[August 06, 2026]

Palladyne AI Reports Second Quarter 2026 Results

Palladyne AI Corp. (NASDAQ: PDYN and PDYNW) ("Palladyne AI" or "the Company"), a U.S.-based aerospace, defense and industrial technology company delivering embodied AI-powered collaborative autonomy solutions, advanced avionics, precision-manufactured components, UAVs, and advanced aerospace engineering services, today announced financial results for the second quarter ended June 30, 2026.

Ben Wolff, President and Chief Executive Officer of Palladyne AI, commented:

"The headline this quarter is the $13 million of new contract awards, and it is why we are comfortable reiterating guidance for the year. Backlog stands at nearly $25 million even after we recognized a record quarter of revenue, and it remains the number I watch most closely because it is the foundation the next several quarters are built on.

"From a product standpoint, the milestone was executing Ivy Mass and hitting every objective we set for it. Ivy Mass was the first in a series of 4th Infantry Division exercises we were competitively selected for under the Army's Disruptive Applications program. Over the course of three weeks, we integrated SwarmOS with the Army's Next-Generation Command and Control prototype ecosystem. SwarmOS enabled us to operate drones from four different manufacturers, including our own Gremlin-X mini bomber, under a single operator. We also just completed another major DoW exercise in late July, and we have been invited to five more over the next 8 months, starting with Northern Strike, which is underway now.

"We also signed our partnership with Israel Aerospace Industries (IAI) during the quarter, which gives us exclusive U.S. rights to Americanize, manufacture, integrate and market IAI's HARPY, HAROP and Mini HARPY loitering munitions to the Department of War. These are long-range, battle-proven systems for suppressing and destroying enemy air defenses, and they fill a capability gap that the U.S. arsenal has today. I believe systems like these could not only reduce the kind of aircraft losses we have seen in recent operations in the Middle East, but also do it far more cost-effectively than current methods for eliminating enemy air defenses. Since signing, we have been working alongside IAI on the strategy and planning for bringing the Department of War on board with these systems, including Americanization requirements and manufacturing readiness.

"Financially, every part of the business grew this quarter. Our operating cash burn¹ ran higher than last quarter. That increase reflects two things: we are still early in scaling revenue against our cost base, and we made deliberate investments ahead of that ramp. We made some one-time capital expenditures, added business development and program management headcount in our Aerospace and Defense division to pursue and support Department of War work, and brought on additional engineers to support existing contracts and advance programs, including Gremlin-X. Those are costs we are taking on against contracts we can already see, and we expect quarterly cash usage to come down as revenue and margins ramp through the second half."

Second Quarter 2026 Strategic and Operational Highlights

• Signed an exclusive partnership with IAI covering U.S. rights to the HARPY, HAROP and Mini HARPY long-range loitering munitions, with no upfront payment and up to ten years of exclusivity;
• Competitively selected for two U.S. Army contracts under the Disruptive Applications Broad Agency Announcement to operationally validate SwarmOS and Gremlin-X with 4th Infantry Division warfighters;
• Secured $2.6 million in orders for BRAIN flight computers from a defense prime, including a $2.3 million contract supporting a low-cost kinetic counter-UAS interceptor;
• Commenced previously announced $4.2 million Air Force Research Laboratory HANGTIME contract, integrating satellites into a coordinated sensor network for the first time;
• Received a $2.9 million U.S. Air Force STRATFI option exercise for the Palladyne IQ embodied AI architecture, bringing total program value to over $10.6 million;
• Demonstrated SwarmOS and Gremlin-X at the Army's Ivy Mass exercise, subsequently participated in an additional Department of War exercise in July, and have been invited to five more through March 2027;
• Selected as one of 14 companies invited to the AFRL Relentless Wolfpack Industry Day, and the only small cap in that group, on a submission combining SwarmStrike with SwarmOS.

Second Quarter 2026 Financial Highlights (vs. second quarter 2025)

• Revenue increased 470% to $5.8 million compared to $1.0 million;
• Operating loss of ($13.4) million compared to ($8.1) million, mainly reflecting higher stock-based compensation and continued investment in Palladyne Aerospace and Defense;
• GAAP net loss and basic and diluted GAAP loss per share (EPS) of ($12.3) million and ($0.27), respectively, compared to ($7.5) million and ($0.20), respectively, in the prior year period
  • Second quarter 2026 included a $0.8 million non-cash gain on warrant liability revaluation, compared to a gain of $0.1 million in the prior year period;
  • Second quarter 2026 included $2.3 million in non-cash stock compensation expenses compared to $1.1 million in the prior year period;
• Non-GAAP net loss and basic and diluted Non-GAAP EPS of ($10.8) million and ($0.23), compared to ($6.4) million and ($0.17) in the prior year period, respectively²;
• Cash, cash equivalents and marketable securities totaled $43.7 million as of June 30, 2026, roughly flat to March 31, 2026; and
• Backlog as of June 30, 2026 increased 43% during the quarter to $24.6 million, reflecting approximately $13.0 million in new contracts awarded, partially offset by revenue recognized during the quarter.

Full Year 2026 Outlook

Revenue:

Palladyne AI is reiterating its guidance for $24.0 - $27.0 million, representing expected year-over-year growth of approximately 357% to 415% compared to 2025 revenue of $5.2 million. The Company expects growth to increase sequentially in Q3 as backlog converts, new contracts are awarded and performed, and commercial deployments expand.

