Pexip's ARR Climbs 18% to $140M on Defense Demand

Pexip Holding ASA (PXPHF) told investors on its fiscal second-quarter 2026 earnings call that annual recurring revenue rose 18% to $140 million, EBITDA increased 30%, and the company posted a Rule of 40 score of 49%, with growth led by its Secure and Custom segments.

Pexip Holding ASA (PXPHF) used its fiscal second-quarter 2026 earnings call to make a case that has become rare among small-cap video software companies: growth and profitability moving in the same direction at the same time. The Norwegian video conferencing and secure-communications vendor reported annual recurring revenue of $140 million, up 18%, alongside a 30% increase in EBITDA and a Rule of 40 score of 49%. Management attributed the momentum to its Secure and Custom segments — the parts of the business that sell to defense ministries, intelligence agencies and other buyers who cannot put a meeting on a public cloud.

What the three headline numbers actually say

Annual recurring revenue, or ARR, is the annualized value of subscription contracts on the books at a point in time. It is a forward-looking measure rather than a record of cash collected, which is why software investors watch it more closely than a single quarter’s revenue line. Pexip’s $140 million figure, growing 18%, tells you the installed base is expanding rather than merely renewing.

EBITDA — earnings before interest, taxes, depreciation and amortization — rising 30% is the more interesting number, because it grew faster than ARR. When a software company’s profit measure outpaces its subscription base, it usually means either that new business is landing at higher gross margin than the existing book, or that operating costs are being held roughly flat while revenue climbs. Both explanations point the same way for shareholders.

The Rule of 40 is the shorthand the software industry uses to compress those two ideas into a single figure: growth rate plus profit margin. Forty is the pass mark. Pexip reported 49%, comfortably clear. Taking the company’s own two disclosed figures at face value and treating the growth component as the 18% ARR increase, the implied profitability contribution would be roughly 31 percentage points — an illustrative arithmetic exercise rather than a reported margin, since companies define the inputs to the Rule of 40 differently. Still, it frames the shape of the quarter: this is not a business buying growth with losses.

Defense budgets are doing the selling

The segment attribution matters more than the headline. Pexip’s Secure and Custom lines exist because a certain class of customer — armed forces, national security agencies, government departments handling classified material — cannot run communications on the same infrastructure as everyone else. Those buyers need self-hosted or air-gapped deployments, sovereign data residency, and software that can be inspected and certified. That is a narrower market than commercial video calling, but it is one where the incumbent commercial platforms are effectively disqualified by their own architecture.

It is also a market where the spending cycle is being set by governments rather than IT budgets. European defense procurement has been running hot, and secure collaboration tooling is the kind of unglamorous line item that gets funded when the broader envelope expands. Pexip did not disclose, in the material reported from the call by GuruFocus, a precise split between what Secure and Custom contributed versus the legacy video estate. Without that breakdown, investors are left inferring the mix from the direction of travel — and the direction is clearly toward the higher-value, stickier government work.

That inference carries a caveat worth stating plainly. Defense contracts tend to be lumpy. A single large multi-year award can flatter an ARR growth rate for four consecutive quarters and then create a difficult comparison in the fifth. Until Pexip discloses segment-level ARR, the durability of the 18% is a question the numbers alone cannot settle.

The legacy business is the other half of the story

Pexip’s original market — interoperability between different video conferencing systems, letting one platform’s meeting room join another’s call — has been squeezed for years by the consolidation of enterprise video around a handful of giants. That business is not the growth engine, and the framing of the quarter around Secure and Custom is itself a signal about where management believes the company’s defensible position lies.

For a company of Pexip’s size, that concentration is a double-edged proposition. Government and defense revenue is exceptionally sticky once certified; the switching cost of replacing an accredited communications stack inside a ministry is enormous. But the sales cycle is long, the customer count is small, and procurement decisions can slip by quarters for reasons that have nothing to do with the product.

