Veritone Q2 2026 Earnings Call: Complete Transcript

Veritone (NASDAQ:VERI) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.

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Summary

Veritone reported a 20% sequential revenue increase to $24.3 million in Q2 2026, driven by Veritone Data Refinery (VDR) and licensing services, although slightly below expectations due to delayed public sector contracts.

The company implemented $11.3 million in annualized cost reductions, targeting up to $20 million by year-end 2026, aiming for breakeven profitability in fiscal 2027.

Strategic initiatives include expanding the VDR with hyperscalers, launching new AI products, and enhancing public sector offerings, while facing temporary delays in Department of Defense contracts due to budget shifts.

Veritone secured significant public sector contracts, including a multi-year deal with the California Highway Patrol, and expanded international presence, particularly in the UK.

Management expressed optimism about future growth, citing a strong pipeline and strategic partnerships, but revised 2026 guidance to reflect anticipated revenue between $100 to $150 million.

Full Transcript

OPERATOR

Good day and welcome to the Veritone second quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded.

I would now like to turn the conference over to Kate Goldsmith, Investor Relations. Please go ahead.

Kate Goldsmith, Investor Relations

Thank you and good afternoon. After the market closed today, Veritone issued a press release announcing results for the second quarter ended June 30, 2026. The press release and other supplemental information are available on the Investor Relations section of Veritone's website. Joining us for today's call are Veritone's President and Chief Executive Officer Ryan Steelberg and Chief Financial Officer Mike Zemetra, who will provide prepared remarks and then open the call for a live question-and-answer session.

Please note that certain information discussed on the call today, including certain answers to your questions, will include forward-looking statements. This includes, without limitation, statements about our business strategy and future financial and operating performance. These forward-looking statements are subject to risks, uncertainties and assumptions that may cause the actual results to differ materially from those stated. Certain of these risks and assumptions are discussed in Veritone's SEC filings, including its Annual Report on Form 10-K. These forward-looking statements are based on assumptions as of today, August 13, 2026, and Veritone undertakes no obligation to revise or update them. During this call, the actual and forecasted financial measures we will be discussing include non-GAAP measures. Reconciliations of these measures to the corresponding GAAP measures are included in the press release we issued today. Finally, I would like to remind everyone that the call today is being recorded and will be made available for replay via a link on the Investor Relations section of Veritone's website at www.veritone.com.

Now I would like to turn the call over to our President and Chief Executive Officer, Ryan Steelberg.

Ryan Steelberg, CEO

Thank you, Kate. Good afternoon everyone and thank you for joining us today. During the second quarter, Veritone executed decisively on the strategy and commitments we outlined in May. Our goal was to create measurable and material outcomes, generating material revenue and repeat orders through Veritone Data Refinery, or VDR, expanding customer adoption and restructuring our organization to be more efficient while materially lowering our cost structure.

I'm proud to report that we delivered on these fronts, improving our second half visibility and firmly positioning the business for profitable growth. I would summarize our performance like this as we sit here in Q3 of 2026. While executing these very material organizational changes and cost-cutting initiatives, we were still able to grow revenues year over year and materially from last quarter. Furthermore, compared to this time last year, we have greatly deleveraged the business, substantially increased our pipeline and total addressable market, and lowered our operating cost structure.

Regarding our remaining convertible debt, we have been and remain in active discussions with our debt holders about potential restructuring and we plan to provide more detail in the upcoming weeks and months. In addition to these corporate and fiscal improvements, our talented product and engineering teams also delivered on the production, build and launch of multiple new AI products in the second quarter, including Veritone Assess and Document Redaction, with more exciting new product releases slated for the third quarter.

Back to our recent actions, subsequent to the quarter end, we made substantial progress on the restructuring and cost actions announced earlier this year. These changes, albeit difficult, were necessary. As of today, we have implemented actions that represent approximately $11.3 million in annualized savings, including headcount reductions and lower non-payroll expenses, towards a projected total of $15 to $20 million by the end of fiscal year 2026.

