Executive Summary
Quantum Corporation’s QQ2 2025 results reflect a work-in-progress turnaround as the company continues to execute on its restructuring and product portfolio refresh. Revenue for the quarter was $70.5 million, with GAAP gross margin at 41.5% and adjusted EBITDA essentially breakeven (-$0.3 million). Management emphasized healthy operational improvements and a higher backlog of roughly $14 million, above the typical run rate, which supports a favorable path to revenue leverage and EBITDA growth in the second half of FY2025. The company is leveraging cost discipline, process automation, and a tilt toward higher-margin, recurring revenue through subscriptions to drive profitability, while aggressively advancing marquee products such as Myriad, ActiveScale, DXi T-Series All-Flash data protection, and Scalar i7 RAPTOR for AI data workflows.
Management guidance underscores a deliberate shift to ARR-driven economics. ARR trailing twelve months stood at approximately $146 million (about 51% of revenue), with subscription ARR at $19.6 million in the quarter, up 28% YoY and 5% QoQ, and over 88% of new unit sales being subscription-based. The company guided Q3 revenue of around $72 million and FY2025 revenue of $280 million ±$5 million, with FY2025 adjusted EBITDA targeted at $3 million ±$2 million. While headwinds persist from supply-chain constraints and a manufacturing transition, Quantum argues that its cost actions, portfolio refresh, and GTM reorganization will yield free cash flow positive in the back half of FY2025 and a cash-flow-positive FY2026 for the first time in five years. The path to sustainable profitability remains contingent on sustaining ARR growth, improving product mix, and completing the factory transition with minimal disruption to revenue execution.
Key Performance Indicators
QoQ: -21.24% | YoY:-125.37%
QoQ: -37.07% | YoY:28.59%
QoQ: -36.89% | YoY:28.61%
Key Insights
Revenue: $70.5 million for Q2 FY2025, down ~7% YoY and ~1% QoQ; GAAP gross margin: 41.5% (down from 43.3% YoY, up from 36.6% in the prior quarter) driven by mix shift toward lower-margin lines YoY with sequential efficiency gains; Operating income: -$6.93 million (margin -9.84%); Net income: -$13.53 million (net margin -19.2%); EBITDA: -$5.46 million; Adjusted EBITDA: -$0.30 million (breakeven level with relative improvement vs prior year); Non-GAAP Opex: $30.4 million, ~9% lower YoY; Backlog: ~...
Financial Highlights
Revenue: $70.5 million for Q2 FY2025, down ~7% YoY and ~1% QoQ; GAAP gross margin: 41.5% (down from 43.3% YoY, up from 36.6% in the prior quarter) driven by mix shift toward lower-margin lines YoY with sequential efficiency gains; Operating income: -$6.93 million (margin -9.84%); Net income: -$13.53 million (net margin -19.2%); EBITDA: -$5.46 million; Adjusted EBITDA: -$0.30 million (breakeven level with relative improvement vs prior year); Non-GAAP Opex: $30.4 million, ~9% lower YoY; Backlog: ~$14 million (above target run rate of $8–10 million); ARR (TTM): ~$146 million (51% of revenue) with gross margin on ARR ~67%; Subscription ARR: $19.6 million, +28% YoY and +5% QoQ; New subscription share: >88% of new unit sales; Cash & liquidity: cash $16.7 million; total debt $135.366 million; net debt $118.647 million; Cash burn: Operating cash flow -$15.30 million; Free cash flow -$16.91 million; Back half 2025 expected free cash flow positive; Guidance: Q3 revenue ~$72 million ±$2 million; Q3 non-GAAP opEx ~$31 million ±$1 million; Q3 adj net loss per share ~-$0.75 ±$0.05; Q3 adj EBITDA ~+$2 million; FY2025 revenue target $280 million ±$5 million; FY2025 adj EBITDA target $3 million ±$2 million.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
70.47M |
-1.44% |
-2.03% |
| Gross Profit |
29.27M |
7.08% |
0.30% |
| Operating Income |
-6.93M |
-125.37% |
-21.24% |
| Net Income |
-13.53M |
28.59% |
-37.07% |
| EPS |
-2.82 |
28.61% |
-36.89% |
Key Financial Ratios
operatingProfitMargin
-9.84%
operatingCashFlowPerShare
$-3.19
freeCashFlowPerShare
$-3.53
Management Commentary
Key management insights and quotes by themes:
Strategy and product portfolio: Jamie Lerner stated, “We finished Q2 '25 with $70.5 million in revenue, GAAP gross margin of 41.5% and adjusted EBITDA approximately breakeven,” underscoring initial success from the transformation. He added that margin improvements were evident as gross margin expanded “490 basis points sequentially to above 41%,” and that EBITDA progression was supported by cost actions aimed at a more profitable revenue mix. Ken Gianella reinforced this with a focus on ARR, stating that “Total annual recurring revenue, or ARR, for the trailing 12-months was approximately 51% of our total revenue at $146 million,” and highlighted the subscription mix as a key driver of profitability: “the subscription portion of our total ARR increased approximately 28% year-over-year and approximately 5% sequentially to $19.6 million, with over 88% of new unit sales in the quarter being subscription-based.”
