FalconStor Software Announces Second Quarter of 2025 Results
MWN-AI** Summary
FalconStor Software, Inc. (OTCMarkets.com: FALC) reported its financial results for the second quarter of 2025, showcasing significant growth in its hybrid cloud segment alongside some challenges in total revenue. The company achieved a remarkable 57% increase in its hybrid cloud annual recurring revenue (ARR) run-rate compared to Q2 2024, and a 77% surge in cloud-native ARR run-rate. The CEO, Todd Brooks, emphasized that the company's strategic transition to subscription and consumption-based revenue models is instrumental in creating a sustainable business that meets the evolving demands of enterprise customers.
Despite these positive strides in the hybrid cloud sector, FalconStor's total revenue for Q2 2025 was $2.1 million, down from $2.4 million in the same quarter the previous year. This decline was attributed to deal timing and the growing prevalence of monthly consumption contracts. Additionally, the firm reported a slight increase in cash holdings, ending the quarter with $2.9 million compared to $2.5 million in Q2 2024.
Operating expenses rose to $2.2 million, up from $2.0 million year-over-year, and the company recorded a non-GAAP EBITDA of $(0.5) million, emphasizing a commitment to long-term growth and operational efficiency, as stated by CFO Vincent Sita. Although the quarter demonstrated net losses, Brook remains optimistic about the company's trajectory, supported by strong partnerships, particularly within the IBM ecosystem, and increasing customer adoption rates.
In summary, while FalconStor faced some revenue challenges, its strategic focus on hybrid cloud services and operational discipline positions the company for future growth in a dynamic market.
MWN-AI** Analysis
FalconStor Software's latest financial report for the second quarter of 2025 reveals a transformative phase for the company, characterized by significant gains in its hybrid cloud Annual Recurring Revenue (ARR) even amid a slight decline in total revenue. The noteworthy 57% year-over-year increase in the hybrid cloud ARR run-rate demonstrates FalconStor's successful strategic pivot towards subscription and consumption-based revenue models, crucial for long-term sustainability in the changing data protection landscape.
However, the total revenue drop from $2.4 million in Q2 2024 to $2.1 million in the current quarter signals potential challenges in short-term sales momentum, possibly attributed to timing in dealing. Investors must assess whether this shift, although presently impacting revenue, could yield more predictable cash flows and higher customer retention rates in the future. The company did report a positive 13% increase in cash holdings, suggesting improved liquidity, which can be leveraged for further investments and operational enhancements.
It is particularly telling that FalconStor acknowledges the need for a disciplined approach to managing expenses—its operating expenses rose to $2.2 million, slightly outpacing growth in cash. The focus on improving operational efficiency might enhance profitability in future quarters. Given these dynamics, FalconStor appears to be laying a solid foundation for growth, with favorable alignment within the IBM ecosystem and expanding global partnerships bolstering its market position.
Investors should consider taking a long-term perspective, recognizing FalconStor's investments in innovation and customer service as key value drivers that may transition the company into a more robust growth phase. Market sentiment may be volatile due to the current revenue contraction; hence, potential buyers may want to wait for further clarity on the effectiveness of FalconStor's strategic initiatives before establishing a position.
**MWN-AI Summary and Analysis is based on asking OpenAI to summarize and analyze this news release.
Hybrid Cloud ARR Run-Rate and Cash Growth
- 57% increase in total hybrid cloud ARR run-rate vs. Q2 2024
- 77% increase in cloud-native ARR run-rate vs. Q2 2024
- 13% increase in cash vs. Q2 2024
FalconStor Software, Inc. (OTCMarkets.com: FALC), a trusted data protection leader modernizing data protection and intelligence for the hybrid cloud world, today announced financial results for its second quarter of 2025, which ended on June 30, 2025.
“Our strategic shift to subscription and consumption-based recurring revenue models continued in Q2, with hybrid cloud ARR run-rate increasing 57% year-over-year,” said Todd Brooks, CEO of FalconStor Software. “This shift is foundational to building a resilient, durable business that aligns with the evolving needs of enterprise customers running mission-critical workloads across on-premises and hybrid cloud environments.”
“While total revenue declined year-over-year due to deal timing and the expanding role of monthly consumption contracts, the underlying momentum in our hybrid cloud business is encouraging. With strong IBM ecosystem alignment, expanding global partnerships, and accelerating customer adoption, we are confident in our long-term growth trajectory and FalconStor’s growing role in powering data resilience for the world’s most critical workloads.”
