Second Quarter 2026
Filed Aug 19, 2026Q2 2026 revenue increased 30% to $6.18 million as Technology Solutions ramped, while a $53.17 million gain on sale of investments drove reported net income; the Company reaffirmed 2026 revenue of over $50 million and 25 MW deployed.
Q2 revenue, gross margin, operating income and adjusted EBITDA improved materially, supported by Technology Solutions and lower AMA-related costs. Reported net income was dominated by a $53.17 million gain on sale of investments, while first-half revenue declined 4%, six-month operating loss widened, and the full-year revenue target depends significantly on second-half project execution.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenuesGAAP | $6,175,423 | – | increased 30% |
| Total cost of revenuesGAAP | $2,729,327 | – | decreased 9% |
| Gross marginGAAP | $3,446,096 | – | increased 94% |
| Total operating expensesGAAP | $3,397,003 | – | increased 2% |
| Sales and marketing expenseGAAP | $253,515 | – | – |
| General and administration expenseGAAP | $3,143,488 | – | – |
| Income (loss) from operationsGAAP | $49,093 | – | improved from net operating loss of $1.54 million |
| Gain on sale of investmentsGAAP | $53,173,803 | – | – |
| Total other income (expenses), netGAAP | $53,590,497 | – | – |
| Income (loss) from continuing operations before income taxesGAAP | $53,639,590 | – | – |
| Income tax expenseGAAP | $(4,984,170) | – | – |
| Net income (loss) from continuing operations, net of taxGAAP | $48,655,420 | – | – |
| Net income (loss) from discontinued operations, net of taxGAAP | $(810,990) | – | – |
| Net income (loss)GAAP | $47,844,430 | – | – |
| Basic net income (loss) per share from continuing operationsGAAP | $1.61 | – | – |
| Basic net income (loss) per shareGAAP | $1.58 | – | – |
| Diluted net income (loss) per share from continuing operationsGAAP | $1.37 | – | – |
| Diluted net income (loss) per shareGAAP | $1.35 | – | – |
| Adjusted EBITDAnon-GAAP | $0.5 million | – | The Company did not report adjusted EBITDA in the prior-year period. |
| Six-month total revenuesGAAP | $8,320,724 | – | decreased 4% |
| Six-month total cost of revenuesGAAP | $3,819,187 | – | decreased 32% |
| Six-month gross marginGAAP | $4,501,537 | – | increased 48% |
| Six-month total operating expensesGAAP | $7,626,720 | – | increased 49% |
| Six-month income (loss) from operationsGAAP | $(3,125,183) | – | net operating loss increased |
| Six-month gain on sale of investmentsGAAP | $53,226,105 | – | – |
| Six-month income (loss) from continuing operations before income taxesGAAP | $50,604,615 | – | – |
| Six-month net income (loss)GAAP | $44,352,185 | – | – |
| Six-month basic net income (loss) per shareGAAP | $1.65 | – | – |
| Six-month diluted net income (loss) per shareGAAP | $1.37 | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Technology SolutionsRevenue increased primarily through the initial ramp in data center, AI and enterprise infrastructure sourcing, integration and value-added supply chain services. | $3,231,544 | – | – |
| Services and Consulting - related partiesRevenue declined in connection with the continued reduction in scope of services under the Duos Energy Asset Management Agreement and New APR's May 2026 sale of substantially all assets. | $2,911,330 | – | – |
| Hosting RevenueThe Company expects hosting services revenue to increase throughout 2026 as additional edge data centers come online. | $32,549 | – | – |
Full year 2026 outlook
- Revenueexceed $50 million
- Note25 MW contracted, with all 25 MW planned for deployment in 2026.
- NoteApproximately $43.5 million in bookings revenue is expected to be recognized during the year, including contracted backlog and near-term anticipated awards.
- NoteApproximately $1.1 million of contracted Technology Solutions deferred revenue recorded in 2025 will be recorded as revenue in 2026.
- NoteDuos Technology Solutions has approximately $28 million in backlog so far in 2026.
- NoteA significant portion of revenue is anticipated to be recognized in the second half of the year.
- NoteThe Company anticipates positive adjusted EBITDA for the full year 2026.
What drove it
- Technology Solutions revenue was the primary driver of Q2 revenue growth.
- Reduced AMA-related costs and the wind-down of AMA-related activities lowered cost of revenues.
- Growing Technology Solutions contribution and lower AMA-related costs improved gross margin.
- Accelerated recognition of remaining AMA-related deferred revenue supported operating performance.
- Sales and marketing spending increased as the Company deployed resources for Edge Data Center and Technology Solutions business development.
- The $53.17 million Q2 gain on sale of investments related to New APR's sale of substantially all its assets was the primary driver of reported pre-tax income.
- The Company secured $111 million in contracted revenue with an investment-grade hyperscaler to provide 10 MW of critical IT-load capacity for five years at its Columbus, Georgia campus.
- The Company signed five-year, 55 MW hosting agreements with Axe Compute valued at more than $500 million.
- The Company completed the sale of its wholly owned rail technology subsidiary, Duos Technologies, Inc., to focus resources on Edge Data Center and AI infrastructure businesses.
Concerns
- First-half total revenue decreased 4% to $8.32 million, reflecting the reduction in Services and Consulting revenue associated with the AMA and New APR asset sale.
- The six-month operating loss widened to $3.13 million from $2.07 million as operating expenses increased 49% to $7.63 million.
- Q2 reported net income included a $53.17 million gain on sale of investments and a $4.98 million income tax expense; these items materially affected reported earnings.
- Hosting Revenue was $32,549 in Q2 2026.
- The Company said a significant portion of expected 2026 revenue is anticipated in the second half of the year, aligned with project timing and infrastructure deployments.
