AI-Media Delivers 80% ARR Growth as LEXI Hits 80% Technology Revenue Milestone

AI-Media delivers 80% ARR growth as LEXI technology hits critical milestone

AI-Media Technologies (ASX: AIM) has reported Annual Recurring Revenue (ARR) of $30.0 million in 1H FY26, representing 80% growth compared to $16.7 million in the prior corresponding period. The result marks a structural inflection point for the AI-powered language infrastructure provider, which achieved its strategic goal of deriving 80% of ARR from technology revenue in December 2025.

The company’s LEXI suite of AI captioning and translation products now generates $24.1 million in technology-focused ARR at an 84% gross margin, while legacy services revenue has declined to 20% of total revenue. Management stated the transition positions AI-Media as an infrastructure-led, hardware-enabled, recurring revenue business.

Tony Abrahams, Co-Founder and CEO

“In the past 6 months, AIM crossed a key structural threshold in achieving our key goal of reaching 80% technology revenue in December 2025. The result is a simpler, more predictable business — infrastructure-led, hardware-enabled, and recurring by design.”

The ARR growth outpaced the company’s guidance of 35%, driven by accelerating adoption of LEXI Text across broadcast, government, and enterprise segments. AI-Media processed 54 million LEXI minutes in 1H26, up 1,287% from 3.9 million in 1H21, reflecting sustained volume growth across its global encoder network.

Financial performance reflects transformation to technology-led model

AI-Media reported total revenue of $29.8 million in 1H26, down 6% on the prior corresponding period, reflecting the deliberate wind-down of lower-margin services business. Technology revenue increased 12% to $21.1 million, while services revenue declined 33% to $8.7 million as the company accelerates its shift toward recurring SaaS products.

Gross margin expanded to 70% (from 67% in 1H25), underpinned by the 84% gross margin generated from technology revenue. The improvement demonstrates operating leverage as the business scales its AI-powered infrastructure.

The company reported an adjusted EBITDA loss of $0.4 million, compared to a profit of $0.7 million in 1H25. Management noted the result reflects planned investment of $5.1 million in product and R&D (representing 17% of total revenue), which is fully expensed rather than capitalised. This conservative accounting treatment means reported earnings do not reflect the long-term value created by R&D investment in LEXI Voice, LEXI AI, and new encoder hardware.

Cash position strengthened to $16.7 million (up 14% from $14.7 million at 30 June 2025), supported by positive operating cash flow of $2.6 million. The company remains debt-free.

SaaS revenue grew 61% year-on-year, while hardware revenue declined 46% ahead of the planned 2H26 release of new encoder products. Management expects the Hardware-as-a-Service (HaaS) commercial model, launching in 2H26, to accelerate encoder replacement cycles and convert one-time hardware sales into recurring ARR streams.

LEXI minutes surge 1,287% as AI adoption accelerates

LEXI’s share of AI-Media’s iCap network has expanded from 11% in 1H21 to 68.5% in 1H26, validating the superiority of AI-powered captioning over legacy human services. LEXI usage has grown at a 66.4% compound annual growth rate over five years, compared to 19.4% for the overall iCap network (which includes both human and AI-powered services).

The volume growth underpins future margin expansion and ARR scaling, as incremental LEXI minutes are processed at minimal marginal cost. Management highlighted that LEXI accuracy now exceeds human captioning, with LEXI achieving 99.15% accuracy compared to 98.7% for human operators.

Understanding AI-Media’s infrastructure model

AI-Media operates as the infrastructure layer of live video distribution, adding AI-powered text and voice translation to broadcast workflows. The company’s technology integrates into secure, regulated environments where broadcasters, governments, and enterprises require deterministic, auditable, and compliant language accessibility solutions.

The workflow operates in four steps:

1. Capture: Video input is fed directly to AI-Media encoders
2. Secure Ingest: Encoders receive source data from approved customer systems
3. AI Automation: The iCap platform and LEXI orchestrate media with AI for optimal output
4. Enhanced Output: LEXI adds AI captions, translation, and voice synthesis to final video

AI-Media’s solutions differ from consumer AI products in critical ways:

• Enterprise-grade security: Translates at the source with secure ingest protocols
• Real-time topic modelling: Frame-accurate output with deterministic consistency
• Regulatory compliance: Full auditability and compliance for customers facing legal and financial liability
• Zero tolerance for failure: Designed for high-trust, professional-grade environments where failure has material consequences

This positioning creates high switching costs and sticky customer relationships. The company has reported zero churn in its top 20 customers over the past five years, with these customers representing 80% of revenue and each generating over $1.5 billion in annual revenue.

