continued near‑term margin drag and execution risk.

Market Headwinds Add a Note of Caution

Management acknowledged broader market softness, lingering tariff uncertainty and the after‑effects of channel inventory destocking, though the latter is now largely behind the company. These factors can still delay customer projects and add volatility to near‑term demand, even as the structural shift to networked AV remains intact.

Guidance Signals Confident Growth with Tighter Spend

Looking ahead, Audinate guided to U.S. dollar gross profit growth of 13–15% in FY26, about two to three times estimated industry growth, indicating confidence in ongoing profitable expansion. Operating costs are now expected to rise around 20% over FY25, with capitalized intangibles forecast at AUD 13–14 million for the year, pointing to sustained but more disciplined investment.

Audinate’s earnings call painted a picture of a company trading short‑term earnings and cash flow for long‑term platform leadership, backed by strong revenue growth, premium margins and a rapidly expanding ecosystem. For investors, the key watchpoints will be execution on Iris, the transition from hardware to software, and whether tighter cost controls can pull profitability back into line as market conditions gradually normalize.