We expect to continue to identify additional opportunities to improve operating efficiency into next year with a continued effort to realize up to 30% in relative total savings through the first part of 2027. Importantly, we have been deliberate in where we reduced spending while preserving targeted investments behind our highest growth opportunities, including VDR and public sector. Our actions have focused on eliminating duplicative corporate cost, streamlining the organization, and leveraging our own AI technologies to drive greater productivity and operating efficiency across the business.

We believe these actions better align our cost structure with our current revenue base while maintaining the resources and capabilities needed to execute against our key growth priorities. As we mentioned last quarter, we are not waiting for revenue growth to catch up to our cost structure. We are actively improving the operating efficiency of the business with the goal of achieving breakeven profitability in fiscal year 2027. Today, we are moving rapidly from vision to commercial execution, connecting data owners with data AI developers and placing Veritone at the center of the rapidly expanding AI data economy.

We are successfully converting VDR opportunities into large commercial deployments, having closed some of our largest individual deals in the second quarter. This traction came from repeat customers, and we are currently sourcing and prepping data for several strategic clients, most of which operate under active master services agreements. We remain very bullish on VDR and our market positioning in the training data market. Hyperscalers remain central to this expansion as both foundational clients and high-velocity partners.

Positioning VDR as a core growth engine for Veritone, we have built the VDR infrastructure and signed the major players. Now is the time to execute and fulfill. To put the scale opportunity in context, based on the firms already under contract, a single incremental order from one of our signed hyperscalers or foundational model developers can represent millions of dollars of margin in a single quarter. As we discussed last quarter, and to continue to support this scale, our migration to Oracle is progressing right on schedule.

Initial storage payloads are expected to begin moving in the months with complete workloads to follow. This transition is seamlessly enabled by aiWARE's containerized, platform-agnostic architecture, which preserves customer flexibility and avoids vendor lock-in. Once relevant payloads are migrated, we expect compute savings of approximately 20% or more. In addition to our infrastructure buildout with Oracle, we are also escalating our co-selling and marketplace opportunities with Oracle.

I recently had the opportunity to speak at their national OCI sales team at their annual kickoff and have been invited to speak at the Oracle AI World 2026 conference in October. Partners like Oracle, Workday, Carahsoft, Getac and others remain a critical part of our future growth strategies both domestically and internationally. In addition to these major global partners, we maintain strategic partnerships with numerous public sector agencies and leaders in the sports, media and entertainment industries.

Through these strategic partnerships, co-selling activity is well underway, currently representing over 450 sourced or jointly pursued opportunities and over $9 million in active pipeline. Partners are critical. Our Commercial Enterprise division delivered another quarter of strong execution, demonstrating scalability and deepening demand for AI software and data monetization solutions, with 232 agreements executed over the period. One of the clearest examples is within our Content Licensing division, which drove double-digit year-over-year growth in both revenue performance and completed agreements.

Simultaneously, our sales team continued to close strategic software deals, expanding the operational footprint of our AI enterprise platform by securing and renewing key rights-clearance partnerships with premier brands like CNN and Sony Pictures Entertainment. Veritone continues to prove its value as an essential software and revenue engine for commercial organizations. Live sports remains the crown jewel of the media ecosystem and Veritone sits directly at the center of it.

Building our Q1 momentum, Q2 marked another milestone in our long-standing relationship with Augusta National, which began in 2008 during the Masters. Our technology delivered live ingestion, automated AI tagging and agentic metadata workflows to transform tournament coverage into instantly searchable, high-value digital assets in near real time. Extending this momentum across the broader sports ecosystem, we have recently announced a multi-year renewal with the Pac-12 Conference as their exclusive global content licensing partner, leveraging our Digital Media Hub to manage and monetize both historical archives and current athletic seasons.

By unlocking immediate asset accessibility while preserving strict IP control, Veritone empowers premier rights holders to open new revenue streams and elevate fan engagement as action unfolds. As global demand for high-quality AI training data reaches an inflection point, we are actively monetizing the AI data economy through our Veritone Data Refinery. As we turn massive unstructured video and audio archives into high-margin, AI-ready assets, we remain consistently and actively engaged with both hyperscalers and frontier labs as a trusted partner of the necessary data to power the AI economy.