A thin American listing and a rough tape

US investors should understand what PXPHF is. Pexip’s primary listing is in Oslo; the PXPHF line is an unsponsored over-the-counter representation of those shares. That means wide spreads, sporadic volume, no US-standard reporting cadence, and currency exposure to the Norwegian krone layered on top of the operating story. Small-cap OTC listings of foreign issuers frequently do not move in step with the underlying home-market shares on any given day.

The broader tape into which this print landed was soft. As of the last trade on Tuesday, 18 August 2026, the S&P 500 tracker (SPY) closed at $767.45, down 0.68% from the prior close of $772.67, with a day range of $766.92 to $769.50. The Nasdaq 100 tracker (QQQ) closed at $717.51, off 1.69% from $729.87 and trading between $715.92 and $722.13. The Dow tracker (DIA) ended at $532.91, down 0.24% from $534.19. Technology took the worst of it, which is the sort of session in which a profitable micro-cap software result can be entirely ignored.

What to check in the next disclosure

Three things would convert this quarter from an encouraging data point into a trend. The first is a segment-level ARR disclosure that separates Secure and Custom from the legacy video base — without it, the quality of the 18% is unverifiable from outside. The second is net revenue retention, which shows whether existing government customers are expanding their seat counts and modules or merely renewing flat. The third is the durability of the EBITDA leverage: profit growing faster than ARR is excellent for one or two quarters, but the test is whether it holds once the company starts hiring against a larger defense pipeline.

A Rule of 40 reading of 49% puts Pexip in the top tier of listed software companies on that particular yardstick. Whether it stays there depends less on video technology than on how long European and allied defense budgets keep expanding.

Key facts

• Annual recurring revenue: $140 million, up 18% (Q2 fiscal 2026)
• EBITDA: Up 30% year over year
• Rule of 40 score: 49%, against a 40% pass mark
• Benchmark close (SPY): $767.45, -0.68%, as of 18 Aug 2026 20:00 GMT

Frequently asked questions

What did Pexip report for its second quarter of fiscal 2026?

Pexip Holding ASA said on its Q2 2026 earnings call that annual recurring revenue rose 18% to $140 million and EBITDA increased 30% year over year. The company posted a Rule of 40 score of 49%. Management credited the performance to growth in its Secure and Custom segments, which serve defense and government customers.

What is the Rule of 40 and why does 49% matter?

The Rule of 40 is a software-industry benchmark that adds a company’s revenue growth rate to its profit margin. A combined score of 40 or above is considered the mark of a healthy business that is not buying growth with losses. Pexip’s reported 49% clears that threshold and places it in the stronger tier of listed software companies on this measure.

Which part of Pexip’s business is driving the growth?

Pexip attributed the quarter’s momentum to its Secure and Custom segments. These serve defense ministries, intelligence agencies and government departments that require self-hosted, sovereign or air-gapped communications rather than public cloud video platforms. The company did not publish a segment-level split of annual recurring revenue, so the precise contribution versus the legacy video interoperability business is not disclosed.

What is the PXPHF ticker?

PXPHF is the over-the-counter US line representing shares of Pexip Holding ASA, whose primary listing is in Oslo, Norway. Such unsponsored OTC lines typically trade with wide bid-ask spreads and thin volume, and they carry Norwegian krone currency exposure. They often do not track the home-market shares closely on any single trading day.

Why did EBITDA grow faster than annual recurring revenue?

EBITDA rose 30% while annual recurring revenue rose 18%, meaning profit outpaced the subscription base. That pattern usually reflects either new business landing at higher gross margin than the existing book, or operating expenses being held roughly flat while revenue expands. Pexip did not break out which factor dominated in the quarter.

How did equity markets close on the day of the report?

As of the last trade on 18 August 2026, the S&P 500 tracker SPY closed at $767.45, down 0.68%. The Nasdaq 100 tracker QQQ finished at $717.51, down 1.69%, and the Dow tracker DIA closed at $532.91, down 0.24%. Technology names bore the brunt of the session’s weakness.

Sources

• Pexip Holding ASA (PXPHF) (Q2 2026) Earnings Call Highlights: ARR Surges 18% to $140M, Defense … — GuruFocus

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