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Earnings analysis · 10-Q

FUSE earnings analysis

Filed August 7, 2026 · Our reading of the company's report

The latest report

Fusemachines reported a weak operating quarter: Q2 revenue declined 12% year over year to $1.794 million, gross margin compressed to 53.7% from 59.3%, and operating loss widened to $2.690 million from $0.852 million.…

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Fusemachines reported a weak operating quarter: Q2 revenue declined 12% year over year to $1.794 million, gross margin compressed to 53.7% from 59.3%, and operating loss widened to $2.690 million from $0.852 million. EPS improved to $(0.10) from $(0.52), but the improvement was driven largely by reduced fair-value and other non-operating losses rather than operating leverage. Liquidity is critical, with $0.368 million of cash, $(3.511) million of six-month operating cash outflow, a $16.75 million working-capital deficit, and substantial doubt regarding going-concern status. The company has pursued additional financing, but the $2.500 million discounted convertible-note financing, warrant overhang, Nasdaq deficiencies, and ineffective controls materially elevate risk.

Read the original on SEC.gov

From revenue to operating profit

Where each $100 of revenue went in this report.

Of every $100 of revenue Cost of sales $46 Operating expenses $204 Left as operating profit $-150

Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.

Where revenue came from

The business segments reported by the company.

Single operating segment 50.0% AI Solutions 49.7% AI Education Services 0.3%

Shares of the segments disclosed in this filing, largest first.

Reported figures

Earnings per share
$-0.1

What stood out

  • Revenue declined on fewer clients

    Q2 revenue declined 12% to $1.794 million from $2.034 million, primarily reflecting a net decrease in total clients. Six-month revenue fell 8% to $3.673 million from $3.987 million.

  • Gross margin compressed

    Q2 gross profit decreased to $0.963 million from $1.206 million, compressing gross margin to approximately 53.7% from 59.3%. Six-month gross profit was $1.911 million versus $2.295 million.

  • EPS loss narrowed year over year

    Q2 EPS improved to $(0.10) from $(0.52), while net loss narrowed to $2.849 million from $3.786 million. The improvement was helped by substantially lower non-operating fair-value losses, including a prior-year $2.860 million loss.

  • Legacy convertible debt largely eliminated

    The company eliminated substantially all convertible notes through prior conversions and had only a $0.300 million related-party loan payable outstanding at June 30, 2026. Q2 interest expense declined to $0.052 million from $0.073 million.

  • Potential $20 million equity facility

    The company signed a Common Stock Purchase Agreement providing up to $20.0 million of potential equity financing over 36 months. No proceeds had been received as of the filing date and the related S-1 registration statement was not yet effective.

What to watch

  • Severe liquidity and going-concern risk

    The filing states that substantial doubt exists about continuing as a going concern within one year. Cash was only $0.368 million at June 30, 2026, six-month operating cash flow was $(3.511) million, and net working capital deficit was approximately $16.75 million.

  • New discounted notes and dilution

    The August 2 financing added $2.500 million of original-principal senior unsecured convertible notes due February 12, 2027 in exchange for $2.050 million of proceeds, plus warrants for 2,050,000 shares. The notes convert at $4.20 per share and could require immediate repayment upon specified registration defaults.

  • Floating-price warrants increase dilution

    The amended Shortfall Warrants cover up to 2,108,070 shares and now have a floating exercise price equal to the greater of the Forward Purchase Agreement termination price or $0.85, replacing the prior fixed $10.00 price. The amendment could increase dilution and derivative-liability volatility if the share price declines.

  • Multiple Nasdaq listing deficiencies

    Nasdaq issued a July 24, 2026 notice that the company was below the $15.0 million MVPHS requirement for 30 consecutive business days, giving it until January 20, 2027 to regain compliance. The company also has until September 23, 2026 to regain compliance with the $50.0 million MVLS requirement.

  • Internal controls remain ineffective

    Management reported that disclosure controls were not yet effective as of June 30, 2026, and that remediation efforts for previously identified material weaknesses had not yet been tested. The filing lists 8 control deficiencies, including inadequate segregation of duties and insufficient U.S. GAAP expertise.

  • Vendor payment default exposure

    The company defaulted on two professional-service settlement installments totaling $0.052 million. The provider may pursue the full undiscounted outstanding balance of $1.032 million, although no default notice had been issued as of the filing date.

Management's outlook

No numeric revenue or EPS guidance was provided. Management expects to access additional equity or debt capital as needed over the next year, but stated that existing cash and potential financing may not be sufficient to meet working capital and capital expenditure requirements for at least the next twelve months.

This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.