FalconStor Software (FALC) AI Stock Analysis

• Market Cap: $12.13M
• Dividend Yield: N/A
• Average Volume (3M): 1.25K
• Price to Earnings (P/E): ―
• Beta (1Y): -0.17
• Revenue Growth: -11.90%
• EPS Growth: -520.12%
• Country: US
• Employees: 53
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): <0.01
• Shares Outstanding: 7,134,504
• 10 Day Avg. Volume: 1,979
• 30 Day Avg. Volume: 1,252
• PEG Ratio: 0.26
• Price to Book (P/B): 14.76
• Price to Sales (P/S): 1.37
• P/FCF Ratio: -28.35
• Enterprise Value/Market Cap: 0.97
• Enterprise Value/Revenue: 1.19
• Enterprise Value/Gross Profit: 1.44
• Enterprise Value/Ebitda: -81.25
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 49 Neutral
• Price Target: $1.50 ▲(10.29% Upside)
• Action: Upgraded Date: 01/28/26
• Date: Action: Upgraded 01/28/26

The score is held down primarily by weak financial performance (loss-making TTM, negative operating/free cash flow, and high leverage versus a thin equity base). Technicals are a meaningful offset with a clear uptrend and positive momentum, while valuation remains constrained by losses (negative P/E) and no dividend support.

Positive Factors

Strong gross margins

Sustained gross margins near the low-to-mid 80% range indicate structurally high product profitability and low variable costs. That core economics provide durable operating leverage potential: if sales recover, incremental revenue can flow quickly to the bottom line and fund reinvestment.

Recurring subscription revenue mix

A revenue base concentrated in subscriptions, licensing and maintenance supports predictable, recurring cash flows and higher retention rates. Over 2–6 months this stability aids planning, smooths seasonality and can be converted to ARR-led growth if customer acquisition and renewal trends improve.

Broad product footprint and partnerships

Offering software-defined storage, backup/recovery and cloud data management across on-prem, virtual and cloud deployments gives structural market reach. Partnerships with tech and cloud providers extend distribution, enabling long-term customer access across hybrid-cloud adoption trends.

Negative Factors

Return to profitability weakness

Returning to a net loss with declining revenue signals inconsistent demand and operational challenges. Persisting losses erode reserves and impede reinvestment; without sustained revenue recovery, profitability will remain fragile and limit the company's ability to execute strategic initiatives.

Negative operating and free cash flow

Consistent negative operating and free cash flow indicate structural cash burn and dependence on external financing. Over months this reduces flexibility to invest in R&D or sales, increases default/refinancing risk, and constrains the firm's capacity to capitalize on market opportunities.

High leverage vs thin equity

A debt/equity ratio near 7x with a thin equity cushion creates a fragile capital structure. This raises refinancing and solvency risk if operating cash flow remains weak, limits strategic flexibility, and amplifies downside from any revenue shortfall or adverse market shock.

FalconStor Software Business Overview & Revenue Model

Company Description

FalconStor Software, Inc. (FALC) is a global provider of data protection and storage management software solutions, catering primarily to enterprises and service providers. The company operates in the information technology sector, focusing on enhancing data availability, management, and protection across various environments including on-premises, virtual, and cloud infrastructures. FalconStor's core products include its FalconStor Software-defined Storage (SDS) solutions, data protection solutions like FalconStor Backup and Recovery, and its cloud-based data management services, all designed to optimize data storage efficiency and ensure business continuity.

How the Company Makes Money

FalconStor generates revenue through multiple streams, primarily from software licensing, subscription services, and support and maintenance contracts. The company offers its software solutions on a subscription basis, providing recurring revenue as customers renew their licenses. Additionally, FalconStor earns revenue from professional services, including implementation and consulting, which help clients effectively deploy and manage their data protection strategies. Strategic partnerships with major technology providers and cloud service platforms also contribute to its earnings, enabling FalconStor to expand its market reach and integrate its solutions within larger ecosystems. This collaborative approach not only enhances product offerings but also drives customer acquisition and retention.

