Doubling EBITDA and raising guidance, but a shifting mix and Gen1 redeployment cloud the gross margin picture.
EVLV · Earnings Call · 2026-08-11
Momentum, with a Caveat
Evolv Technologies reported a strong second quarter, with revenue up 34% year-over-year to $43.8 million, and raised its 2026 revenue outlook to 23-27% growth. The company now expects to end the year with “comfortably over 10,000 deployed units,” reflecting roughly 30% net unit growth. Yet despite the upbeat tone, the stock sits 51% below its January 2021 peak and is down 10% over the past 90 days. The market is wrestling with a nuanced story: top-line acceleration, but a persistent drag on gross margin from structural changes.
“While advances in AI and Agentic technologies may reshape portions of the software industry, they do not replace the proprietary hardware, real world data, operational expertise, and long term customer relationships that underpin our business.” — John Kedzierski, President and Chief Officer · 2026-08-11
That confidence is built on a hardware-enabled subscription model with multiyear contracts and more than $312 million in remaining performance obligation.
The ARR vs. Unit Gap
One of the most-discussed points on the call was the divergence between ARR growth (20% y/y) and unit growth (~30%). CFO Chris Kutsor explained it patiently:
The difference between ARR and unit growth is as we would have expected because we are selling Gen1 units at a lower ARPU and expedite has been lower, that will be converging with Express.
This is not a red flag but a byproduct of two strategies: redeploying older Gen1 units at lower ARPU after customers upgrade to Gen 2 platforms, and selling the newer Evolv eXpedite bag-screening device at an introductory price. Management is now raising prices across both products to close the gap, and the mix is shifting toward a 60% purchase-subscription / 40% full-subscription split for 2026, up from the prior 55% assumption.
Margin Headwinds Mount
Adjusted gross margin held at 51% in Q2, but management flagged three specific pressures on second-half margins: the rising share of purchase subscriptions (which recognizes hardware costs upfront), the cost of bringing back and refurbishing Gen1 units, and modestly higher component and supply-chain costs. Together, these are expected to weigh on margins, though pricing increases and manufacturing efficiencies through new partner Plexus should provide tailwinds over time.
The company’s long-term gross margin target remains compelling—the RPO carries roughly 66% gross margins—but the near-term path is lumpy. As Chris noted, “We expect revenue growth to more closely align with deployed unit growth subject to normal fluctuations driven by deployment timing, pricing, product mix, and the timing of short term rental agreements.” — George Chris Kutsor, Chief Financial Officer · 2026-08-11
Execution Highlights
Operationally, Evolv added 70 new customers in the quarter, its strongest two-year pace, with about 80% of bookings from existing customers expanding. The Fortune 500 count now exceeds 30, and the company now supports more than 800 hospitals and 1,800 schools. The FIFA World Cup deployment screened 3.5 million fans, and new wins like Northwestern’s Ryan Field point to the broadening appeal of the platform.
“We see more opportunities and see continued demand for short term events of that nature.” — John Kedzierski, President and Chief Officer · 2026-08-11
Financial Trajectory
The numbers confirm the improvement in the core business. Revenue has grown from roughly $20 million in 2022 to a run rate above $180 million expected this year. Adjusted EBITDA margin expanded to 10.1% in Q2, and the company guided to full-year adjusted EBITDA of $15-16 million. But the profit journey is still early, as visible in the operating income trend.
Total revenue reached $46M in Q2, up 45% year-over-year, a pace that supports the raised guidance.
Meanwhile, gross margin fell to 50.9% in Q2 from 58.2% in the year-ago quarter, reflecting the shift to purchase subscriptions and the reintroduction of Gen1 units. The company expects gross margins to hold at first-half levels through 2026.
Outlook and Valuation
The company raised its ARR forecast to $148-150 million, and management reiterated its confidence in the long-term framework of $500 million revenue by 2031 with 25% adjusted EBITDA margins. Given the stock’s drawdown, the valuation is undemanding at under 7x forward revenue, but the market is waiting for gross margin expansion to validate the model.
Prior calls telegraphed these moves. On the Q1 call, John said, “We do anticipate ARR to accelerate throughout the year.” — John Kedzierski, President and Chief Executive Officer · 2026-03-10 And earlier this year, Chris noted, “We do expect to be cash flow positive in the second half of '26.” — George Kutsor, Chief Financial Officer · 2026-03-10 The company delivered on both fronts, but the margin evolution remains the next test.