Kopin Swings to Profit as Grant Revenue and Drone Orders Surge
Kopin (KOPN) posted net income of $0.9 million in the second quarter, reversing a $5.2 million year-earlier loss as revenue grew 51% on funded R&D and defense orders.
Kopin Corp. (KOPN) reported net income of $0.9 million, or breakeven per share, in the second quarter of 2026, reversing a $5.2 million loss a year earlier, as total revenue rose 51% to $12.7 million from $8.5 million. The maker of microdisplays for defense and industrial applications had posted flat revenue in the first quarter and a 42% year-over-year decline in the fourth quarter of 2025, making the second-quarter acceleration a break from a run of consecutive prior-year revenue declines that stretched through the third and fourth quarters of last year.
The swing to profitability was not driven by core product sales alone. Non-product revenue, which includes grant, collaboration and funded R&D income, surged 433% year over year to $5.1 million from $1.0 million, building on 292% growth in the first quarter. That growth traced to two new programs: a collaboration with Fabric.AI on Kopin's Neural I/o interconnect initiative, and grant revenue tied to the Army's IBAS MicroLED award. Product revenue, by contrast, grew just 2% to $7.6 million, a sequential recovery from a 41% decline in the first quarter, as stronger defense thermal weapon sight and LCD demand offset continued softness in industrial markets.
Gross margin on products continued to improve, with cost of product revenue falling to 86% of net product revenue from 94% a year earlier, extending a trend from 83% in the fourth quarter of 2025 and 79% in the third quarter. Research and development expense jumped 133% to $4.5 million from $1.9 million, matching the first quarter's identical year-over-year increase, both tied to funded R&D work under the Army IBAS award. Selling, general and administrative expense rose just 5% to $5.1 million, a marked deceleration from 28% growth in the first quarter and 45% growth in the fourth quarter of 2025, as the company reined in overhead even while R&D spending climbed. The combined effect narrowed the operating loss to $3.5 million from $5.5 million a year earlier; the swing to net income also drew on roughly $2.3 million in investment gains and a $2.1 million tax benefit from the expiration of an uncertain tax position.
Two new business lines introduced earlier in the year gained traction in the quarter. The Sentinel FPV drone product line, launched in the first quarter with an initial $3.2 million order for up to 40,000 goggles by 2028, converted into multiple new prototype orders tied to the U.S. Drone Dominance Program, with volume production orders expected in late August 2026. The Neural I/o initiative with Fabric.AI, backed by a $15 million initial order and a 19.9% equity stake in Fabric.AI when it was announced in the first quarter, advanced with new non-disclosure agreements including NVIDIA NVLink partners and the opening of a Dallas Optics & Photonics Design Center.
Management raised its outlook, expecting second-half 2026 results to exceed prior guidance and setting an explicit target of making meaningful progress toward sustainable GAAP profitability in the fourth quarter. That marks a more specific forward commitment than the first-quarter guidance, which had cited recovering order momentum without offering a profitability timeline.
Kopin ended the quarter with $50.3 million in total cash, restricted cash and marketable securities, including $24.3 million in cash and equivalents, following a $56 million private placement completed in the fourth quarter of 2025 that had strengthened the balance sheet. Of that total, $26.0 million remains restricted, largely tied to a litigation bond connected to the company's dispute with BlueRadios.