This underscores the strength of our data pipeline as AI technology and innovation leaders turn to Veritone to fuel their next-generation models. Looking ahead, we continue to aggressively execute on our strategy to dramatically expand our total addressable market. Leveraging our cloud-native Digital Media Hub, we are taking the enterprise-grade AI architecture we have built for media giants and democratizing it through modular packaging and tier pricing to capture high-margin growth across previously underserved market segments including mid-market SMBs, marketing agencies and independent creators.

We are transforming Veritone from purely an enterprise specialist into a universal software standard for audio and video workflows. Turning to the public sector, Veritone's AI applications and iDEMS suites are revolutionizing productivity and efficiency for mission-critical workflows. This quarter we launched Veritone Document Redaction and Veritone Assess to our product portfolio. Both applications are built on aiWARE and fit seamlessly into the iDEMS suite of solutions that we currently offer.

Document Redaction materially increases our TAM, as all states have requirements for document redaction. We have already closed several deals and will be making Document Redaction available to our existing customers and generally available to all customers this quarter. Veritone Assess is an agentic, AI-powered data analysis solution designed to help public safety agencies rapidly identify inconsistencies, missing information and critical intelligence gaps hidden within complex unstructured data sets.

Assess significantly expands our AI capabilities across investigations, compliance and case analysis while increasing the speed and accuracy of decision-making. Its use cases include solving crimes, identifying procurement and financial fraud, developing mission plans and applying policies and procedures to processes involving unstructured data. As we highlighted during our July Innovation Showcase, we are translating our technology into meaningful real-world impact through our ongoing work with the Cold Case Foundation.

Veritone Assess is currently being used on multiple cases, including the JonBenet Ramsey case in Colorado. We believe the public exposure from this work, as well as engagement with the law enforcement agencies where these cases originate, will continue to help accelerate growth across our public safety business. We also secured a multi-year contract with the California Highway Patrol, or CHP, the largest state police agency in the United States, for Veritone Redact to automate the redaction of sensitive information within digital evidence data sets collected by CHP, significantly accelerating public records processing while protecting citizen privacy. This contract validates a highly scalable, repeatable deployment model for use across a variety of state and local agencies. In fact, the CHP is already evaluating our other iDEMS applications, thereby contributing to the growth of our overall public safety pipeline. Our broader public safety sales momentum also remains strong. We secured a five-year agreement with a state agency in Washington and added several new customers that licensed multiple products under multi-year agreements.

We also saw a significant increase in partner activity, including new activations and new accounts. We added MCCI and JustFOIA as new channel partners for our redaction solutions, added several new reseller partners, and continue to advance our technical integration and co-selling relationship with Getac to accelerate adoption across the local agency market. We have established a strategic partnership with Police1 and Lexipol to help agencies identify, pursue and secure grant funding for advanced investigative technologies, reducing a key barrier to procurement.

At the federal level, we are demonstrating our leadership in AI infrastructure and government AI initiatives through our partnership and participation in the Genesis Mission Consortium, supporting efforts to accelerate the federal government's AI resources, data sets and high-performance computing capabilities by utilizing aiWARE and our applications. In addition to supporting our current Department of Defense agencies, the U.S. Defense Logistics Agency and the U.S. Air Force, we are in the process of expanding our enterprise ATO and application footprint for the Department of Justice by adding Veritone Investigate with Assess to the FedRAMP marketplace. We are also in the final stages of contracting for a border security project that we expect to commence shortly. Internationally, we recently concluded an agreement with the UK Department for Work and Pensions, highlighting our growing global momentum in the public sector.

Also, as it relates to the UK, we have been down-selected as part of an exclusive group of technology firms and vendors for a large countrywide procurement framework, which we remain optimistic as we finalize the contract to secure the award and the appointment here shortly. We also have been actively engaged on iDEMS opportunities with law enforcement agencies in the UK, Canada and Ireland. Our international activity continues to grow as we focus on these important markets.

