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zSpace, Inc. - Common stock
Our verdict on zSpace, Inc. - Common stock isn’t the consensus take — see where we landed, and the one risk the bull case glosses over.
See the verdict — free →Does management do what it says?
The company confirmed the closing of the financing in April 2025 with gross proceeds of $13.0 million. (1 met across 1 tracked commitment)
“The gross proceeds to the Company from the Initial Senior Secured Convertible Note Financing, prior to the payment of legal fees and transaction expenses, was $13,000,000.”
The company successfully raised $13.0 million in gross proceeds from the Senior Secured Convertible Note Financing in April 2025 and utilized $6.78 million for debt repayment during the six months ended June 30, 2025. (2 met, 1 in progress across 3 tracked commitments)
“We expect our working capital needs to increase in the future as we continue to expand and enhance our operations.”
The company continues to utilize the equity line-of-credit, issuing common stock for $0.1 million in proceeds during the quarter ended March 31, 2026. (1 in progress across 1 tracked commitment)
“To the extent the Company sells shares under the ELOC Agreement, the Company currently plans to use any proceeds therefrom for operating expenses, working capital and other general corporate purposes... Shares of Common Stock may be sold by the Company pursuant to this arrangement over a period of up to 24 months after the closing of the transactions contemplated by the ELOC Agreement.”
The actual effective tax rate for the year ended December 31, 2025, was 0.1%, which is within a reasonable tolerance of the (0.11)% guidance. (1 met, 4 revised across 5 tracked commitments)
“as of September 30, 2025, we had approximately $11.2 million in purchase obligations outstanding under such agreements, all of which are scheduled to come due on or before December 31, 2025.”
The transition has decelerated rather than accelerated. Software revenue as a percentage of total revenue for the nine months ended September 30, 2025, was 38%, compared to 35% in the prior year, but absolute software revenue declined 15% YoY. Furthermore, the Net Dollar Retention Rate (NDRR) collapsed from 102% to 77%. (1 missed across 1 tracked commitment)
“Software revenue decreased by $1.6 million or 15%, to $8.7 million for the nine months ended September 30, 2025... NDRR for the trailing twelve-month period ended September 30, 2025 was 77%, as compared to 102% for the trailing twelve-month period ended September 30, 2024.”
See the full cited Management analysis of zSpace, Inc. - Common stock
How durable is the business?
Hardware revenue share increased to 57.8% of total revenue this quarter, up from 56.1% a year ago, despite a slight 1% decline in total revenue. Gross margins for hardware improved significantly to 32% from 24% due to lower manufacturing costs for the new Inspire 2 laptop. (1 expanding across 3 engines)
“Hardware 2,795 $ 3,829 $ (1,034) (27)%... Hardware Product revenue accounted for 53% and 57% of our total revenue for the three months ended March 31, 2026 and 2025, respectively.”
Software revenue remained flat in dollar terms but its share of total revenue expanded to 37% as hardware sales collapsed. Management expects this to be the primary growth engine moving forward. (1 expanding)
“Software applications revenue accounted for 37% and 29% of our total revenue for the three months ended March 31, 2026 and 2025, respectively.”
The company's financial position has deteriorated to the point of 'substantial doubt' regarding its ability to continue as a going concern, threatening the long-term defensibility of its proprietary technology. (1 shifted)
“The conditions identified above raise substantial doubt about the Company’s ability to continue as a going concern for at least twelve months”
The company's moat is showing signs of strengthening through improved retention metrics. Net Dollar Retention (NDRR) for large customers surged to 131% from 104%, indicating that existing high-value customers are significantly expanding their spend. (1 expanding, 3 contracting)
“For the trailing twelve-month period ended March 31, 2026 and 2025, our NDRR on customers with at least $50,000 of ACV was 65% and 97%, respectively.”
