Shares of NetSol Technologies, Inc. (NTWK Quick QuoteNTWK - Free Report) have declined 1.8% since reporting results for the second quarter of fiscal 2026. This compares with the S&P 500 index’s 1.5% dip over the same time frame. Over the past month, the stock has lost 15% compared with the S&P 500’s 1.9% fall.

NetSol reported second-quarter fiscal 2026 total net revenues of $18.8 million, up 21.1% from $15.5 million in the prior-year period. Higher services and recurring subscription revenues drove the rise. Recurring subscription and support revenues increased 5.1% year over year to $9.1 million from $8.6 million, while services revenues climbed 40.9% to $9.6 million from $6.8 million.

Gross profit rose to $9 million, representing 48% of net revenues, compared with $6.9 million, or 44.5%, a year earlier. Operating income totaled $1.3 million against an operating loss of $0.5 million in the prior-year quarter. On the bottom line, GAAP net income attributable to NetSol was $0.2 million, or 2 cents per diluted share, against a net loss of $1.1 million, or 10 cents per diluted share, in the year-ago period.

NetSol Technologies Inc. Price, Consensus and EPS Surprise

 

NetSol Technologies Inc. price-consensus-eps-surprise-chart | NetSol Technologies Inc. Quote

Other Key Business Metrics

The company’s revenue mix shifted during the quarter. Subscription and support revenues accounted for 48.3% of total net revenues, down from 55.6% in the prior-year period, reflecting a higher contribution from implementation services. For the first half of fiscal 2026, total net revenues rose to $33.8 million from $30.1 million a year earlier, with recurring subscription and support revenues up 7.2% to $18 million and services revenues up 17.9% to $15.6 million.

For the first half of fiscal 2026, gross profit was $14.9 million, or 44.2% of net revenues, compared with $13.5 million, or 44.8%, in the prior-year period. The GAAP net loss attributable to NetSol for the six months widened to $2.1 million, or 18 cents per diluted share, from $1.1 million, or 9 cents per diluted share, a year ago.

NetSol ended the quarter with cash and cash equivalents of $18.1 million, up from $17.4 million at June 30, 2025. Working capital was $26.4 million, and total stockholders’ equity stood at $35.9 million, or $3.04 per diluted share, underscoring a stable liquidity position.

Management Commentary

Chief executive officer Najeeb Ghauri characterized the quarter as strong, highlighting 21% revenue growth and a 41% service revenue increase, driven by the active implementations of the company’s Transcend Finance and Transcend Retail platforms. He noted that implementation momentum is viewed as a leading indicator of future subscription scale. Management pointed to traction in the U.S. automotive market for Transcend Retail, with adoption by dealer groups and franchised dealerships, and emphasized ongoing investments in AI-enabled capabilities, such as “Check,” an AI-powered credit decisioning tool integrated into its loan origination system.

During the earnings call, management reiterated confidence in margin improvement and operating leverage as investments in AI and new hires begin to scale. Executives also discussed the impacts of non-controlling interest from the Pakistani subsidiary, where approximately 30% of subsidiary earnings are allocated to minority shareholders under GAAP consolidation rules.

Factors Influencing the Quarter

Revenue growth was largely influenced by the implementation timing and project mix, particularly in services. The increase in cost of sales, which rose to $9.8 million from $8.6 million year over year, primarily reflected higher salaries and travel expenses. Despite these cost pressures, the gross margin expanded by 350 basis points to 48%, reflecting improved operating efficiency and scale.

Foreign currency movements contributed a modest gain in the quarter compared with a loss in the prior-year period, according to management commentary. Non-GAAP EBITDA improved to $1.7 million from a loss of $0.8 million a year earlier, indicating strengthened operating performance.

Guidance

Management raised its fiscal 2026 revenue growth guidance to nearly $73 million or better, supported by its current pipeline and ongoing investment in go-to-market initiatives and its AI-enabled Transcend platform. While acknowledging macroeconomic and currency considerations, leadership expressed confidence in achieving full-year objectives based on recurring revenues and multi-year contracts.

Other Developments

In the second quarter of fiscal 2026, NetSol announced a leadership transition, appointing Sardar Abubakr as the chief financial officer, with Roger Almond transitioning to the chief accounting officer. Management described the changes as part of strengthening governance and financial oversight to support the company’s next phase of growth.