With the addition of new products, new partners and expanding channel presence, we have significantly increased our addressable market and routes to market. Our applications and iDEMS suites are doing more than improving workflows. They are enabling mission-critical outcomes, improving productivity and efficiency, increasing case closure rates and helping the public sector customers reduce costs. The strong momentum we are seeing across our public sector business underscores the critical nature of our offerings, and we look forward to the public sector opportunity in the future.

Our Hire division, now officially rebranded as Broadbean by Veritone, delivered a focused and highly productive second quarter. Even as we navigate a selective and challenging macro hiring environment, Broadbean remains a bedrock of high-margin recurring revenue for Veritone. This operational stability is powered by the sheer scale of our global network. Broadbean now manages over 7.6 million jobs annually and generates 132 million candidate engagements, cementing its position as a vital foundational asset within our product portfolio.

On the product innovation front, I'm thrilled to report the successful launch of our Job Acceleration feature on May 11. While our programmatic advertising campaigns excel at standard budget pacing, shared tool dynamics can sometimes leave urgent or specialized roles underserved. Job Acceleration solves this directly by allowing recruiters to place high-priority roles into a dedicated high-velocity fast lane without altering their main campaign settings.

Market adoption and customer feedback during early rollouts have been exceptional. A key client, SOS Group, highlighted the tool as an absolute game changer, specifically praising its ability to enable their team to respond immediately to sudden spikes in talent demand. By combining dedicated budgets with a friction-free pay-for-performance model, Job Acceleration gives talent acquisition teams instant speed and control, a capability we expect will drive meaningful incremental spend across our broader user base.

Our enterprise sales momentum also remains strong in Q2, highlighted by 76 new business wins and key multi-year wins across our global footprint. Our media services revenue delivered exceptional performance, surging by 48% compared to Q1 and reflecting robust demand across our global advertising footprint. Concurrently, our team is executing smoothly on the multi-agency UK public sector rollouts announced last quarter, including the flagship UK Department for Work and Pensions implementation.

Finally, as we have stressed above and previously, the importance of our partnership channels are very critical to the business, and I wanted to provide an update on our Tier 1 HCM ecosystem where we have reached several critical milestones this quarter. SAP PartnerEdge Build program: On May 5th, we officially signed as a partner in the SAP PartnerEdge Build program. This creates a direct channel to integrate Broadbean solutions directly in SAP's core talent management ecosystem, establishing a clear pathway to expand our footprint within the Global 2000 brands that rely on SAP daily.

Oracle HCM: we continue to deepen our functional integrations with Oracle HCM, ensuring our global distribution power is seamlessly exposed to their enterprise customer base. We will continue to push into this ever-expanding relationship with Oracle. Workday: building our momentum as a Workday Platinum Partner, we closed several new—seven new—Workday deals in Q2, bringing our year-to-date Workday total to $1.3 million across 33 joint wins, keeping us firmly on track towards our full-year ecosystem expansion goals.

These operational wins, technology launches and strategic alliances collectively signal a pivotal transition for Broadbean by Veritone. We are no longer just a job distribution tool. We have established ourselves as a deeply embedded, AI-driven strategic partner essential to how the world's largest employers source, engage and manage talent. Looking forward, I'm exceptionally excited about the rapid strides we are making in engineering technology and our next-generation product roadmap for Broadbean.

By embedding autonomous capabilities into our core job management architecture and pioneering new enterprise-compliant career sites, we are positioning Broadbean to not only streamline recruitment workflows, but to set the global standard for intelligent, compliant talent acquisition in the AI era. In closing, the investments, as well as the difficult yet disciplined operational decisions we have made over the past several quarters, position Veritone to accelerate growth while materially improving our path to profitability through the second half of 2026 and into 2027.

Our decisive reorganization and cost cutting will more appropriately align our current revenue base and growth areas, creating a clear path to profitability in 2027. Now I'll turn the call over to Mike, who will review our financials and business performance in more detail. Mike, great.

