Last time I covered the FY25 results here, I indicated that this didn’t seem like a one-year transition. Instead, it felt like a two-to-three-year adjustment period before the business could return to normal growth. I listed both company-specific and industry headwinds at the time.
The following is what I wrote for what I will be looking in the future results:
“Looking ahead, what matters most to me is whether management can actually deliver on their FY26 guidance without letting costs spiral further (they should be able to beat this guidance in my view). I’ll be keeping a close eye on whether embedded software and video adoption genuinely accelerate, while also watching if Dante CCM sales also grow rather than just being cannibalised by embedded software. On top of that, Dante adaptor sales will remain an important signal of market demand and the ongoing relevance of the Dante protocol for legacy products. And, of course, I’ll be paying very close attention to the decisions coming out of management and the board”
With this in mind, let’s dig into FY26 first half results. At high level:
- Revenue: $32.2m
- 12% above 1H FY25: $28.72m
- 3.5% below 2H FY25: $33.35m
- Gross Profit: $26.56m
- 12% above 1HFY25: $23.68m
- 3.2% below 2H FY25: $27.42m
- Reported EBITDA: -$5.55m
- 660% below 1H FY25 : 0.84m
This result is below expectations and guidance, particularly given the company’s guidance for gross profit growth of 13–15% (which I initially considered conservative). The first-half result clearly falls short of this range, meaning the second half will have to do the heavy lifting to meet full-year targets.
Management stated during the investor conference call that they secured strong forward orders in the first half and currently have 3 to 4 months of order visibility. They also reconfirm 13–15% gross profit growth for the full FY26 financial year. Additionally, after cost cutting exercise during the half, they have lowered their operating cost guidance. They now expect costs to grow by 20% over FY25, rather than the 25% originally forecasted. (A comparison of employee numbers between the FY25 and 1H FY26 presentations shows a reduction of 15 employees, or approximately 6% of the headcount.)
They launched the Iris video platform in early December 2025 and Dante Director pro is in BETA currently. The reduced headcount reflects a transition from the ‘build phase,’ with several major initiatives now complete. I was looking for a sign that they could beat guidance without costs spiraling further. Instead, they will only just manage to meet it; and for that too we have to rely on a stronger second half. At least management has initiated cost control measures to adjust their spending to gross profit growth.
Although the result disappointed me, there are signs in the numbers that this slow growth is not structural, but rather a reflection of the headwinds currently facing the wider AV industry. Let’s dig deeper into the financials
As Audinate’s OEM customers transition from hardware CCMs to embedded software, Gross Profit is the most relevant metric for evaluating performance, rather than simple revenue growth.
Gross Profit Growth
The following graph shows gross profit growth (or lack thereof).
Audinate Revenue Trend Breakdown
Although Gross Profit is the key metric, it is also worth analyzing how revenue is shifting between hardware and software. The chart below breaks down revenue from Cards, Chips, and Modules (CCM), software, and other sources.
On the call, management indicated that the inventory destocking effect is clearly behind them. This suggests that the lack of growth in CCM revenue is less about inventory corrections and more a reflection of genuinely soft market conditions and the transition to software. The good news is that embedded software grew by 17%, driven partly by customers migrating from hardware CCMs to software solutions. Since the AV market is growing around 5% per year, and Audinate is growing around 12% per year, it is fair to say the company is increasing its share of the market.
Audinate’s Operating Expenses
The chart below shows the operating expense has increased significantly from 3-4 years ago despite revenue dropping to the same level it was back then. .
Audinate’s H1 FY 2026 EBITDA
You would be hard-pressed to find a chart uglier than this EBITDA trend. Few expected earnings to take such a dive, as demonstrated by the Audinate share price, which is down 68% in the last year and almost 90% from its peak.
At least some of the EBITDA loss can be attributed to restructuring costs incurred “to better align our cost base” with company objectives. This should see EBITDA improve from here. Audinate held $70.9 million in cash and term deposits as at half-year ended 31 December 2025, compared to $109.9 million as at 30 June 2025.
Long term thesis
The simple long-term thesis for Audinate is that it will become the de facto networking standard for the Audio Visual (AV) industry and will provide control and management (SaaS) to system integrators and end users for all Dante enabled AV products. This will enable the company to command pricing power, achieve high net margins, and generate substantial cash flows at maturity.
For adoption within OEM, the following two graphs show that the trend is going in the right direction. The number of brands shipping Dante Products was up 5.3% half-on-half to 516.
And the number of products in the Dante ecosystem grew almost 6.6% half-on-half to 4,947.
On top of that, Dante Adapters grew by over 50%. This signals that System Integrators are finding a large volume of legacy equipment that needs to be brought onto the Dante network. The simplest solution is to use a Dante adapter as a bridge, allowing them to connect older hardware immediately without waiting for a full hardware refresh cycle to replace it with native Dante-enabled gear.
