Zedge Spends Its Whole Cash Cushion to Sell Robot Data

A returning CEO, a $7.7 million insider check and a 17% drop in monthly users: Zedge wants investors to value an AI-training-data startup buried inside a wallpaper app.

ZDGE · Earnings Call · 2026-10-26

A wallpaper app with a data label inside

Zedge closed fiscal 2026 with $31.6 million in total revenue, up 7.6%, a $0.6 million GAAP operating loss against $3.2 million a year ago, and $4.2 million of free cash flow, up 46.6%. Good numbers for a $33.5 million company. But none of it is why anyone listened to the call. The call was about DataSeeds.AI, a B2B business that sells purpose-built training data to AI developers — and which, for the first time, has a dedicated balance sheet behind it. Jonathan Reich, now President and COO rather than CEO, framed the market plainly: “AI developers increasingly need specialized purpose-built data tailored to particular models, applications and edge cases.” — Jonathan Reich, President and Chief Operating Officer · 2026-10-26 The keyword record confirms this is not recycled material. Zedge's earlier quarters were dominated by the language of a consumer app scraping for growth — rewarded video, ad stack, coin-based game economy, restructuring savings, lifetime subscriptions. This quarter's spikes are entirely different vocabulary: the robotics space, model evaluation, sensor data, consent management, and a capitalized-sounding DataSeeds Production Cloud. New CEO Morris Berger — the man who, by his own account, found the company in Norway when it had two employees — spent his prepared remarks almost entirely on the new unit's enterprise value.

The balance sheet becomes the business plan

The mechanics matter more than the narrative. Zedge ended July with $20.3 million of cash and no debt, then raised roughly $7.7 million in an insider-led financing, lifting pro forma cash to about $28 million. Share repurchases were suspended in connection with the raise; the quarterly dividend continues. Roughly $7.5 million of fresh capital is earmarked for DataSeeds — sales hires, marketing, engineering for the evals platform and video annotation. Reich was explicit about the shape of the spend: “Conceptually, we'd like to see to it that we keep a cushion of, give or take, $20 million of cash on the balance sheet.” — Jonathan Reich, President and Chief Operating Officer · 2026-10-26 That is a break from stated policy, and it is the single most interesting thing in this report. A year ago the same executive described a far more cautious posture:

we are aligning that development with signed contracts and revenue in order to align expense and revenue as opposed to taking a perspective of build and then they will come.
Jonathan Reich, Chief Executive Officer · 2025-10-28

Now they are, in effect, pre-building. To be fair to management, the patience was earned: DataSeeds produced repeat orders from existing customers, a first six-figure engagement, an evaluation engagement with Bria, and, per Reich, "a couple of prospects in the pipeline now that are speaking to us about 6-digit plus orders." The repeat orders point is the one that matters for a project business — acceptance-rate credibility is the only real moat in bespoke data production. But it remains a project business: revenue "will likely remain uneven in fiscal 2027" because assignments vary in size and timing.

Robots as the wedge, and where the tape disagrees

The most technically specific part of the call was embodied data. Training robots requires video of humans doing physical tasks, captured with synchronized motion and depth. Reich's description of the mechanics was unusually concrete:

Typically, the way that, that's collected is that a human subject will wear a camera on their forehead or will wear a camera on some sort of a necklace and begin filming themselves doing any number of tasks... it's a matter of capturing the video and in parallel, capturing the various sensor data that exists on a phone.
Jonathan Reich, President and Chief Operating Officer · 2026-10-26

This is a real and crowded frontier. Globally, Physical AI has been a persistent editorial keyword for several quarters, and humanoid robotics surfaced this week out of a semiconductor reporter, NVEC, which cited "humanoid robotics front" alongside power conversion for data centers. Zedge's edge is not the model — it is the crowd and the consent plumbing: a scaled creator community with rights, provenance and auditability already baked in, which is precisely what frontier labs fear getting sued over. Here is the tension. The public market has spent the last month marking down the adjacent AI infrastructure complex — AI data center names traded negative across a 30-day window with forty-eight decliners against six advancers, and the 90-day picture is worse. Zedge is raising insider capital to lean into an AI-adjacent story at the moment the tape is de-rating that story. Its own stock reflects the skepticism: down 14.7% over ninety days, 22% below the July 1 high of $3.28, and valued at 1.2x revenue, down 30% year-over-year against a 2021 peak near 14.8x. The market is not paying for DataSeeds. Yet.

The engine being harvested, not grown

The offsetting strength is in monetization of a shrinking audience. Fourth-quarter active subscriptions rose 35.3% to roughly 1.3 million and average revenue per monthly active user climbed 30.5% to $0.121, more than offsetting a 17% decline in monthly active users. Full-year subscription revenue grew 29.5% to $6.6 million, while advertising — two-thirds of the company — grew just 4.1%, dragged by Emojipedia. Margins tell the same story: net margin of 11.6%, up 9.2 points year-over-year. But listen for the recurring question. Allen Klee asked it again this quarter: “for monthly active users, what are you actually trying to do now to stabilize that?” — Allen Klee, Analyst · 2026-10-26 He asked a near-identical question in June 2025 — "what can you do to stabilize that and then grow it" — and again in June 2026. The answer keeps narrowing: three tracks became two, and now “there have been some changes in our marketing team that we believe will translate into stabilizing the monthly active user base” — Jonathan Reich, President and Chief Operating Officer · 2026-10-26. The Active User base has been a top-ranked theme for Zedge for two years and the trend has not reversed. Emojipedia is now explicitly managed "for cash generation" — a graceful way of saying harvested.

What stopped being said

The silences are as informative as the noise. Tapedeck, once a genuine momentum keyword for the company, was relegated to the last question of the call, answered with a reggae-vertical proof of concept and a promise of “much more clarity about this in the first half of 2027” — Jonathan Reich, President and Chief Operating Officer · 2026-10-26 — which is what was said about calendar 2026 a year ago. The AI "alpha" apps, six launches and counting, were reduced to two still receiving investment and an innovation team redirected to DataSeeds. GuruShots has been folded into DataSeeds entirely. The three-track strategy of 2025 is now one track. And the disclosure discipline has not improved with the fervor. Reich conceded a year ago that “we'll need another couple of quarters until we have the clarity” — Jonathan Reich, Chief Executive Officer · 2025-12-12 on order-to-delivery timing; by June he was saying “we are not at the point where we can project revenue with certainty” — Jonathan Reich, Chief Executive Officer · 2026-06-11. Both remain true today, which is why the capital raise — not the pipeline — is the hard fact on which this quarter turns.

The verdict

Zedge is a cash machine with a decaying user base choosing to convert its fortress balance sheet into an option on embodied AI data. Morris Berger's own framing is the honest one: “I believe we have an opportunity to build DataSeeds into a substantial business over time with high enterprise value.” — Morris Berger, Chief Executive Officer · 2026-10-26 Over time is doing enormous work in that sentence. Investors are being asked to underwrite a first-time B2B sales motion, a lumpy project P&L, and a robotics bet, at 1.2x revenue, with management voluntarily surrendering its repurchase powder to fund it. That is a real strategic pivot, not a re-brand — but it is also a bet placed just as the market's enthusiasm for AI infrastructure data has cooled. The next two quarters of DataSeeds order sizes will decide whether $7.7 million of insider money bought an enterprise business or bought time.