Mike Zemetra, CFO

Thank you, Ryan. Overall revenue was strong in Q2 2026 led by VDR, however, was slightly short of expectations, largely driven by the public sector, where we experienced delayed budgetary shifts in late Q2 2026 from the Department of Defense to move funds over to support the conflict in Iran. As I will explain in more detail later in my prepared remarks, we view this as a temporary shift as the pipeline of projected adoption of our AI platform across the U.S. Federal Government is forecasted to increase substantially over the next several quarters, and we continue to work directly with the DoD despite the temporary decision to move budget funds to the Iran conflict. On the operating side of the business, we executed 11.3 million of annualized cost reductions to date, or roughly 11% of our annualized cost structure as of June 30, 2026, mostly from headcount reductions and reduced third-party professional and consulting fees.

By the end of fiscal 2026 we are targeting up to an additional 3.5 to 8.5 million of cost reductions to reach up to 20% of annualized cost reductions. As I will explain later in my prepared remarks, none of these reductions for revenue are growth impacting and we are expected to start showing breakeven results on a non-GAAP basis as early as the first half of 2027 and potentially for the full year. Fiscal 2027 is modest forecasted revenue growth year over year.

During my prepared remarks I will discuss our Q2 year-over-year performance and KPIs, balance sheet liquidity position, including our recent cost reductions, and provide updates on our financial progress in Q2 2026 and fiscal 2026 guidance. Now I would like to discuss our Q2 2026 performance in more detail. Q2 revenue was 24.3 million, up 4 million or 20% sequentially from Q1 2026 and up 1 million or 5% from Q2 2025. The sequential 20% revenue improvement from Q1 2026 was driven by increased VDR and licensing services which, when combined, were up 40% quarter over quarter.

The improvement over Q2 2025 was driven by our managed services which saw increases in licensing and representation services, while software and products and services was relatively flat year over year, driven by higher VDR revenue offset by declines in Veritone Hire and the public sector. Veritone Hire was down year over year principally due to lower consumption-based revenue from one of its largest hiring platforms, driven in part by a continually challenging macro environment across hiring in the quarter, which is expected to continue through the second half of fiscal 2026.

The year-over-year decline in public sector was largely due to the delayed contract extension with the DoD, which was entirely driven by temporary budgetary shifts and wartime spending due to the ongoing conflict in Iran. To be clear, this is an active project with the DoD that we have been working on expanding for more than a year. We remain highly engaged with the DoD on next steps and anticipate that funding will be approved as early as the second half of 2026 or first half of 2027, depending on the status of the Iran conflict.

As I will explain later in my prepared remarks, we remain very bullish on our current and future pipeline in the public sector, including expanding further within other critical areas of the U.S. Federal Government and internationally into Western Europe. Our Q2 results were also somewhat tempered by the fact that certain transactions with some of our larger hyperscalers for VDR remain under active review but not fully processed. I would like to remind everyone that we have all the largest hyperscalers under contract and we currently have a near-term VDR sales pipeline and bookings of over 65 million.

In addition, we have an active sales pipeline of more than 15 million which could all close in Q3 and/or Q4 2026 and includes several deals in a single to high multimillion-dollar range. While the timing of these VDR deals is not fully in our control, we remain optimistic on the near- and long-term revenue growth opportunities for VDR. Turning to the public sector, we are forecasting the public sector to continue to grow throughout fiscal 2026, albeit lower than we had originally expected, with more pronounced growth beginning in fiscal 2027 and expanded rollout of iDEMS across the DoD including OSI and other larger international and U.S. federal agencies. Turning to Q2 managed services, which increased 1 million year over year, firstly as a result of increases in both licensing and representation services. As previously discussed, we are seeing improvements in our representation and licensing services over 2025 and expect this trend to continue throughout the remainder of fiscal 2026. Turning to key performance metrics across our software, products, and services in Q2 2026, ARR of 62 million, up slightly from Q2 2025 of 61.9 million, driven by increased consumption-based revenue from one-time software revenue and VDR, offset by a decline in SaaS-based revenue as we made the decision to sunset one of our legacy SaaS products in Q2 2026 which was margin negative since its inception. Overall ARR and consumption-based customers increased 71% year over year while recurring subscription-based SaaS customers declined 15%. New bookings of 13.9, which were down slightly year over year. Gross revenue retention continued to be above the 90th percentile and total software, product, and service customers of 2,829, down 8% year over year predominantly from our commercial enterprise sector, which includes lower consumption-based customers and across Broadbean by Veritone, principally due to macro-driven churn from smaller customers as we focus on larger ARR opportunities. As the hiring market continues to be challenged, we expect this trend of smaller ARR customers to continue throughout fiscal 2026. Q2 GAAP gross profit was 14.2 million compared to 15.7 million in Q2 2025. The decline was primarily driven by the decline in revenue, principally from our hiring products and services. Q2 GAAP gross margins of 58.5% as compared to 67.5% in Q2 2025, a decline of 900 basis points driven largely by the mix of revenue in each period.

