Cerence delivered first quarter fiscal 2026 revenue of $115.1 million, driven in part by a $49.5 million patent license payment from Samsung. GAAP gross margin expanded to 86.3% from 65.0% a year ago, while adjusted EBITDA surged to $44.6 million versus $1.4 million in Q1 FY25. Despite an overall GAAP net loss of $5.2 million, or $0.12 per diluted share, the combination of license revenue and disciplined cost management pushed non-GAAP operating expenses to $57.3 million, below guidance and reflecting improved operating leverage.

Net cash provided by operating activities reached $37.9 million, up from $9.3 million in the prior-year quarter, and free cash flow hit a quarterly record of $35.6 million. The company used disciplined execution to strengthen its balance sheet, reducing debt and maintaining healthy liquidity. These cash generation metrics underscore Cerence’s ability to convert strong earnings into cash, supporting further investment in AI and reducing reliance on external financing.

Cerence continues to gain traction with its xUI conversational AI platform, now engaged in five significant customer programs with major global automakers. The company demonstrated next-generation, large language model-powered experiences and new AI agents at CES 2026, receiving highly positive feedback. Management expects the first xUI-powered vehicles to reach consumers later this year, marking the transition from development to commercial rollout.

For Q2 FY26, Cerence projects revenue of $58 million to $62 million, including $5 million from fixed license contracts, gross margins of 71% to 72%, and adjusted EBITDA of $2 million to $6 million. Full-year fiscal 2026 guidance remains unchanged, with revenue forecast between $300 million and $320 million, adjusted EBITDA of $50 million to $70 million, and free cash flow of $56 million to $66 million. The outlook reflects confidence in sustained demand for AI-powered automotive solutions and disciplined cost control.