zSpace Revenue Drops 43% in 2025 Amid Federal Shutdown, But Software Margins Expand — zSpace, Inc.

Event summary

Revenue fell 43% YoY to $27.9M in 2025, with Q4 revenue dropping 43% to $4.8M, driven by a federal government shutdown freezing orders and shipments.
Software and services revenue grew to 53% of total revenue in Q4, up from 43% a year ago, contributing to an 840 basis point gross margin expansion to 49%.
Net loss widened to $25.4M in 2025 from $20.8M in 2024, with adjusted EBITDA at -$14.8M compared to -$9.9M the prior year.
Annualized Contract Value (ACV) for renewable software decreased 12% to $9.9M, with Net Dollar Revenue Retention (NDRR) at 71% for customers with over $50K ACV.
Completed a $4.3M senior secured convertible note in March 2026, following a $3M investment from Planet One Education in January 2026.

The big picture

zSpace's financial results reflect the broader challenges facing edtech companies amid macroeconomic uncertainties and funding freezes. The shift towards software and services, coupled with strategic restructuring, positions the company for potential long-term growth, but immediate revenue recovery remains a critical focus. The company's ability to leverage its AR/VR solutions in international markets will be key to sustaining value for shareholders.

What we're watching

Revenue Recovery: Whether zSpace can rebound from the federal shutdown impact and stabilize revenue growth in 2026.
Software Shift: How the company's focus on software and services will affect long-term profitability and customer retention.
International Expansion: The pace at which zSpace can capitalize on international opportunities, particularly in Italy and other global markets.