International bookings as a share of the total mix are expanding, reaching 13% for the first half of 2025 compared to 10% in the prior year, signaling successful global reseller expansion despite current revenue volatility. (1 expanding, 4 contracting)
“International 747... Total $ 5,251”
See the full cited Business Model analysis of zSpace, Inc. - Common stock
Where does growth come from?
The shift toward software is accelerating as a percentage of total revenue, increasing from 30% in the first half of 2024 to 31% in the first half of 2025, and reaching 32% in the most recent quarter. (1 accelerating, 1 steady, 1 new trend across 3 signals)
“Software applications revenue accounted for 37% and 29% of our total revenue for the three months ended March 31, 2026 and 2025, respectively.”
Bookings from Career and Technical Education (CTE) have decreased as a percentage of the total mix from 35% to 29%, indicating a temporary shift or headwind in that specific segment. (1 decelerating, 1 steady, 3 accelerating across 5 signals)
“CTE bookings accounted for approximately 43% and 29% for the three months ended March 31, 2026 and 2025, respectively”
Management has explicitly stated that software revenue is expected to outpace hardware and service growth, signaling a strategic pivot to a higher-margin software-led model. (1 new trend, 1 decelerating, 2 accelerating across 4 signals)
“Adjusted EBITDA: 2026 ($2,126) [thousands], 2025 ($4,354) [thousands]”
International bookings have declined as a percentage of total bookings, dropping from 30% to 23% year-over-year. (1 decelerating, 1 steady, 1 reversing, 1 accelerating across 4 signals, 2 leading indicators)
“International bookings accounted for approximately 10% and 3% for the three months ended March 31, 2026 and 2025, respectively.”
The company is showing a steady trend of narrowing its Adjusted EBITDA losses, improving from a $4.2M loss to a $4.3M loss (adjusted for one-time stock compensation spikes in the prior year). (1 steady across 1 signal)
“The recurring losses... raise substantial doubt about our ability to continue as a going concern for the twelve-month period from the date the financial statements included herein were issued.”
See the full cited Future Growth analysis of zSpace, Inc. - Common stock
What could break the thesis?
The risk remains high and is intensifying in terms of total bookings, which fell from $23.4M to $15.5M for the six-month period year-over-year, driven by K-12 funding uncertainty. (4 intensifying, 1 high-severity)
“Hardware revenue decreased by $1.0 million or 27%, to $2.8 million for the three months ended March 31, 2026... primarily attributable to uncertainty in our K-12 end-user markets where funding sources have been disrupted.”
The risk is intensifying as the cash balance dropped from $4.9M to $1.4M in six months, and management explicitly stated there is 'substantial doubt' about the company's ability to continue for the next 12 months. (3 intensifying, 1 stable, 1 high-severity)
“The conditions identified above raise substantial doubt about the Company’s ability to continue as a going concern for at least twelve months from the issuance date of the condensed consolidated financial statements.”
The risk is easing significantly as the Net Dollar Retention Rate (NDRR) improved to 131% for the trailing twelve months ended June 30, 2025, up from 104% in the prior year period. (1 easing, 2 intensifying, 1 high-severity)
“For the trailing twelve-month period ended March 31, 2026 and 2025, our NDRR on customers with at least $50,000 of ACV was 65% and 97%, respectively.”
The risk is intensifying as purchase obligations have increased to $23.7 million, all due by December 31, 2025, while the cash balance has dwindled to $1.4 million. (4 intensifying, 1 easing, 1 high-severity)
“As of March 31, 2026, the Company had $16.2 million in purchase obligations outstanding... all of which are scheduled to come due on or before December 31, 2026.”
The company has $10.4 million in purchase obligations due by the end of 2026, which is more than 10x its 2025 year-end cash balance of $1.0 million. (1 intensifying)
“as of December 31, 2025, we had approximately $10.4 million in purchase obligations outstanding under such agreements, all of which are scheduled to come due on or before December 31, 2026.”
See the full cited Risk analysis of zSpace, Inc. - Common stock
zSpace, Inc. - Common stock analysis by filing period
Read the full thesis on zSpace, Inc. - Common stock
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