FalconStor Software Financial Statement Overview

Summary

Overall financials are weak: TTM returned to a net loss with revenue down, the balance sheet shows very high leverage versus a thin equity base (higher financial risk), and operating/free cash flow are negative with worsening free cash flow trends. Strong gross margins are a notable positive but are not translating into consistent earnings or cash generation.

Income Statement

TTM (Trailing-Twelve-Months) shows a return to losses (net loss about 2.7% of revenue) after profitable 2023–2024, indicating weakening profitability momentum. Revenue has also slipped in recent periods (down ~4.0% TTM after a modest decline in 2024), though gross margin remains very strong (roughly low-to-mid 80% range), suggesting the core product economics are healthy. Overall, the key issue is inconsistent earnings power despite excellent gross profitability.

Balance Sheet

Leverage has increased meaningfully: debt relative to equity is very high in TTM (about 7.0x) driven by a low equity base, which reduces financial flexibility. While total debt is not extremely large in absolute terms (~$2.3M TTM), the thin equity cushion (about $0.33M TTM) makes the capital structure more fragile and raises refinancing/solvency risk if operating performance stays soft.

Cash Flow

Cash generation is a major weak spot: operating cash flow is negative in TTM and also negative in 2024, and free cash flow is negative across those periods as well. The sharp deterioration in free cash flow growth in TTM signals worsening cash burn versus the prior period, increasing reliance on external funding or balance-sheet resources. Positively, 2023 showed the business can generate strong cash flow in a better operating environment, but the most recent trajectory is unfavorable.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	9.91M	10.42M	11.60M	10.05M	14.18M	14.77M
Gross Profit	8.22M	8.75M	9.95M	8.49M	12.23M	12.94M
EBITDA	-145.19K	907.35K	1.44M	-1.06M	1.58M	3.35M
Net Income	-267.33K	693.91K	978.38K	-1.80M	203.33K	1.08M
Balance Sheet
Total Assets	10.05M	12.04M	12.62M	10.17M	12.67M	13.41M
Cash, Cash Equivalents and Short-Term Investments	1.92M	2.49M	3.41M	2.01M	3.18M	1.92M
Total Debt	2.30M	2.21M	2.37M	2.37M	2.27M	4.74M
Total Liabilities	9.72M	11.07M	12.04M	10.65M	11.25M	15.07M
Stockholders Equity	329.00K	967.14K	572.17K	-479.42K	1.42M	-1.67M
Cash Flow
Free Cash Flow	-501.36K	-503.38K	1.50M	-1.24M	-1.07M	625.25K
Operating Cash Flow	-374.23K	-476.01K	1.51M	-1.20M	-883.53K	706.06K
Investing Cash Flow	-127.13K	-27.37K	-8.14K	-38.08K	-182.35K	-29.08K
Financing Cash Flow	-248.70K	-91.56K	-86.27K	177.15K	2.33M	-246.00K

FalconStor Software Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 1.36
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FALC, the sentiment is Positive. The current price of 1.36 is below the 20-day moving average (MA) of 1.62, below the 50-day MA of 1.46, and below the 200-day MA of 1.63, indicating a bullish trend. The MACD of 0.06 indicates Positive momentum. The RSI at 59.59 is Neutral, neither overbought nor oversold. The STOCH value of 82.61 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for FALC.

FalconStor Software Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
FALC	49 Neutral	$12.13M	-8.11	―	―	-11.90%	-520.12%
SMSI	44 Neutral	$11.41M	-0.30	-101.21%	―	-24.08%	70.11%
NVNI	43 Neutral	$12.14M	-0.38	―	―	―	―
SOPA	41 Neutral	$9.13M	-0.31	-137.15%	―	4.65%	55.05%
IDAI	41 Neutral	$13.53M	-0.06	-205.65%	―	72.57%	-261.66%