Sequans Communications (SQNS) Q3 2026 earnings review
Sequans chip sales rise 22%, and its Bitcoin gamble ends
Sequans Communications, a maker of cellular chips for connected devices, grew its chip sales while finishing its exit from Bitcoin. Revenue rose 22% from last quarter to $9 million as customer projects entered production, and selling its last 314 Bitcoin lifted cash and short-term deposits to $40 million. Chief executive Dr. Georges Karam highlighted a narrower loss, which rested on a $6 million Bitcoin sale gain.
| Revenue | $9.09M +21.9% from last quarter |
|---|---|
| Operating loss, excluding Bitcoin gain | $7.29M reported loss: $1.04M (by our math) |
| Cash and short-term deposits | $39.7M $21.0M last quarter; 0 Bitcoin left |
| Forward outlook | Held backlog extends into the second half of 2027 |
⚖️ Verdict: 🟢 Bullish
The story got better because the company turned its remaining Bitcoin into cash and cut core operating expenses near $10 million, easing the immediate risk to its cash reserve. One caution: without the one-time Bitcoin gain, the chip business lost $7.3 million on an operating basis by our math, and gross margin stayed stuck at 33% because no new licensing deal closed.
The question now is whether chip sales and licensing deals can cover costs before the $40 million cash reserve runs low. Either new customer launches and a high-margin license push quarterly revenue toward the $15 million break-even mark in 2027, or persistent cash burn forces another share sale. Fourth-quarter cash burn and the year-end pipeline update will tell.
🐂 Bull Case
Bitcoin Exit Removes Price Risk and Debt
Sequans spent the past year unwinding a cryptocurrency bet that brought heavy losses and debt. Chief executive Dr. Georges Karam said the exit leaves the wireless chipmaker with "a significantly strengthened financial foundation, a simplified capital structure, and approximately $40 million in cash and short-term deposits and a nearly debt-free balance sheet". After redeeming its convertible debt in the second quarter, the company sold its last 314 Bitcoin this quarter.
- Bitcoin held: 0 at September 30, down from 314 in Q2 and 2,139 at year-end
- Cash Proceeds from Q3 Bitcoin sales: $24.6 million by our math
- Cash and short-term deposits: $39.7 million, up from $21.0 million in Q2
- Interest expense: $0.4 million, down from $2.4 million in Q2
Completing the sale removes a major concern because suppliers and customers no longer have to worry about cryptocurrency swings wiping out the company's cash reserve. What to watch: total cash and short-term deposits at the end of the fourth quarter. A drop of less than $5 million would show that lower interest costs and rising chip sales are stretching its cash reserve into 2028.
New Customer Programs Lift Chip Sales 21%
Sequans designs cellular chips for connected devices such as smart meters and trackers, known as the Internet of Things (IoT). Karam attributed the third-quarter revenue rise to "the successful conversion of our design-win pipeline into production revenue", supported by "a growing backlog that now extends into the second half of 2027". Total revenue reached $9.09 million, up 21.9% from last quarter, while product sales rose 20.5%.
Revenue nearly tripled from a year ago, when a parts shortage and the end of a past licensing contract depressed sales to $3.21 million. The gain from last quarter is the cleaner test, and it landed inside management's $8.5–10.0 million outlook on product strength alone. What to watch: fourth-quarter product revenue on the conference call. Another sequential rise would confirm customer launches are still accelerating.
Cost Cuts Bring Expenses Near $10M Target
Last year the French chipmaker launched a programme to cut its quarterly operating expenses toward $10 million so its chip business could reach break-even sooner. Excluding Bitcoin gains and impairments, operating expenses across research and development, sales and marketing, and general administration fell to $10.29 million by our math, down 13.8% from $11.93 million in the second quarter.
Every cost line dropped as a share of revenue from last quarter: research and development fell 27.9 percentage points to 73.2%, sales and marketing fell 10.3 percentage points to 17.3%, and general administration fell 8.7 percentage points to 22.6%. What to watch: operating expenses in the fourth quarter. A reading at or below $10.0 million would meet management's target and lower the revenue needed for break-even.
🐻 Bear Case
Bitcoin Gain Hides a $7.3M Operating Loss
"Our third quarter results demonstrate the continued acceleration of our core IoT semiconductor business and the progress we are making toward building a more profitable company," chief executive Dr. Georges Karam said. Sequans highlighted an operating loss of $1.04 million and a loss excluding one-offs of $0.60 million. However, both figures include a $6.24 million realized gain on the sale of Bitcoin "as a part of our exit of the Bitcoin strategy and to strengthen our cash position".