Excluding non-cash depreciation and amortization expense, Q2 2026 non-GAAP gross margin was 63.7% as compared to 72.6% in Q2 2025, a decline of 890 basis points. Note that we continue to forecast 2026 non-GAAP gross margins to be closer to 60% to 65% throughout the year and will vary depending on the timing and mix of VDR revenue in a given period. Q2 operating loss of 22 million increased by 3.1 million, or 16% year over year, primarily driven by the 0.7 million decline in non-GAAP gross profit, a 4.5 million increase in one-time severance and transition costs associated with our recently announced restructuring and cost reduction efforts, offset by lower non-cash depreciation and amortization and a 1.3 million net decrease in year-over-year operating line item expenses driven by lower personnel across G&A and sales and marketing due in part to headcount efficiencies year over year, offset slightly by higher R&D costs as we continue to invest in our future growth. Net loss was 22.2 million as compared to 26.5 million in Q2 2025, a 4.3 million or 16% year-over-year improvement. Driving this year-over-year improvement was a 3.4 million decline in net interest expense year over year as a result of the paydown and retirement of 100% of the company's senior secured debt in November 2025.

In addition, the company recorded a one-time non-cash loss of 2.9 million in Q2 2025 from a change in the fair value of the company's estimated earnout from the Veritone One sale in October 2024 that did not recur in Q2 2026. Lastly, income taxes were approximately 1.1 million higher in Q2 2026 primarily due to the timing of certain income tax items. Offsetting this was a decline in operating loss of 3.1 million; excluding the one-time restructuring charge of 4.5 million, future net loss would have been approximately 17.7 million as compared to 26.5 million, an 8.8 million or 33% improvement year over year.

Overall non-GAAP net loss was 9.95 million as compared to 8.4 million in Q2 2025. The year-over-year variance was mostly driven by lower non-GAAP gross profit coupled with a 0.3 million decline in capitalized software in Q2 2026 as compared to Q2 2025. Turning to our liquidity and balance sheet, as of June 30, 2026, we held cash and restricted cash of 12.7 million as compared to 27.7 million at December 31, 2025. The 15 million net change in cash reflects net cash outflows from operations of 22.1 million, principally driven by our non-GAAP net loss of 21.9 million, and net cash inflows from investing and financing activities of 6.9 million, primarily driven by net cash outflows of 2 million in capital expenditures and 9.4 million in net proceeds raised from our ATM in Q2 2026. As of June 30, 2026, we settled 5.8 million shares under our ATM, raising net proceeds of approximately 9.4 million at an average price of $1.68 per share. Excluding capital raises in the first half of 2026 and 2025, we also improved our net cash outflows by over 27% by 8.8 million year over year. Turning to liquidity today, as of June 30, 2026, we held 12.7 million of cash and restricted cash as compared to 13.8 million as of June 30, 2025.

Moreover, all the entirety of today's cash is unencumbered and free of any restricted debt covenants, unlike in the prior year when we had a 15 million minimum cash requirement under our legacy senior secured debt. In addition, we have approximately 45 million of total debt outstanding at June 30, 2026, accruing interest at an annual rate of 1.75% as compared to approximately 130 million at June 30, 2025, a year-over-year improvement of 85 million in debt principal and more than 13 million in reduced annualized debt carry costs.

