What Management Said
Read the full Q2 2026 transcript ↗The more time I spend in the field, the clearer it becomes of the opportunity to accelerate top-line growth and to meaningfully expand profitability in the years ahead. We are shifting towards a comprehensive solutions-oriented offering that increases customer uptime, enhances system performance, and drives higher-margin recurring revenue while addressing customer needs and increasing lifecycle engagement across the installed base. These external pressures affected both demand patterns and the timing of commercial activity in ways that have been difficult to fully anticipate. Given the visibility we have today, we think it's prudent to reset our fiscal 2026 revenue and adjusted EBITDA outlook for the remainder of the fiscal year.
This updated guidance assumes and reflects continued volatility in China, the persistence of current tariff structures, and other ongoing headwinds, but does not assume a material worsening beyond what we are experiencing today. Our revised guidance on the revenue will be in the range of $440 million-$450 million, with adjusted EBITDA guidance of $22 million-$25 million. This compares to our previous guidance of $471 million-$485 million of revenue and $31 million-$35 million of adjusted EBITDA. Despite the external headwinds, we remain firmly focused on delivering against our transformation commitments and strengthening Accuray's foundation for sustained, profitable growth.
Our objectives are clear: drive top-line growth, improve profitability, and create lasting value for patients, providers, and shareholders. Net revenue for the quarter was $102.2 million, which was down 12% versus the prior year and down 13% on a constant currency basis. Product revenue for the second quarter was $45 million, down 26% overall and down 28% on a constant currency basis. As Steve mentioned, most of this decline was due to product revenue in China that was lower than expected as a result of ongoing geopolitical tensions and the impact of tariffs.
- The service business proved resilient at $57.2 million, up 4% (up 3% constant currency), continuing to anchor recurring revenue.
- Product gross orders were about $66 million, a strong 1.5x book-to-bill in the quarter (1.2x trailing 12 months), with no order cancellations.
- Backlog ended at about $383 million, representing more than 18 months of product revenue, diversified geographically and backed by long-term customer commitments.
- The mid-December transformation plan advanced quickly, targeting ~$25 million of annualized operating-profit improvement (including a ~15% workforce reduction) and ~$12 million of benefit in fiscal 2026, with adjusted operating expenses down almost 21% quarter-over-quarter (ex-restructuring).
- Customer conversations showed no downward shift in hospital capital-equipment spending, and management tightened weekly/monthly operating reviews around orders, revenue, margins, service and cash.
- Net revenue of $102.2 million fell 12% year-over-year (down 13% constant currency), missing expectations.
- Product revenue of $45 million dropped 26% on lower-than-expected China sales amid geopolitical tensions and tariffs.
- Overall gross margin collapsed to 23.5% from 36.1%, with product gross margin at 19.7% (vs. 43.5%) hit by lower China JV margin releases (8.2 pts), tariffs (~6 pts) and product mix (zero CyberKnife shipments vs. five prior year, ~5.4 pts).
- Operating loss widened to $11.6 million and adjusted EBITDA was a loss of $1.9 million (vs. +$9.6 million), including $6.1 million of one-time restructuring charges.
- Cash, equivalents and short-term restricted cash fell to $41.9 million from $63.9 million on working-capital use, cash interest and restructuring payments.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Fiscal 2026 revenue | FY2026 | Cut to $440 million to $450 million |
| Fiscal 2026 adjusted EBITDA | FY2026 | Cut to $22 million to $25 million |
| Adjusted EBITDA margin run-rate | Next ~9 months | Still expect a high-single-digit adjusted EBITDA margin run-rate within nine months; double digits over the medium-to-long term |
| Transformation savings | FY2026 / FY2027 | ~$12 million of ~$25 million annualized savings expected to benefit fiscal 2026; ~$10 million of restructuring charges spread across Q2-Q4 |
| Product gross margin | Near term | Expected in the 20%-30% range, highly dependent on product mix and China release timing |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Net revenue | -12% to $102.2 million (-13% cc) | Sharp product decline in China on geopolitical tensions and tariffs; timing of commercial activity. |
| Product revenue | -26% to $45 million | Lower-than-expected China product sales. |
| Service revenue | +4% to $57.2 million (+3% cc) | Continued installed-base and offering expansion; a key recurring-revenue anchor. |
| Product gross margin | 19.7% vs. 43.5% | Lower China JV margin releases (8.2 pts, vs. 27 units released a year earlier), tariffs (~6 pts) and zero CyberKnife shipments vs. five prior year (~5.4 pts). |
| Adjusted EBITDA | -$1.9 million vs. +$9.6 million | Gross-margin compression plus $6.1 million of restructuring charges. |
| Book-to-bill | 1.5x in quarter (1.2x TTM) | ~$66 million of gross orders with no cancellations; backlog ~$383 million (>18 months). |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Transformation plan | Announced, details pending | Launched mid-December: ~$25 million annualized savings, ~15% workforce cut, ~$12 million FY2026 benefit; organizational realignment, outsourcing of non-core work and reallocation of engineering to high-ROI programs. | — |
| China risk | Tariffs and slower demand | China (a major recent growth driver) drove the product miss; the quota/license/tender/funding process has slowed and deal dynamics have become more protracted. | — |
| Service portfolio expansion | Service growth focus | Shift to solutions-oriented Select/Advantage/Optimum tiers beyond break-fix (training, monitoring, software upgrades, workflow analysis) for steadier, higher-margin recurring revenue. | — |
| Distributor management | Reliance on distributors in 81 countries | Building a tiered, pay-for-performance distributor model with clearer standards, transparency and support; a dedicated channel leader planned. | — |
| Commercial leadership | — | Company signaled the imminent appointment of a new global Chief Commercial Officer to strengthen commercial execution. | — |
| Guidance reset | $471-$485M / $31-$35M | Cut to $440-$450M revenue and $22-$25M adjusted EBITDA, assuming continued China volatility and current tariffs but no material worsening. | — |
Q&A Summary
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