Telos First-Quarter Revenue Jumps 56% as Profit Turns Positive

By Olivia Hart

Telos reported first-quarter 2026 revenue of $47.7 million, up 56% from $30.6 million a year earlier and above its guidance of $44 million to $45 million. The cybersecurity and identity technology company attributed the outperformance to stronger Security Solutions activity. Telos's result cleared the top of that range by $2.7 million.

What drove Telos's first-quarter revenue increase?

Telos said Security Solutions revenue increased 78% year over year to $46 million, reflecting better-than-expected performance within Telos ID. The business generated 96% of total company revenue, compared with 84% in the first quarter of 2025.

Those Telos figures mean 96 cents of every revenue dollar came from Security Solutions, up from 84 cents a year earlier. The mix shift increased revenue concentration around its largest segment.

Secure Networks revenue declined 63% from the prior-year period to approximately $1.7 million. Management said the decline remained consistent with its assumptions following completion of certain programs.

Telos did not separately disclose Telos ID revenue. That omission prevents a precise test of how much of the $46 million segment result came from Telos ID.

Telos's first-quarter progress came with a narrower revenue base, so a slowdown in Telos ID would have a larger effect.

How strong were margins and profits?

Telos reported a GAAP gross margin of 36.4%, above its assumption of more than 33%. It also reported cash gross margin, a non-GAAP measure, of 42.3%, which exceeded guidance.

Adjusted EBITDA reached $7.9 million, a 16.5% margin, compared with $362,000 and a 1.2% margin in the prior-year quarter. GAAP net income reached $2 million, reversing a net loss of $8.6 million a year earlier.

Telos's figures put adjusted EBITDA at more than 20 times the prior-year result. Net income improved by $10.6 million on that comparison.

Telos did not disclose prior-year gross-margin comparisons. The year-over-year EBITDA and net-income swings therefore provide the clearest scale check on the improvement.

Across Telos's reported measures, profitability improved sharply, but one quarter does not establish that first-quarter margins will persist.

What did cash generation fund?

Telos reported operating cash flow of $8.7 million, an 18.1% margin. Free cash flow reached $6.4 million, a 13.4% margin.

Telos deployed $2.2 million to repurchase approximately 500,000 shares at an average price of $4.25. Management said it expected repurchases to accelerate during the second quarter.

The $2.2 million deployment equaled roughly one-third of first-quarter free cash flow. Telos gave no second-quarter repurchase amount, leaving the planned acceleration open-ended.

Telos also disclosed no prior-year operating or free cash flow comparison. Telos's reported cash generation was strong, but its year-over-year trajectory remains unmeasured.

Cash generation funded the buyback, while management left the scale of second-quarter repurchases unspecified.

What does the outlook require?

Telos projected second-quarter 2026 revenue of $44 million to $46 million, representing growth of 22% to 28%. It forecast adjusted EBITDA of $5 million to $6 million and an adjusted EBITDA margin of 11.4% to 13%.

The upper end of Telos's revenue forecast remained below its first-quarter result, even with 22% to 28% year-over-year growth. Its $5 million to $6 million adjusted EBITDA forecast also trailed the first quarter's $7.9 million.

Management expects growth to come primarily from continued expansion within Telos ID. The company gave no separate Telos ID revenue forecast for the second quarter or full year.

For full-year 2026, Telos set these targets:

• Revenue of $187 million to $200 million, implying growth of 14% to 21%.
• Adjusted EBITDA of $20.6 million to $28 million and a margin of 11% to 14%.
• Cash gross margin of approximately 38.2% to 39.5%.

Telos said the outlook also assumes continued operating expense discipline as it works to "convert double-digit growth into sustained profitability and cash generation". The annual cash gross margin range also sits below the first quarter's 42.3%, reinforcing management's more conservative margin assumption.

Telos enters the rest of 2026 with 56% first-quarter revenue growth, positive net income and strong cash generation, but the next test is whether Telos ID can sustain expansion without further concentrating the business.