This improved flexibility and stability has strengthened our balance sheet and allows us to focus on reaching our growth potential to meet the hypergrowth market opportunities ahead of us. At June 30, 2026, we had 99.1 million shares issued and outstanding and 2.5 million warrants outstanding to certain legacy term debt holders. In late June 2026, we began our operating restructuring efforts with a goal to reduce our current operating expenses up to 30%.

In the first phase of this restructuring, which continued through this week, we eliminated 62 full-time employees, which is roughly 14% of our workforce. In addition, we reduced other operating expenses. When combined, we have executed approximately 11.3 million, or roughly 11%, of our annualized operating expense. And we're not done. We have plans to further enact an additional 3.5 to 8.5 million of annualized operating expense reductions under this restructuring effort to reach to at least 15 to 20 million of annualized cost reductions by the end of 2026, or up to 20% of our annualized operating expenses.

As I will explain further in my prepared remarks, these efforts will ensure we are on target to achieve breakeven profitability with revenue growth at or near 125 million to 130 million of annualized revenue in fiscal year 2027 for approximately 11% year-over-year growth from the high point of our fiscal 2026 guide. This is absolutely achievable given that substantially all of the investments to achieve this targeted revenue growth have already been made.

There will be minimal additional opex required to achieve these revenue milestones heading into fiscal 2027. That said, we will continue to be opportunistic with continued focus to further improve our current liquidity position and balance sheet as well as previously discussed plan to reduce our consolidated operating expense over the next several months. As of June 30, 2026, we have over 40 million of availability remaining under our current ATM and we have been in active discussions with our debt holders on potential structuring going forward, which we plan to update you in more detail in the coming months.

Lastly, we are working on multiple strategic funds with some of the largest companies in the world. We continue to accelerate our growth across our commercial and public sector services. Now turning to full year 2026 guidance. As a reminder, we will only be providing financial guidance for the full fiscal year 2026 given the complexity of forecasting the timing of VDR deals which tend to be larger in dollar values and entirely consumption based, coupled with the complexity of government decision-making, especially during wartime.

That said, and as I explained earlier, we are seeing a large backlog of more than 15 million of active VDR deals that all could close in Q3 2026, and we have given a soft range on Q3 2026 revenue to be between 24 million to in excess of 28 million, which at the high point would be a year-over-year improvement of over 5%. As a backdrop to our annual guide, our software, products, and services revenue pipeline and long-term outlook continue to be at all-time highs.

More specifically, we continue to see strong demand across commercial VDR and the public sector. In 2026, hyperscalers including Google, Amazon, Meta, Nvidia, which are all current customers, have individually forecasted to spend hundreds of billions of dollars in fiscal 2026 to progress their AI initiatives, including further investments into their large language models. With a global AI training dataset market size projected to grow from 4.4 billion in 2026 to 23.2 billion by 2034, we are just in the early phases of AI data modeling from a model training perspective.

We believe that we continue to be well positioned to exploit this potential revenue opportunity at the forefront of future spending with our VDR solution as the more mature models are now investing heavily in rich video data, where we believe Veritone has a clear competitive advantage. As of today, our near-term sales pipeline of VDR remains over 65 million and continues to grow. And to be clear, the average deal size is in the million to millions per VDR order.

While we do not control the timing, we are active with these hyperscalers on this potential near-term pipeline of 15 million to address this in 2026. We are focused on the most efficient and cost-effective ways to increase the supply of data and we will also be investing in the engineering and product around VDR, including Veritone Marketplace, where our aim is to deepen our competitive moat with exclusive access to thousands more data providers.

As previously discussed, we now have access to content rights holders who control more than 50 million hours of valuable video data, which is vastly significant as compared to the hours we held this time last year. We believe these near-term strategic decisions will enable us to continue to grow VDR revenue in fiscal 2026 and beyond at or above the 23% projected CAGR for spending on large language models through fiscal 2034. In the public sector, the market TAM for digital evidence management solutions today exceeds north of 10 billion and it continues to grow at double-digit rates.