So why is growth sluggish?
In my previous article, I highlighted three clear macro and industry headwinds. All three still apply, but I speculate that the current softness is largely due to tariff issues and how OEMs are navigating these tariff rules.
The US government has placed high tariffs (~25%) on components imported from China. However, finished goods( completed speakers or amplifiers) face lower tariffs. This creates a situation where it is cheaper to build a product in a country other than China (like India, Indonesia, or Mexico) and import it as a finished unit, rather than importing parts to assemble in the USA or importing directly from China.
We are seeing evidence of this shift. OEMs with the resources to do so are diversifying manufacturing away from China e.g Yamaha and Sony scaling up their India manufacturing, Shure opened a second major facility in Mexico. However, those unable to move their production lines quickly have two options: accept lower margins or pause selling the product entirely. An example is QSC, which paused shipping on approximately 200 products because tariffs on Chinese components made them unprofitable to build.
My hypothesis is that these tariffs are damaging not just supplier operations, but also customer sentiment, which is likely translating into the lower numbers we are currently seeing.
How I am seeing Audinate
I view Audinate as a company comprised of four buckets:
- Dante Audio CCM/Software for OEM and Adaptor business
- Cash
- Dante Video CCM/Software for OEM
- Platform Software – Dante Virtual Studiocard (DVS), Dante Director and Iris
Bucket 1: Dante Audio
This is a network-effect monopoly. It is a solid business with high potential to become a significant cash-generating engine. However, do not expect explosive year-over-year growth. The sales cycle is long and relies on OEMs selling their products, which in turn depends on the broader economy. Currently, the hardware component is also subject to supply chain volatility (stocking and destocking). Once this transitions more fully to software, it will depend purely on macroeconomic conditions. Overall, this is a robust business capable of generating strong cash flows in the coming years.
Bucket 2: Cash
Cash currently makes up roughly ~23% of the company’s market cap. It is important to note that this bucket has largely been filled by shareholder capital. The table below details Audinate’s recent capital raises and how that money was deployed.
Bucket 3 & 4: Strategic bets
These are the buckets where the cash is being spent.
- Bucket 3 (Dante Video): This is essentially the video version of Bucket 1. The key difference is that Audinate is not a monopoly here yet. It has all the ingredients to become one, but faces stiff competition and requires significant investment to succeed. Currently, there isn’t any way to track how this bucket is performing because it is merged into Bucket 1 for reporting purposes, making it very hard for me to gauge progress. For example, in this report, out of 66 design wins, 10 related to the video segment; however, this isn’t being separated anymore and was only disclosed when asked during the investor call.
- Bucket 4 (Platform Software): This includes software designed to manage devices sold in Buckets 1 and 3, targeted at System Integrators and Managed Service Providers (MSPs). Since these products (like Dante Director and Iris) have been either launched recently or are in beta, their growth potential is a mystery. Your guess is as good as mine, but this segment will need to show some green shoots in FY27 if the market accepts Dante Director and Iris. I will be tracking this; as you can see in the graph below that there isn’t much growth here so far
The most important question in my mind is: Do I trust this management to handle these four buckets without spending all the cash in Bucket 2 to fund the new ventures in Buckets 3 and 4? I agree with the company’s strategic direction, but right now, the market (including me) isn’t confident that the new segments will grow, so investors are treating them as if they are worth nothing. That said, the recent job cuts show that management is trying to protect the cash pile.
Audinat’s Valuation & The Impact of Artificial Intelligence
My view on the company’s valuation hasn’t changed much since my FY25 analysis. One good thing is that this is one of the very few companies for which I am confident that AI is a tailwind for the business, because you cannot have AI without a network.
For an AI agent to actually do anything in the physical world, the device needs to be online and accessible via an API. In the future, a Managed Service Provider (MSP) will want to ask their AI interface: “Reboot the camera and microphone in the Level 5 boardroom,” or “Change a certain setting in the amplifier in meeting room 3.” For the agent to execute that command, the hardware must be networked. That is exactly the role Audinate plays.
As disclosed earlier, I still hold shares in Audinate. The position has naturally become smaller due to the share price performance over the last year. I don’t intend to sell, as I view the current problems as short-term hurdles rather than structural breaks, and the risk/reward actually looks more promising at these levels from a long term perspective.
That said, I will not be adding any new capital until I see genuine traction in the Video and Platform segments (Buckets 3 and 4). For now, I am content to “hold the bag” and wait for the turnaround
Disclosure: The author of this article owns shares in AD8. The editor Claude Walker also owns shares in AD8. Neither will trade AD8 shares for at least 2 days following the publication of this article. This article is not intended to form the basis of an investment decision and is not a recommendation. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 343937).
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