Quantum results show green shoots as tape sales double

Quantum grew revenues year-on-year for the first time in ten quarters – two and a half years – beating its guidance under new CEO Hugues Meyrath's management team.

Revenues in the third fiscal 2026 quarter, ended December 31, 2025, were $74.6 million, up 8.6 percent year-over-year, with a GAAP loss of $27.8 million, much better than the year-ago $75.3 million loss and the previous quarter's $46.5 million one. The company's gross margin was 38.8 percent, which is down from the year-ago 40.6 percent but better than the preceding quarter's 37.5 percent, indicating that Meyrath’s team is getting costs under control. 

There are two strong factors facing Quantum in the market: AI and DRAM/NAND shortages. AI is seen as a beneficial trend, especially with rising DRAM and NAND prices, as that encourages customers to look to move less critical data off flash onto disk and tape, with Quantum's StorNext software, ActiveScale object, and Scalar tape libraries providing data movement, warm, and cold data stores.

Meyrath said: "Given StorNext's proven reliability and broad installed base, we see this as a meaningful opportunity for incremental growth as customers reassess their storage strategies in today's market environment."

"As flash and disk become more expensive and harder to secure, we believe tape provides customers with a practical way to offload massive volumes of data to a core tier, freeing up primary storage while meaningfully reducing power, cooling and operating costs."

"Our tape sales doubled quarter-over-quarter as customers pivoted toward architectures designed to reduce dependence on constrained components and deliver predictable economics at scale for warm and cold data."

However, supply shortages and price rises are a headwind. White said: "We are erring on the side of caution with our Q4 forecast due to increasing difficulty in procuring critical components across the entire industry."

Meyrath added: "AI-driven demand is increasing pressure on global supply chains. Critical components, particularly memory, disk, and flash are becoming increasingly difficult to procure and prices are rising as a result. In just the last 10 days, we've seen pricing double and in some case triple. This is not unique to Quantum. It's affecting the entire industry." 

Meyrath adopted a measured tone in the earnings call. "Over the past two quarters, we've put a deliberate structure and focus in place to execute our operating plan," he said. "As a result, we've seen meaningful improvement in revenue, pipeline and backlog. We also continue to strengthen our financial foundation. Through restructuring initiatives, we've lowered our cost structure in support of our near-time goal of achieving positive cash flow."

"Our revitalized sales team is executing and delivering meaningful improvements to our pipeline and backlog with a growing number of multimillion-dollar deals. We've also significantly lowered our cost structure while further strengthening our balance sheet."

He's had three priorities: reducing costs, increasing revenues, and cutting debt, and progress has been made on all. OPEX, SG&A, and R&D expense levels are showing reduction-focused control.

Revenue increases are apparent, likely with more coming. CFO William White said: "The higher-than-expected revenue was partially driven by strong backlog coming into the quarter as well as a strong shipment into the quarter end... We exited the third quarter with a strong backlog of over $20 million, which is significantly above our historical run rate of $8 million to $10 million. We expect backlog to remain meaningfully above our historical run rate in the fiscal fourth quarter, reflecting the continued success of our revitalized sales organization."

Meyrath added: "We strategically realigned our North America sales model to mirror the successful approach used in EMEA, where we have seen strong results improving focus, coverage and execution."

The conversion of Dialectic's long-term debt to senior secured convertible notes was agreed by Quantum's board in December. Meyrath said this reduced Quantum's "outstanding term debt by approximately 50 percent to historically low levels. We continue to evaluate options for remaining term debt as we work towards further strengthening our balance sheet." 

 A better balance between costs and revenues is shown by Quantum's rising gross margin, with White commenting: "GAAP gross margin for the third quarter was 38.8 percent compared to 37.6 percent in the prior quarter and 40.6 percent in the fiscal third quarter of 2025. Although we still have more work to do in order to expand gross margins back above 40 percent, the sequential increase in the third quarter reflects the initial improvement in operating efficiencies from our restructured service organization."

The outlook for the next quarter is $68 million ± $2 million, a modest 7 percent rise on the year-ago fourth quarter.