As discussed earlier, we did experience temporary delays with our current DoD project in large part due to the reallocation of current fiscal budget towards war efforts in Iran. That said, we are actively in contact with the DoD on this project and are highly optimistic this project will re-engage at some point in the second half of 2026 or early in fiscal 2027. Despite this delay, deal progress in the public sector has been substantial. Specifically, we have been down-selected on a multi-year approximate 10-figure award internationally where we were selected along with a dozen or so other vendors to deploy our iDEMS solution across a major European country. In addition, we should also be announcing another major win to deploy our iDEMS product across another investigative department of the U.S. Government, and we are well underway with a third-party hardware provider to jointly deploy our iDEMS solution and capture a larger share of the state and local law enforcement market. While we cannot quantify the impact of these opportunities, given the stage they are in which will most likely impact fiscal 2027, they could easily double our current public sector pipeline when combined, which today remains north of 200 million.

We look forward to providing more details on these opportunities as they mature over the coming months. With the uncertainty around timing of these potential new partnerships and the budgetary shift in the DoD, we will be revising our financial guidance for the public sector, which is now expected to grow at a more modest rate versus what was expected in the previous quarter. That said, once we begin formally rolling out more instances of iDEMS across the broader DoD, including the previously discussed upcoming deals, we expect that growth rate to be much higher starting in the first half of 2027.

On the opex side, the 11.3 million from restructuring and cost reduction efforts will directly benefit the second half of 2026, with the potential for an additional 3.5 million to 8.5 million by year end. These cost reductions will impact the entire organization, but more pronounced on sales and marketing and general and administrative. As a result, we are expecting the back of 2026 to show declines in sales and marketing and G&A expenses year over year, with forecasted spending across these areas as a percentage of total revenue expected to show improvements year over year.

We are projecting research and development expenses to be slightly down in the second half as compared to the run rate in Q2 2026. However, we are still continuing to invest in VDR and public sector revenue initiatives, including the Veritone Marketplace and planned new software product features and enhancement in 2026 and beyond. With our updated financial guidance, we are projecting operating profitability as early as the first half of fiscal 2027, provided we execute the remainder of our cost reductions by the end of 2026.

The key risks to our revenue projections are the consumption-based nature of VDR coupled with the timing of government-based contracts and decision-making. As a reminder, over the past 12 months individual deal sizes for VDR have ranged from the high six figures to mid–seven figures. While we feel confident in our sales pipeline for VDR, our visibility into the timing is typically two to three months in advance of delivery, and decision-making on the nature and volume of content may change depending on the customer's need and anticipated impact on its training models.

More specifically, we are updating our fiscal 2026 guidance to revenue to be between 100 to 150 million, which at the midpoint represents a 17% increase year over year for fiscal 2025. As discussed, we are expecting the public sector revenue to modestly grow year over year and the remaining growth to come from our commercial enterprise sector, predominantly from VDR. Our Broadbean by Veritone Hire products and services are included in this group and we expect Broadbean by Veritone Hire to be slightly down year over year given the current macroeconomic hiring environment.

Our managed services is expected to be up year over year by 10% to 15%, principally due to the recent improvements we are seeing on the representation side of our business. We expect gross margins to fluctuate between 60% to 65% driven by the forecasted mix of revenue in the period, and non-GAAP net loss to be between 22 and 32 million, which at the midpoint represents a 34% improvement year over year as compared to fiscal 2025. The change is reflective of the timing shift in revenue, the previously discussed cost reduction efforts to date, coupled with the compression in gross margins due to the mix of VDR.

We believe we are still on track towards profitability, but are shifting this to the first half of fiscal 2027 and it is highly dependent on the planned compounding growth of VDR in the public sector heading into fiscal 2027 coupled with the execution of our remaining cost reductions. Before closing the call, I'd like to remind everyone that's listening that Veritone will be in New York City attending the H.C. Wainwright 28th Annual Global Investment Conference taking place September 14th through the 16th at the Lotte New York Palace Hotel in New York City.

That concludes my prepared remarks. Operator, please open up the call for questions.

OPERATOR

We will now begin the question and answer session. To ask a question, you may press Star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press Star then two. At this time, we will pause momentarily to assemble our roster. The first question is from Kevin McVeigh with UBS. Please go ahead.