On August 4, OneSpan (NASDAQ:OSPN) reported second-quarter 2026 results for the period ended June 30, and the numbers pulled in two directions at once. Total revenue barely moved, up just 1% year over year to $60.5 million, yet the business underneath looks different depending on where you look. Subscription revenue jumped 11% to $46.7 million, and annual recurring revenue climbed 7% to $189.7 million. But operating income fell 17% to $8.7 million, a reminder that top-line stability does not automatically translate into stronger profits.
The Subscription Engine Is Humming
The clearest sign of momentum sits in OneSpan’s subscription business. Subscription revenue grew 11% year over year to $46.7 million, and Digital Agreements revenue, the newer of the company’s two segments, jumped 25% to $19.5 million. A net retention rate of 103% shows existing customers are spending more over time rather than churning out, which matters more for a subscription business than any single quarter’s headline number. Gross margin also ticked up, from 73% to 74%, with gross profit rising to $44.5 million from $44.0 million a year earlier, evidence that the mix shift toward subscriptions is helping profitability at the margin line even if it has not reached the bottom line yet.
Management is also betting on where authentication is headed next. Two weeks before the earnings report, OneSpan introduced DigipassONE, a platform that bundles its existing authentication tools with new verifiable credentials and digital wallet capabilities, mobile app protection, and analytics across the whole stack. CEO Victor Limongelli framed it as the foundation for supporting “consumer agentic use cases for financial institutions and other high-trust, high-value environments,” a signal the company wants a seat at the table as banks experiment with AI-driven services.
OneSpan also raised its full-year guidance across every line, now expecting total revenue of $248 million to $252 million and Adjusted EBITDA of $67 million to $71 million, both above its prior ranges, while still returning cash to shareholders through a $0.13 per share quarterly dividend, payable September 4 to shareholders of record as of August 14, plus roughly $2.9 million in buybacks during the quarter.
Profits Are Moving The Wrong Way
Look past the subscription number and the picture gets tougher. Cybersecurity revenue, still OneSpan’s larger segment, fell 7% year over year to $40.9 million, and that decline was large enough to hold total revenue growth to just 1%. Operating income dropped 17% to $8.7 million, net income fell to $6.8 million, or $0.18 per diluted share, from $8.3 million, or $0.21 per diluted share, a year earlier, and non-GAAP net income slid to $11.6 million from $13.3 million. Adjusted EBITDA also declined, down 4% to $16.9 million. None of these drops look dramatic on their own, but together they show a company whose profitability is under more pressure than its revenue line suggests.
Cash also moved sharply in the wrong direction, falling to $43.3 million at the end of June from $70.5 million at the start of the year. Some of that reflects the dividend and buyback spending, but a company betting on a new product platform while its legacy cybersecurity revenue shrinks needs the balance sheet intact to fund that transition without added strain.
What The Market Is Pricing In
Hedge fund ownership of OneSpan slipped from 19 funds to 18 in the most recent quarter, a mild pullback rather than a rush for the exits. Shares carry a forward price-to-earnings ratio of 9.44, a multiple that assumes little of the subscription growth story continues. Short interest sits at 10.81% of the float, high enough to reflect real skepticism about the profit decline. That combination, a single-digit multiple paired with double-digit short interest, suggests the market is unconvinced the recurring revenue shift will offset shrinking cybersecurity sales anytime soon.
Two Stories, One Stock Ticker
OneSpan’s second quarter leaves two competing narratives on the table. One shows a company successfully pivoting toward recurring subscription revenue, backed by a 103% retention rate and a new platform aimed at emerging authentication use cases. The other shows shrinking operating income, falling net income, and a cash balance that dropped by more than a third in six months. For the subscription story to win out, Digital Agreements and DigipassONE need to grow fast enough to outrun the cybersecurity segment’s decline.
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