Backlog, supply chain, and operations: The CFO noted elevated backlog of roughly $14 million, above the targeted $8–$10 million range, driven by extended lead times in high-speed all-flash systems. Lerner elaborated on supply-chain headwinds, explaining longer SSD/server lead times (up to 10 weeks) and the company’s approach to pre-purchasing equipment while avoiding overstock risk. “The bookings were on target,” and the firm is managing backlog progression alongside a factory transition slated for the end of the quarter.
Go-to-market and growth cadence: Lerner highlighted the growth trajectory for Myriad and ActiveScale as core drivers, while the company continues to backstop with traditional data protection offerings. He noted that “DXi T-Series All-Flash data protection appliance” is gaining traction and that Scalar i7 RAPTOR is now shipping with a multimillion-dollar purchase order from a leading cloud platform, illustrating momentum in AI-oriented storage architectures.
Financial discipline and guidance: Ken emphasized non-GAAP cost controls, noting “non-GAAP operating expenses were $30.4 million in the second quarter, a ~9% reduction from last year,” and that Adjusted EBITDA was essentially breakeven. He projected ongoing SG&A efficiency and automation to support profitability in the back half of FY25 and beyond, and reiterated the plan to return to cash-flow positive operations in FY26 on the back of ARR growth and cost discipline.
"We finished Q2 '25 with $70.5 million in revenue, GAAP gross margin of 41.5% and adjusted EBITDA approximately breakeven."
— Jamie Lerner
"Total annual recurring revenue, or ARR, for the trailing 12-months was approximately 51% of our total revenue at $146 million. The subscription portion of our total ARR increased approximately 28% year-over-year and approximately 5% sequentially to $19.6 million, with over 88% of new unit sales in the quarter being subscription-based."
— Ken Gianella
Forward Guidance
Assessment of trajectory and catalysts: Quantum’s management is targeting a cash-flow-positive back-half of FY2025 and aims for a cash-flow-positive FY2026, supported by a narrowed cost base and a ramp in recurring revenue. Near-term catalysts include: (1) continued growth in ARR and subscription adoption (subscription ARR at $19.6m, 88% of new unit sales subscription-based), (2) adoption and expansion of Myriad and ActiveScale with stronger go-to-market alignment and dedicated resource allocation, (3) DXi T-Series All-Flash data protection gains and improving recovery/cost reduction dynamics, (4) Scalar i7 RAPTOR ramp for AI data lakes with a multimillion-dollar cloud platform order, (5) ongoing efficiency improvements yielding ~$40 million in total savings since FY2023, and (6) a manufacturing consolidation expected to reduce cost and improve cadence.
Risks to watch: (i) persistent supply-chain constraints and longer lead times for high‑speed storage components, (ii) the manufacturing transition to a single facility that could blur quarterly revenue execution, (iii) a potentially weaker gross margin in lower-margin legacy storage lines if mix shifts stall, (iv) a negative balance sheet with negative equity and meaningful leverage intensifying financing risk, and (v) competitive dynamics from larger incumbents such as Dell, NetApp, and Pure Storage, which could pressure pricing and market share.
Overall assessment: The company is implementing a deliberate shift toward recurring revenue, improved gross margin through mix optimization, and an efficiency-led cost structure. If ARR growth sustains and manufacturing transition headwinds abate, Quantum could generate meaningful EBITDA improvements and cash flow resilience in 2H FY2025 and into FY2026, which could re-rate the stock on a fundamental basis. Investors should monitor ARR progression, backlog normalization, the durability of cost savings, and the speed of the factory integration.