Coda Octopus Group (NASDAQ:CODA) reported first-quarter fiscal 2026 results showing higher revenue and operating income, driven primarily by growth in its marine technology business and improved rental utilization. Management also highlighted ongoing efforts to expand adoption of its core technologies—its Echoscope real-time 3D imaging sonar and Diver Augmented Vision Display (DAVD) system—particularly in defense markets.
Quarterly results: revenue up 28.8% to $6.7 million
For the quarter ended Jan. 31, 2026, Coda Octopus reported total revenue of $6.7 million, up from $5.2 million in the prior-year period, an increase of 28.8%.
Operating income increased to $1.0 million from $0.6 million, an increase of 52.6%, while operating margin improved to 15.1% from 12.7%. Pre-tax income was $1.2 million versus $0.9 million a year ago.
Net income after taxes was $0.93 million, or $0.08 per diluted share, compared with $0.91 million, also $0.08 per diluted share, in the year-ago quarter. The company recorded a tax expense of $0.3 million versus $0.05 million in the prior-year period.
Marine technology led growth; rental revenue jumped
CEO Annmarie Gayle said the company’s business comprises three operations: marine technology (its “core” business), defense engineering services, and acoustics sensors and materials. She said the marine technology unit generated 50% of consolidated net revenue in the first quarter and is the foundation of the company’s growth strategy.
The marine technology business posted revenue of $3.4 million, up from $2.3 million, representing 47.4% growth. Management cited several drivers:
- Hardware sales rose 31% to $2.3 million from $1.7 million, with a “strong focus” on Echoscope sales from Asia.
- Rental asset utilization improved, lifting rental revenue by 232.8% to approximately $0.7 million compared with approximately $0.2 million in the prior-year quarter.
- Marine technology gross margin increased to 75.3% from 73.1%, which Jardine said was largely due to the increase in rental sales.
Gayle described the Echoscope as a real-time, 3D volumetric imaging sonar that can generate three-dimensional imagery underwater in zero-visibility conditions, and said a “significant part” of annual revenue is derived from the commercial offshore marine market. She added that, to achieve the growth shareholders want, the company aims to increase its market share for underwater imaging sensors in defense programs where new classes of underwater vehicles are being adopted.
Defense engineering services: growth amid funding-related delays
The defense engineering services business generated revenue of $1.8 million, up from $1.6 million, a 9.2% increase. Gayle said the unit has long-standing relationships with prime defense contractors and has served the defense market for more than 48 years, but is reliant on funding under defense programs.
She said many defense programs are being funded through continuing resolutions, which in practical terms reduces funding available for programs and has led to delays in contract awards. Although a federal budget is in place, Gayle said line-item appropriations were still pending and continued to impact the business.
Jardine reported defense engineering services gross margin decreased to 44.1% from 58.9% a year ago, reflecting a change in the mix of engineering projects during the quarter.
Acoustic sensors and materials: higher revenue and margin
The acoustics sensors and materials business reported revenue of $1.6 million, up from $1.3 million, an increase of 20.7%. Gross margin rose to 66.8% from 61.7%, which Jardine said reflected the mix of sales. Gayle said management continued to be “very pleased” with the unit’s performance.
Technology milestones: DAVD approvals and NanoGen adoption timeline
President of Technology Blair Cunningham focused his remarks on milestones to expand market share for the company’s underwater technologies, particularly the DAVD untethered variant and its next-generation ultra-small form factor 3D sonars, the NanoGen series.
Cunningham said the DAVD untethered variant represents the largest market opportunity for the technology. He cited an estimate of approximately 14,000 divers across the U.S. government and defense community as potential users of the DAVD untethered system.
He said the company completed a hardening program for DAVD untethered in fiscal 2025 and delivered the first batch of the new generation system to a Navy customer, enabling the Navy to begin safety qualification. Management said it is awaiting authorization for Navy use (ANU) assessment completion and is hopeful that approval will be concluded in the second quarter of fiscal 2026. Cunningham also said the company is on schedule to perform DAVD site acceptance test training with a “key European Navy” in the second quarter, which management expects could be a precursor to broader adoption discussions.
On NanoGen, Cunningham said the company is seeing “strong global momentum” and expects initial adoption to begin in the third quarter through “defense-funded product improvement programs,” with small initial quantities for fleet assessment. On the call, Gayle and Cunningham also indicated expectations for small batches in the third and fourth quarters tied to these programs.
During Q&A, an analyst asked management to size the total addressable market in dollar terms for DAVD in the U.S. Gayle said it was difficult to provide a number because it depends on the sale price accepted by the Navy and that pricing was still being negotiated. She noted that in the past, the company had provided the military diving system at $50,000 per unit, while also emphasizing that pricing would depend on customer acceptance.
Asked about what has held back Echoscope sales from scaling to prior peaks, Gayle pointed to the company’s reliance on the commercial offshore marine market for “bread and butter” revenue and said the pathway to multiple recurring sales is winning positions on multi-year defense programs, which can take a long time to mature. She said the company is particularly focused on nearer-term opportunities under product improvement programs and also cited “pull through” Echoscope sales associated with the DAVD product line.
Separately, in response to a question about whether rising oil prices were affecting demand, Gayle said the development cycle is not that responsive and that the company was not seeing increased demand based on near-term oil price movements.
On the balance sheet, Jardine said the company ended the quarter with $30.5 million in cash and cash equivalents and no debt, up $1.8 million from Oct. 31, 2025. Total assets increased by $1.1 million to $65.6 million.
In closing remarks, Gayle reiterated management’s intent to continue pursuing an M&A strategy in fiscal 2026 and said the company is “very keen” to close another acquisition during the year. She also said the company aims to pivot the marine technology revenue model toward multi-year, program-based adoption supporting multiple sales over the life of major programs.
About Coda Octopus Group (NASDAQ:CODA)
Coda Octopus Group, Inc is a technology company that develops and sells real-time 3D sonar systems and related solutions for underwater applications. Its flagship Echoscope® real-time 3D sonar system enables clients to visualize subsea structures and seabed conditions in unprecedented detail. The company’s product portfolio also includes BathyCORR® geophysical survey processing software, a range of ROV and USV inspection tools, and advanced subsea positioning and motion reference units. These technologies support tasks such as inspection, maintenance, salvage, survey, and security in challenging marine environments.
The company serves a broad set of industries, including offshore oil and gas, marine mining, defense, civil engineering, telecommunications, and scientific research.
