zSpace, Inc. reported a significant decline in its financial performance for the fiscal year ending December 31, 2025, with total revenue decreasing by 27% to $27.9 million, down from $38.1 million in 2024. The decrease was primarily driven by a 35% drop in hardware revenue, which fell to $14.2 million, and an 18% decline in software revenue, which totaled $10.6 million. The company attributed these declines to budgetary constraints faced by public school districts, exacerbated by the freezing of federal education funding and extended sales cycles. As a result, zSpace recorded a net loss of $25.4 million for the year, compared to a loss of $20.8 million in the previous year.
In terms of operational metrics, zSpace's Annualized Contract Value (ACV) decreased to approximately $9.9 million, down from $11.3 million in 2024, while its Net Dollar Retention Rate (NDRR) fell to 71% from 92%. The company also reported a reduction in its cash reserves, with cash and cash equivalents dropping to $1.0 million from $4.9 million year-over-year. The total liabilities increased to $30.1 million, reflecting ongoing financial challenges and the need for additional capital to support operations and growth.
Strategically, zSpace is focusing on targeted software growth through acquisitions and expanding its presence in the U.S. education market. The company plans to enhance its software offerings and increase its customer base in K-12 and Career and Technical Education (CTE) sectors. Additionally, zSpace has entered into a Securities Purchase Agreement to issue Series P Preferred Stock, raising $3 million, and has plans for further financing to address its working capital needs.
The company’s operational challenges are compounded by its reliance on government funding, which has become increasingly uncertain. zSpace has implemented a remediation plan to address its financial difficulties, including refinancing existing debt and exploring new capital sources. However, the company has expressed substantial doubt about its ability to continue as a going concern without securing additional funding. As of December 31, 2025, zSpace had an accumulated deficit of approximately $315.8 million, raising concerns about its long-term viability in a competitive and rapidly evolving education technology market.
About zSpace, Inc.
zSpace, Inc. provides augmented reality (AR) and virtual reality (VR) educational technology solutions for K-12 and career training markets. Its platform offers interactive, stereoscopic 3D learning experiences without goggles, enhancing STEM, health sciences, and skilled trades education. Serving schools, colleges, and international resellers, the company leverages proprietary hardware, software, and professional services to deliver immersive, kinesthetic learning tools that improve engagement and knowledge retention.
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