Backlog of $24.6 million as of June 30, 2026, reflects continued contract momentum during the quarter. Palladyne AI expects a majority of this backlog to be recognized as revenue over the next 12-18 months.

Cash Burn:

The Company reiterates its full-year 2026 expected operating cash burn of ($32.0) - ($36.0) million, or ($8.0) - ($9.0) million per quarter, on average. Second quarter operating cash burn primarily reflected strategic hiring in the Aerospace and Defense division, and roughly $0.9 million in capital expenditures. The Company expects cash burn to trend lower through the remainder of 2026 as revenue and margins ramp in the third and fourth quarters.

Based on its liquidity position and expected backlog conversion, management believes it is well-positioned to execute its 2026 plan.

Conference Call

Palladyne AI will host a conference call today at 8:00 a.m. Eastern Time to discuss its financial and operational results, strategy and future opportunities.

About Palladyne AI

Palladyne AI is a U.S.-based technology company developing patented embodied artificial intelligence, collaborative autonomy solutions, advanced avionics, autonomous systems, advanced UAV engineering services, and precision-manufactured components for aerospace, defense and industrial markets. Palladyne AI delivers secure, American-developed and operated platforms designed to meet the stringent requirements of U.S. government and public-sector customers, including data sovereignty, security, and compliance.

Palladyne AI's embodied AI is designed to operate in complex, contested, and high-risk environments, enabling distributed tasking, human-on-the-loop decision-making, degraded-communications resilience, and multi-domain coordination. Its platform-agnostic autonomy stack combines real-time sensor fusion, adaptive AI models, and edge-native orchestration - without vendor lock-in - to support autonomous and collaborative systems across air, ground, maritime, and industrial domains where performance, resilience, and trust are paramount. For more information about Palladyne AI, including GuideTech and Palladyne Aerospace and Defense, please visit www.palladyneai.com/.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding 2026 expected financial performance, including expected timing and amount of revenue; the amount and timing of backlog realization; the benefits of its AI software and other products and the markets for its products and services; cash usage; the pursuit of opportunities across U.S. government programs; the award and timing of new contracts and commercial deployments; and its ability to execute on its 2026 plan. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events, or results of operations, are forward-looking statements. These statements may be preceded by, followed by, or include the words "believes," "estimates," "expects," "projects," "forecasts," "may," "will," "should," "seeks," "plans," "scheduled," "anticipates," "intends" or "continue" or similar expressions. Such forward-looking statements involve risks and uncertainties that may cause actual events, results, or performance to differ materially from those indicated by such statements. These forward-looking statements are based on Palladyne AI's management's current expectations and beliefs, as well as a number of assumptions concerning future events. However, there can be no assurance that the events, results, or trends identified in these forward-looking statements will occur or be achieved. Forward-looking statements speak only as of the date they are made, and Palladyne AI is not under any obligation and expressly disclaims any obligation to update, alter or otherwise revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.

Readers should carefully review the statements set forth in the reports which Palladyne AI has filed or will file from time to time with the Securities and Exchange Commission (the "SEC"), in particular the risks and uncertainties set forth in the sections of those reports entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements," for a description of risks facing Palladyne AI and that could cause actual events, results or performance to differ from those indicated in the forward-looking statements contained herein. The documents filed by Palladyne AI with the SEC may be obtained free of charge at the SEC's website at www.sec.gov.

PALLADYNE AI CORP.
NON-GAAP FINANCIAL MEASURES
(Unaudited)

To supplement our financial statements presented in accordance with GAAP and to provide investors with additional information regarding our financial results, we have presented in this release non-GAAP net income (loss) and non-GAAP net income (loss) per share (non-GAAP EPS), each of which are non-GAAP financial measures. Non-GAAP net income (loss) and non-GAAP EPS are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies.

We define non-GAAP net income (loss) as our GAAP measures of net income (loss) excluding the impacts of stock-based compensation expense, gain or loss on change in fair value of warrant liabilities, expenses related to business combinations and other non-recurring or non-operating expenses. We define non-GAAP EPS as non-GAAP net income (loss) divided by weighted average outstanding shares.

The most directly comparable GAAP measures to non-GAAP net income (loss) and non-GAAP EPS are net income (loss) and EPS, respectively. We believe excluding the impact of the previously listed items in calculating non-GAAP net income (loss) and non-GAAP EPS can provide a useful measure for period-to-period comparisons of our core operating performance. We monitor, and have presented in this release, non-GAAP net income (loss) and non-GAAP EPS because they are each a key measure used by our management and board of directors to understand and evaluate our operating performance and to establish budgets. We believe non-GAAP net income (loss) and non-GAAP EPS help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we include in net income (loss) but not in non-GAAP net income (loss). Accordingly, we believe non-GAAP net income (loss) and non-GAAP EPS provide useful information to investors, analysts and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance.

Non-GAAP net income (loss) and non-GAAP EPS are not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of non-GAAP net income (loss) and non-GAAP EPS rather than net income (loss) and EPS, which is for each the most directly comparable financial measure calculated and presented in accordance with GAAP. In addition, the expenses and other items that we exclude in our calculations of non-GAAP net income (loss) and non-GAAP EPS may differ from the expenses and other items, if any, that other companies may exclude from non-GAAP net income (loss) and non-GAAP EPS when they report their operating results, limiting the usefulness of non-GAAP net income (loss) and non-GAAP EPS for comparative purposes.

In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of non-GAAP net income (loss) and non-GAAP EPS as tools for comparison.

The following table reconciles non-GAAP net income (loss) to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP (in thousands, except share and per share data):

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