Precision Optics: A Record Year Undone by One Satellite Customer

FY26 revenue rose 65% to a record $31.5M — and FY27 was guided flat, because the customer that drove it just stopped ordering.

POCI · Earnings Call · 2026-09-28

A Record Year, A Flat Guide

Precision Optics delivered everything it promised in fiscal 2026 — then told investors not to expect more of it. Revenue rose 65% to a record $31.5M; Q4 alone was up 42% to $8.8M; Q4 gross margin jumped to 25.3% from 13.0%; and adjusted EBITDA, negative $2.1M for the year, flipped positive in the back half. Yet FY27 guidance is $30–33M — essentially flat — with adjusted EBITDA still negative $1.2–1.7M. The reason is a single word: satellites. CEO Joe Forkey was blunt: “the flat guidance is entirely caused by the pullback on this one customer, which we fully believe is temporary because there's no chance they're not going to continue building out their constellation.” — Joseph Forkey, Chief Executive Officer · 2026-09-28 That is the whole story in one sentence — a company whose growth is now hostage to one constellation builder's launch schedule.

The Pullback That Got Worse

Here is the tension worth naming. Six months ago this was described as a blip. On the May 2026 call: “our customers asked us to pull back a bit in Q1 and Q2. So for that particular program, we may see, I don't know, 15%, 20% pullback in Q1 and Q2.” — Joseph Forkey, Chief Executive Officer · 2026-05-13 And Forkey then: “So we see this as a bit of a blip and not a long-term issue.” — Joseph Forkey, Chief Executive Officer · 2026-05-13 Now it is a 40% reduction in Q1 FY27 revenue, plus another cut in Q2, with recovery pushed to "the end of fiscal 2027." The pullback deepened roughly two-fold, and the recovery horizon slid. Management's explanation is unchanged and plausible — excess customer inventory caused by constrained global launch capacity, not by a design loss — but investors should note the company has now twice underestimated the depth and duration of the same, concentrated customer's slowdown. This is a name that was rewarded for execution and is now being repriced for concentration: the stock is down about 16% over 90 days and roughly 28% from its June peak.

What's Genuinely New: Laser Comms

The fresh theme this quarter is the satellite communications market itself — and here the company does something it rarely does: make a large, quantified market argument.

Industry research firm Novaspace projects that the number of laser communication terminals in orbit will reach approximately 118,000 by 2035 with cumulative global terminal revenue of $12.9 billion through that period.
Joseph Forkey, Chief Executive Officer · 2026-09-28

Forkey frames the edge as IP, not just capacity: “Our major competitive advantage is in IP around the way that we design and manufacture the subassemblies...” — Joseph Forkey, Chief Executive Officer · 2026-09-28 — assemblies holding alignments as tight as 5 microns that must survive launch and the space environment. The keyword trajectory confirms a step-change, not boilerplate: laser comms is now the company's top keyword by momentum, alongside satellite constellation and communication terminals — all spiking this quarter after being lesser themes before. low Earth orbit satellites have 3–5 year lifespans, so steady-state constellations need roughly a third to a fifth replaced annually — a genuine annuity argument. The new customer (a second ~$50K engineering order after the first) targets a constellation "similar or even larger" than the incumbent, with higher-value assemblies. Forkey barely hides the ambition: “all we can really say right now is it will be north of that $13 million we expect, but it's difficult to say just how much higher it will be.” — Joseph Forkey, Chief Executive Officer · 2026-09-28

The Base, the Balance Sheet, and What Faded

Strip out the satellite drama and the base is solid. The single use endoscope lines run at 94% yield (up from 90%), Ross Optical grew 32% to $4.9M, and a $1.3M defense follow-on signals a multiyear renewal. The Q4 margin needs a caveat, though: roughly 3pp came from tariff refunds (IEEPA), a windfall rather than structure. CFO Wayne Coll: “tariff refunds retained by the company reduced COGS by approximately $707,000, together equating to a roughly 3 percentage point increase of quarterly margin.” — Wayne Coll, Chief Financial Officer · 2026-09-28 That tailwind is not company-unique — it is everywhere. The global board shows Net tariff refunds, IEEPA refund and benefit from IEEPA tariff refunds riding high this quarter, with fellow reporters COST and CBRL citing the same. POCI is riding a broad wave here, not creating one. On the balance sheet, the March offering left a real cushion — about $9M in effective net cash against just $1.3M of bank debt and no revolver borrowings — and management ruled out a raise: "we don't have any particular plans for that now." That matters, because a 12x price-to-gross-profit multiple shows the market has priced in a lot of future success for a ~$55M-cap company. Meanwhile, what quietly fell off the script is Unity. For several quarters the platform was the marquee marketing thrust; on the May call Forkey admitted “I expected that by now we would have a product development pipeline full of Unity projects and we don't. We have 1.” — Joseph Forkey, Chief Executive Officer · 2026-05-13 This quarter Unity got a single passing mention. A theme management stops leading with is itself a signal. The bottom line: Precision Optics proved in FY26 it can manufacture profitably at scale while holding operating expenses flat. But it now has a textbook concentration problem — two satellite constellation customers, one of which just cut orders 40%, and a valuation that assumes the other ramps fast. The fresh laser comms narrative is genuinely exciting and market-sized, but it is a 6-to-12-month production promise, not a booked order. Watch for the incumbent's restart order (2–4 months to resume production) and the new customer's production PO. Until then, the flat guide is the story.