- The proposed 0Lat LLC structured lease is subject to a 90-day exclusivity and confirmatory diligence period.
What to watch
- Recognition of approximately $43.5 million of bookings revenue during 2026 and the timing of the significant second-half revenue contribution.
- Deployment of all 25 MW planned for 2026 and execution of the 10 MW, $111 million hyperscaler agreement.
- Progress on the five-year, 55 MW Axe Compute hosting agreements valued at more than $500 million.
- Conversion of approximately $28 million of Duos Technology Solutions backlog and $1.1 million of contracted deferred revenue into 2026 revenue.
- Whether adjusted EBITDA remains positive and whether the Company achieves positive adjusted EBITDA for full-year 2026.
- Capital deployment, including $68.79 million in equipment deposits, the $5.80 million real-estate deposit, and investment in the Columbus facility and related infrastructure.
Balance sheet and cash flow
- Cash and cash equivalents were $112,308,012 at June 30, 2026, compared to $15,472,229 at December 31, 2025.
- Accounts receivable, net were $3,064,611; accounts receivable, net - related parties were $222,923; holdback receivable - related parties was $10,013,872; and contract assets were $2,558,125 at June 30, 2026.
- The Company reported over $15.90 million in receivables and contract assets and approximately $128.21 million in cash and expected short-term liquidity.
- Total current assets were $129,716,055 and total assets were $241,286,943 at June 30, 2026.
- Notes payable - financing agreements were $326,617 at June 30, 2026.
- Total liabilities were $33,882,132 and total stockholders' equity was $207,404,811 at June 30, 2026.
- Six-month net cash provided by operating activities was $11,360,764, compared to net cash used in operating activities of $7,875,737 in the prior-year period.
- Six-month net cash used in investing activities was $26,674,385, including $68,793,810 in deposits on equipment, $5,800,000 deposit on real estate, $2,510,721 purchase of property and equipment, and $50,392,931 proceeds from sale of investments.
- Six-month net cash provided by financing activities was $112,149,404, including $120,096,195 in proceeds from common stock issued and $7,983,869 in stock issuance costs.
- Net increase in cash was $96,835,783 for the six months ended June 30, 2026.
Analysis
Duos reported a stronger second quarter at the operating level. Total revenue increased 30% to $6,175,423, led by $3,231,544 of Technology Solutions revenue. Services and Consulting - related parties contributed $2,911,330, but the Company attributed its decline to the continued reduction in services under the AMA and New APR's May 2026 asset sale. Hosting Revenue remained small at $32,549. The quarter marked the Company's first positive operating quarter as a data center infrastructure company, with income from operations of $49,093 versus a $1,540,182 operating loss a year earlier.
The gross-profit improvement was substantial. Cost of revenues decreased 9% to $2,729,327 while revenue increased, producing gross margin of $3,446,096, up 94% from $1,776,591. Management attributed the improvement to reduced AMA-related costs and a growing Technology Solutions contribution. Operating expenses increased only 2% to $3,397,003 in Q2, despite added sales and marketing and general and administrative resources. Adjusted EBITDA was positive at $0.5 million, although the Company did not provide a prior-year adjusted EBITDA figure.
Reported earnings were principally shaped by the disposition-related investment gain rather than operating income. Gain on sale of investments was $53,173,803 in Q2, contributing to $53,639,590 of income from continuing operations before taxes and $47,844,430 of consolidated net income. The quarter also included a $4,984,170 income tax expense and an $810,990 loss from discontinued operations. For the first six months, revenue decreased 4% to $8,320,724 and operating loss increased to $3,125,183 as operating expenses rose 49% to $7,626,720, underscoring that the Q2 inflection followed a weaker first quarter.
Liquidity expanded materially. Cash was $112,308,012 at June 30, 2026, following proceeds from common stock issued of $120,096,195 during the six months and $50,392,931 of proceeds from sale of investments. The Company also deployed $68,793,810 in equipment deposits, $5,800,000 in a real-estate deposit, and $2,510,721 toward property and equipment. Six-month operating cash flow was positive at $11,360,764, supported by contract-liability changes and despite investment-related and working-capital movements.
Management reaffirmed its expectation for total 2026 revenue to exceed $50 million, with a significant portion anticipated in the second half. It cited approximately $43.5 million of bookings revenue expected to be recognized during the year, approximately $1.1 million of Technology Solutions deferred revenue to be recognized in 2026, and approximately $28 million of Technology Solutions backlog so far in 2026. The execution focus is deployment of all 25 MW planned for 2026, including the newly cited $111 million, 10 MW hyperscaler contract, while sustaining positive adjusted EBITDA toward management's stated full-year profitability objective.
Management, verbatim
In the second quarter and over the last several weeks, we have made tremendous progress both in operational execution and the fundamental repositioning of our business as a standalone AI infrastructure provider.
Doug Recker, CEO
Financially, we began to see the early stages of the substantial performance ramp we expect to build over the course of this year, highlighted by a 30% increase in revenue and a material improvement in profitability.
Doug Recker, CEO
Operationally, we recently announced the successful divestiture of our legacy rail operations, which will now enable us to fully concentrate our resources on the Edge Data Center and AI infrastructure businesses.
Doug Recker, CEO
Not in the filing
stated, not guessed- Previous-quarter outlook was not provided, so comparison with prior guidance is unavailable.
- Free cash flow was not reported.
- GAAP gross-margin percentage was not reported.
- Non-GAAP EPS was not reported.
- No capital-return activity, including share repurchases or dividends, was reported.
- No full-year 2026 guidance was provided for gross margin, operating expenses, tax rate, GAAP earnings, or EPS.
- No prior-quarter financial metrics were provided for sequential comparison.
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.