Evolv Technologies Tops Q2 Estimates

Evolv Technologies (EVLV 16.01%), a company specializing in artificial intelligence (AI)-powered security screening systems, reported its second-quarter 2025 earnings on August 14, 2025. The headline news: revenue (GAAP) climbed to $32.5 million, up 29% from a year earlier (GAAP) and ahead of the $30.9 million GAAP Wall Street estimate. Adjusted EBITDA was $2.0 million, compared to last year’s $8.0 million adjusted EBITDA loss. However, the company missed expectations for net earnings (GAAP), posting a GAAP loss of $0.25 per share (much larger than the $(0.05) anticipated (GAAP)). Management raised full-year 2025 guidance, projecting revenue of $132 million–$135 million (27%–30% growth) and a positive full-year Adjusted EBITDA margin in the mid-single digits, reflecting upbeat momentum from subscription growth and expanding customer adoption across core markets. Overall, the quarter marked significant operational improvement and market expansion, but profitability under generally accepted accounting principles (GAAP) remains a challenge.

Source: Evolv Technologies. Note: Analyst estimates provided by FactSet.

Company Overview and Business Model Focus

Evolv Technologies develops AI-powered weapons detection systems used in security screening at public venues, schools, hospitals, and entertainment sites. The company’s systems combine advanced sensors and proprietary software to spot firearms and explosives while minimizing false alarms, aiming to improve both security and visitor experience. Its flagship product family includes Evolv Express, an AI-powered security scanner, and the recently launched Evolv eXpedite, an autonomous bag screening solution introduced in September 2024.

In recent years, Evolv has emphasized shifting to a recurring revenue model built on long-term software subscriptions. The majority of customer contracts are now multi-year agreements, usually spanning four years, which helps ensure predictable revenue. The company’s growth strategy centers on expanding its installed base in education, healthcare, and sports venues, alongside continuous investment in technology and analytics platforms. Key performance metrics include annual recurring revenue and customer retention rates, both of which underpin the sustainability of the business model over time.

Quarter Highlights: Growth, Expansion, and Metrics

During the quarter, Evolv posted a 29% increase in total revenue (GAAP), outpacing analyst forecasts. This performance was largely driven by rapid adoption of its subscription-based offerings. Annual recurring revenue, a key measure of future revenue locked in via ongoing subscriptions, reached $110.5 million at quarter-end, growing 27% year-over-year. Subscription revenue and recurring service income made up 80% of total revenue in the first quarter.

Customer growth and sector reach also expanded. The company added 63 new customers, after onboarding 54 in the previous quarter and 84 new customers a year ago. About half of new business came from existing customers expanding their security deployments—an indicator of satisfaction and value perception. Product installations now span over 1,300 school buildings, 20 of the largest 100 U.S. school districts, and 500 hospital locations. In sports and entertainment, Evolv furthered its presence by deploying systems at new venues and high-profile events.

The product lineup grew, too. The core Evolv Express security scanner has screened more than three billion visitors since 2019. Meanwhile, the eXpedite bag screening system secured early contracts with 12 customers in the first few months following its launch in September 2024. Evolv also rolled out a Certified Pre-Owned program, letting customers access refurbished systems at lower price points and recapturing value from older equipment. These initiatives provided new entryways for additional segments and repeated sales cycles.

Profitability metrics saw clear progress, as Adjusted EBITDA improved to $1.7 million (5.3% margin) in the first quarter from a loss of $10.4 million a year earlier. Adjusted EBITDA (non-GAAP) was $2.0 million, compared to an $8.0 million adjusted EBITDA loss a year ago. Operating cash flow (GAAP) became positive, reaching $2.1 million, a turnaround from a cash outflow of $21.6 million a year earlier. These shifts reflect the scaling effect of more subscriptions and expense control measures, including a 15% year-over-year drop in adjusted operating expenses in the first quarter. However, gross margin (which measures profit after direct costs but before operating expenses) compressed to 49.8% under GAAP, down from 58.5% a year ago, due to changes in how revenue from new and renewed contracts is recognized as more deals use subscription models rather than up-front payment. Management cited a 200–300 basis point margin headwind for FY2025 as part of the trade-off for greater recurring revenue visibility.

On the technology side, the company’s focus on proprietary AI and analytics continued to provide differentiation. The Evolv Insights analytics platform enables customers to access data on system performance, visitor flows, and alarm rates. In addition, Evolv’s offerings remain certified as Qualified Anti-Terrorism Technologies by the U.S. Department of Homeland Security, reinforcing its status in the security screening space.

Not all trends were positive. The company’s GAAP net loss widened to $40.5 million, reversing from a GAAP net profit a year earlier. The difference stems from large non-cash items like revaluation of warrants, stock compensation, and one-time legal and regulatory charges. These costs contributed to the discrepancy between GAAP accounting and the adjusted (non-GAAP) figures cited by management. Additionally, restatements and management turnover over the past year are also ongoing watch areas for investors, though leadership reported progress on governance and operational controls. No dividend was declared.

Looking Ahead: Guidance and Investor Focus

Evolv Technologies raised its financial outlook for fiscal 2025. Management now projects full-year revenue between $132 million and $135 million, representing growth of 27% to 30% over 2024 -- an upgrade from earlier expectations. Adjusted EBITDA is forecast to be positive for the full year, with Adjusted EBITDA margins in the mid-single digit percentage range. Cash flow is expected to turn positive in the fourth quarter, and capital expenditures are expected to be in the $20 million to $25 million range, primarily to support the expansion of the subscription business model.

No new dividend was announced for the current quarter. EVLV does not currently pay a dividend. The company stated that it will continue to prioritize operational efficiency, customer retention, and further penetration within its core verticals -- particularly education, healthcare, and entertainment venues. Upcoming quarters will see continued emphasis on rolling out next-generation solutions and deepening customer analytics via the Evolv Insights platform.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.