- Operating loss excluding Bitcoin gain: $7.29 million by our math, down from $9.48 million in Q2
- Loss excluding one-offs and Bitcoin gain: $6.85 million by our math
- Q3 operating cash burn: $4.66 million by our math, vs $11.52 million average in H1
- Q3 free cash flow burn: $5.68 million by our math, or 62.4% of revenue
The company strips out non-cash Bitcoin write-downs from its loss excluding one-offs, but it leaves realized Bitcoin gains in. Because the chipmaker now holds zero Bitcoin, that $6.24 million gain cannot repeat, and the underlying business still burned $5.68 million of free cash flow this quarter. What to watch: fourth-quarter operating cash flow. A burn above $5 million without new licensing cash would keep pressure on its $39.7 million reserve.
Product Gross Margin Stays Stuck at 33%
Sequans earns a much higher profit margin when it licenses its wireless technology than when it sells physical chips and modules. In the third quarter, the company said product sales made up "the vast majority of revenue", while Karam noted "a growing pipeline of high-margin licensing opportunities". Gross margin — the share of sales left after the cost of making the products — was 33.0%, barely changed from 32.9% in the second quarter.
Management had expected at least one licensing deal in the second half of 2026 to lift revenue toward the $10.0 million top of its third-quarter range. Because no deal closed in the third quarter and memory costs remain high, gross profit reached only $3.00 million, far short of $10.29 million in operating costs. What to watch: signed licensing deals in the fourth quarter. Another quarter without one keeps gross margin near 33%.
Risks this quarter didn't answer
The preliminary earnings release gave no new numbers on several standing product, supply-chain and accounting items that normally appear on the conference call or in filings.
- Design-win share in mass production: last reported at 55% of the $300 million three-year pipeline in Q2; management promised a full pipeline update at year-end.
- RF transceiver revenue for drones and defense: Karam cited expansion in defense, drone and space markets and 5G eRedCap (its next-generation low-power 5G chip), without dollar figures.
- Memory and packaging supply: no update in the release on component costs, price pass-through, or module price competition.
- 2025 audit adjustments: Q3 2025 revenue was revised down from $4.29 million to $3.21 million following purchase accounting and audit reviews.
💲 Other KPIs
Deferred revenue — cash customers have paid for licensing and services not yet delivered — rose 16.9% from last quarter to $9.59 million by our math. That reverses a drop from $10.79 million in the first quarter to $8.21 million in the second quarter, suggesting upfront customer billings picked up.
Uncollected customer bills more than doubled to $7.06 million at September 30 from $3.28 million at the end of 2025. As chip shipments grew across the first nine months of 2026, higher receivables tied up $4.66 million of working capital and added to the operating cash burn.
The diluted share count edged up 0.1% from last quarter and 7.7% from a year ago, when the July 2025 stock offering took effect. The wireless chipmaker spent $0.93 million on share buybacks in the first quarter of 2026, then paused repurchases over the past two quarters to conserve cash.
🔮 Guidance
Unchanged. Sequans did not issue a dollar revenue range for the fourth quarter in its press release, but Karam said the order backlog now reaches into the second half of 2027 and reiterated the goal of scaling toward long-term profitability. Across four prior numeric quarterly outlooks, revenue landed 1.4% below the middle of the range on average by our math.
❓ Key Questions
What is the fourth-quarter revenue outlook?
The press release gave no dollar range for fourth-quarter revenue and did not mention the $40–45 million full-year 2026 target set a year ago. With nine-month revenue at $22.60 million, reaching $40 million would require $17.40 million in the fourth quarter.
Why include Bitcoin gains in profit excluding one-offs?
Sequans removed non-cash Bitcoin impairment losses from its profit excluding one-offs in prior quarters, but it kept the $6.24 million realized Bitcoin gain inside this quarter's $0.60 million loss. Management should clarify how it defines recurring earnings now that the Bitcoin exit is complete.
When will a new licensing agreement close?
Management previously said one or more licensing deals under discussion could sign in the second half of 2026. Because third-quarter revenue came almost entirely from product sales, investors need to know whether a signing is still expected before year-end and how much upfront cash it brings.
Why was third-quarter 2025 revenue revised down 25%?
The comparative table lists third-quarter 2025 revenue at $3.21 million, down from $4.29 million in last year's preliminary release, citing purchase accounting and audit adjustments. Management should explain which revenue lines changed and whether the 2025 audit is now final.