Evolv Technologies surges as security firm turns profitable, raises guidance
Q4 EPS beat of $0.06 vs expected loss drives 32% revenue growth and full-year profitability forecast
Evolv Technologies Holdings Inc. shares rallied in Tuesday trading after the AI-powered security screening company reported a surprise profit for the fourth quarter and raised its full-year revenue outlook, marking a significant milestone in its transition from unprofitable growth to sustainable earnings.
The Waltham, Massachusetts-based company reported revenue of $38.5 million for the quarter ended December 31, 2025, representing a 32% increase from the same period a year earlier and beating analyst estimates by more than 14%. More notably, Evolv posted net income of $10.9 million, achieving profitability sooner than Wall Street expected.
"This quarter marks a significant milestone for Evolv as we delivered profitability while maintaining strong growth," the company stated in its quarterly filing with the Securities and Exchange Commission.
The earnings per share of $0.06 came as a stark reversal from the loss of $0.03 per share that analysts had anticipated, representing a beat of more than 300% relative to expectations. The company also generated positive adjusted EBITDA of $1.8 million, compared to negative figures in prior quarters.
Annual recurring revenue, a key metric for subscription-based software companies, grew 21% year-over-year to reach $120.5 million, demonstrating strong customer retention and expansion. This growth outpaced total revenue growth, indicating improving business quality as the company shifts toward higher-margin recurring revenue streams.
Building on the strong quarterly performance, management raised its fiscal 2026 revenue guidance to a range of $172 million to $178 million, up from the previous outlook of $160 million to $165 million. The company now expects to generate positive adjusted EBITDA for the full year, with margins reaching high single-digit percentages.
"We're seeing accelerating adoption of our AI-powered security screening solutions across a range of vertical markets, including education, healthcare, and corporate campuses," the company noted in its earnings materials. Annual recurring revenue is expected to grow by at least 20% in 2026, exceeding total revenue growth as the company continues its transition to a more subscription-focused model.
The stock closed at $5.25 on Tuesday, giving the company a market capitalization of approximately $887 million. The shares have recovered significantly from their 52-week low of $2.64 but remain below their peak of $8.91. Analysts have maintained a generally positive outlook on the stock, with an average target price of $9.88, representing substantial upside potential from current levels.
All four analysts covering the stock currently rate it a buy, with no hold or sell recommendations, according to MarketBeat data. Institutional investors own approximately 72% of shares outstanding, indicating strong confidence from professional money managers.
Evolv's contactless security screening systems use artificial intelligence to detect weapons and other threats without requiring people to stop or empty pockets, positioning the company to benefit from increased security concerns at schools, entertainment venues, and other public spaces following high-profile incidents in recent years.
The company's improved profitability comes as it has shifted its business model toward more recurring revenue from software subscriptions and ongoing service contracts, rather than one-time hardware sales. This transition typically carries higher gross margins and more predictable cash flows, though it can temporarily pressure revenue growth as hardware sales decline relative to software arrangements.
Looking ahead, investors will be watching whether Evolv can maintain its momentum in ARR growth and achieve the profitability targets outlined for 2026. The company's ability to expand into new vertical markets and deepen penetration of existing customer relationships will be key factors in determining whether it can sustain the strong growth trajectory that has attracted analyst optimism.