Fadel Partners H1 2026: ARR rises 11% as EBITDA loss narrows

Fadel Partners' half-year update shows a software business moving in the right direction, even if it has not yet reached profitability.

For the six months ended 30 June 2026, revenue increased by 4% to $4.8 million. More importantly, higher-margin licence and support revenue grew strongly, gross margin improved and operating costs came down.

That combination helped reduce the adjusted EBITDA loss by 53% to $1.1 million. Adjusted EBITDA is a measure of operating performance before interest, tax, depreciation and amortisation, with certain other items excluded.

The key question for investors is whether Fadel Partners can maintain recurring revenue growth while continuing to narrow its losses.

Fadel Partners' H1 2026 key figures

Metric	H1 2026	H1 2025	Change
Revenue	$4.8 million	$4.7 million	Up 4%
Licence and support revenue	$3.1 million	$2.4 million	Up 25%
Services revenue	$1.8 million	$2.2 million	Down 19%
Gross margin	61%	49%	Up 12 percentage points
Operating expenses	$4.1 million	$4.8 million	Down 15%
Adjusted EBITDA loss	$1.1 million	$2.4 million	Improved 53%
Cash and cash equivalents	$1.9 million	$1.6 million	Up 18%

Annual recurring revenue, or ARR, reached $9.4 million at 30 June 2026. That was 11% higher than the $8.4 million reported a year earlier and up from $8.9 million at the end of December 2025.

ARR represents the annualised value of recurring licence and support revenue. It is an important indicator for a software company because it can provide greater visibility over future revenue than one-off sales.

Better revenue quality is the main positive

Headline revenue growth of 4% is fairly modest. However, the composition of that revenue improved considerably.

Licence and support revenue rose by 25% to $3.1 million, driven by new customer wins and additional sales to existing customers during the second half of 2025. Fadel had previously said that most of its FY 2025 ARR growth occurred in the fourth quarter, meaning the benefit was expected to appear more clearly in FY 2026 revenue.

Services revenue moved the other way, declining by 19% to $1.8 million. Management described this reduction as expected and consistent with its previous guidance.

The shift towards licence revenue matters because it is higher margin. That helped lift Fadel's gross margin from 49% to 61%, alongside lower employee costs and increased use of subcontractors within cost of sales following changes to the services delivery structure.

This is a more encouraging picture than the 4% total revenue growth rate might initially suggest. Fadel is generating a larger proportion of revenue from the part of the business that should offer better economics and recurring visibility.

Costs fall and losses narrow

Operating expenses declined by 15% to $4.1 million, with reductions across research and development, sales and marketing, and general and administrative costs.

Combined with the stronger gross margin, this reduced the adjusted EBITDA loss from $2.4 million to $1.1 million.

Management is continuing to look for efficiencies and further savings. However, it also wants to create capacity for new spending where it identifies opportunities offering a high return on investment.

That balance is important. Cutting costs can improve short-term financial performance, but Fadel still needs to invest in product development and sales if it is to expand its recurring revenue base.

Investors looking for a comparison of how margin improvement can affect a software and data business may also find the Fintel half-year trading update useful.

Customer activity supports ARR growth

Fadel reported new customer wins including Wilson, Peachtree, FlexJet, Bleacher Report and The Royal Mint.

It also expanded relationships with existing customers including L'Oréal, Philip Morris and The Coca-Cola Company.

Net revenue retention, or NRR, was 104% across all product lines for the 12 months ended 30 June 2026. NRR measures how recurring revenue from existing customers changes after accounting for expansions, reductions and customer losses.

A figure above 100% means that expansion from retained customers more than offset lost or reduced business. At 104%, Fadel's existing customer base delivered modest net growth.

The company also said its sales pipeline had expanded significantly across its IPM Suite and Brand Vision products, covering enterprise and mid-market accounts. No pipeline value or expected conversion rate was disclosed, so investors cannot yet quantify how much of this opportunity may become contracted revenue.

AI products move from announcement to launch

Fadel continued investing in its AIVA artificial intelligence platform during the period.

In January, it announced that its AI-enabled Product Approval system had gone live. The system includes the AIVA Reviewer Agent, which automates early-stage compliance reviews against brand guidelines and licensing terms.

In May, the company launched AIVA Intelligence. This conversational AI capability provides access to licensing agreement terms, deal structures and licensing information within the IPM Suite and LicenSee platforms.

These developments build on the platform activity covered in the earlier Fadel Partners FY 2025 trading update.

The strategic logic is understandable, but this update does not disclose how much revenue the AI products have generated, how customers are being charged or how much additional investment will be required.

Cash remains the main financial risk

Cash and cash equivalents stood at $1.9 million, up from $1.6 million a year earlier. Fadel also has access to an undrawn $1.0 million credit facility with Bank of America, which has been renewed until 31 May 2027.

The higher cash balance and narrower loss are positive. Even so, Fadel remains loss-making and its cash resources are relatively limited in absolute terms.

The announcement does not provide cash flow figures or enough information to calculate a reliable cash runway. Investors will therefore need to examine working capital movements and operating cash consumption when the full interim report is published.

What investors should watch next

Management expects FY 2026 revenue, adjusted EBITDA loss and cash to be in line with market expectations. The numerical level of those expectations was not disclosed in the announcement.

The original company announcement also confirms that the half-year report is expected no later than 30 September 2026.

That report should provide a fuller view of cash flow, the cost base and the progress required during the second half.

For now, the strongest parts of the update are the 11% ARR growth, 25% increase in licence and support revenue, improved gross margin and substantial reduction in the adjusted EBITDA loss. The weaker points are the decline in services revenue, continued losses and modest cash balance.

Fadel is showing evidence of improving operating leverage, meaning revenue growth and a better sales mix are having a proportionately larger effect on earnings. The next test is whether it can convert its expanded pipeline and AI product investment into sustained recurring growth without putting renewed pressure on costs and cash.