Second Quarter 2025 Financial Results
- Hybrid Cloud ARR Run-Rate: 57% increase trailing twelve months
- Ending Cash : $2.9 million, compared to $2.5 million in the second quarter of fiscal year 2024
- Total Revenue: $2.1 million, compared to $2.4 million in the second quarter of fiscal year 2024
- Total Operating Expenses: $2.2 million, compared to $2.0 million in the second quarter of fiscal year 2024
- Non-GAAP EBITDA: $(0.5) million, compared to $0.1 million in the second quarter of fiscal year 2024
- GAAP Net Income (Loss): $(0.5) million, compared to $(0.03) million in the second quarter of fiscal year 2024
“While the quarter produced negative year-over-year revenue growth, we remain focused on long-term growth, innovation, and delivering excellent customer service. At the same time, we are taking a disciplined approach to managing expenses and improving operational efficiency to strengthen our financial foundation and support long-term, sustainable growth,” said Vincent Sita, FalconStor CFO.
Non-GAAP Financial Measures
The non-GAAP financial measures used in this press release are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The Company’s management refers to these non-GAAP financial measures in making operating decisions because they provide meaningful supplemental information regarding the Company’s operating performance. In addition, these non-GAAP financial measures facilitate management’s internal comparisons to the Company’s historical operating results and comparisons to competitors’ operating results. We include these non-GAAP financial measures (which should be viewed as a supplement to, and not a substitute for, their comparable GAAP measures) in this press release because we believe they are useful to investors in allowing for greater transparency into the supplemental information used by management in its financial and operational decision-making. The non-GAAP financial measures exclude (i) depreciation, (ii) amortization, (iii) restructuring expenses, (iv) severance expenses, (v) board expenses, (vi) stock based compensation, (vii) non-operating expenses (income) including income taxes and interest & other expenses (income). For a reconciliation of our GAAP and non-GAAP financial results, please refer to our Reconciliation of Net Income (Loss) to Adjusted EBITDA presented in this release.
Please click this link for accompanying financial charts.
About FalconStor Software
FalconStor is the trusted data protection software leader modernizing disaster recovery and backup operations for the hybrid cloud world. The Company enables enterprise customers and managed service providers to secure, migrate, and protect their data while reducing data storage and long-term retention costs by up to 95%. More than 1,000 organizations and managed service providers worldwide standardize on FalconStor as the foundation for their cloud first data protection future. Our products are offered through and supported by a worldwide network of leading managed service providers, system integrators, resellers, and original equipment manufacturers.
FalconStor and FalconStor Software are trademarks or registered trademarks of FalconStor Software, Inc., in the U.S. and other countries. All other company and product names contained herein may be trademarks of their respective holders.
Links to websites or pages controlled by parties other than FalconStor are provided for the reader's convenience and information only. FalconStor does not incorporate into this release the information found at those links nor does FalconStor represent or warrant that any information found at those links is complete or accurate. Use of information obtained by following these links is at the reader's own risk.
View source version on businesswire.com: https://www.businesswire.com/news/home/20250806288637/en/
CONTACT INFORMATION
For more information, contact:
Vincent Sita
Chief Financial Officer
FalconStor Software Inc.
investorrelations@falconstor.com
CONTACT US AROUND THE GLOBE
Corporate Headquarters
111 Congress Avenue
Suite 500
Austin, Texas 78701
Tel: +1.631.777.5188
salesinfo@falconstor.com
Europe Headquarters
GERMANY
Landsberger Straße 302
80687 München, Germany
salesemea@falconstor.com
FAQ**
How does the 57% increase in hybrid cloud ARR run-rate for FalconStor Software Inc. (OTCMarkets.com: FALC) reflect on the company's overall strategic shift towards subscription models?
Given the total revenue decline to $2.1 million for FalconStor Software Inc. (FALC), what measures are being implemented to enhance revenue generation moving forward?
With a 1increase in cash to $2.9 million, how does FalconStor Software Inc. (FALC) plan to leverage this cash for future growth and investment in its services?
What factors contributed to the negative non-GAAP EBITDA of $(0.5) million for FalconStor Software Inc. (FALC) in Q2 2025, and how does the company plan to improve this metric in future quarters?
**MWN-AI FAQ is based on asking OpenAI questions about Falconstor Software Inc (OTC: FALC).
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