Growth strategy targets $70 billion addressable market

AI-Media’s growth strategy is built on three pillars: Product Expansion, Geographic Penetration, and Segment Differentiation.

Product Expansion focuses on increasing wallet share with existing customers through LEXI Text and new encoder hardware, while monetising new offerings such as LEXI Voice and LEXI AI. The launch of LEXI Voice expands the company’s total addressable market approximately 30x, from $2 billion to $70 billion, by enabling live voice interpreting from captions in over 100 languages with under 8 seconds latency.

Geographic Penetration aims to replicate North American success in Europe and Asia. AI-Media now services 43 countries, adding 7 new countries in 1H26 (Chile, Taiwan, Guernsey, Italy, Mongolia, Turkey, and Vietnam). The European Accessibility Act (EAA), which became effective in June 2025, creates a regulatory tailwind for AI-Media’s products across EU markets.

Segment Differentiation strengthens the company’s position in Enterprise, Education, and Government sectors, building on successes within parliamentary and congressional institutions. Management highlighted initial customer pilots in US and Canadian government departments as a key FY26 priority.

Management’s “9 Squares” framework targets specific product-market fit opportunities across three regions (AMER, EMEA, APAC) and three customer segments (Broadcast, Government, Enterprise). Key FY26 growth targets include:

1. EMEA Broadcast: Encoder sales and LEXI Text adoption driven by EAA compliance
2. Global Enterprise: Expansion of LEXI Voice proof-of-concepts with high-value customers
3. AMER Government: Building on Title II ADA opportunities and Audio Description use cases
4. APAC Broadcast: Encoder refresh cycles and continued displacement of legacy competitors

The company’s encoder installed base of 7,948 units includes 5,152 units over three years old, creating a built-in replacement opportunity. The Hardware-as-a-Service (HaaS) model launching in 2H26 will convert one-time hardware sales into monthly recurring ARR, eliminating customer capital expenditure barriers while strengthening AI-Media’s recurring revenue profile.

Product suite expansion drives future growth

AI-Media’s LEXI product suite consists of three core offerings:

• LEXI Text: AI-powered live captioning, representing 100% of current LEXI revenue and serving as the foundation for LEXI Voice and LEXI AI
• LEXI Voice: Live voice interpreting from captions in over 100 languages with under 8 seconds latency, targeting high-value proof-of-concepts with strategic broadcast partners
• LEXI AI: Secure enterprise GenAI solutions deployed within proprietary data environments, launching at NAB 2026 alongside LEXI Insights

LEXI Text accuracy of 99.15% surpasses human captioning at 98.7%, creating a competitive moat against both human services and consumer-grade AI products. The product suite is supported by AI-Media’s encoder hardware (optimised for LEXI workflows with SDI, IP, and SRT support) and a 24/7/365 global support offering, which will transition to a Support-as-a-Service (SUaaS) model to generate additional recurring ARR.

Investment case and outlook

AI-Media’s transformation to a high-margin ARR model positions the company for sustained growth. The business has achieved $30.0 million in ARR with an 84% gross margin, supported by positive operating cash flow and a debt-free balance sheet with $16.7 million in cash.

Management forecasts ARR to grow 50% per annum, underpinned by:

• Accelerating adoption of LEXI Text and LEXI Voice across broadcast, government, and enterprise segments
• HaaS and SUaaS models converting one-time sales into recurring revenue streams
• Regulatory tailwinds (EAA in Europe, Title II ADA in North America) driving structural demand
• Aging encoder installed base creating built-in refresh opportunities
• Zero churn in top 20 customers validating defensible moat and sticky customer relationships

The company’s conservative accounting approach (all R&D expensed rather than capitalised) means reported earnings understate the long-term value creation from product development. AI-Media invested $5.1 million in product and R&D in 1H26, representing 17% of total revenue.

Key catalysts for 2H26 include:

• Launch of new 2026 encoder products
• Rollout of HaaS commercial model
• LEXI AI and Insights product launch at NAB 2026
• Continued geographic expansion in EMEA and APAC markets
• Proof-of-concept conversions for LEXI Voice with strategic broadcast partners

AI-Media’s infrastructure positioning, high-margin recurring revenue model, and expanding addressable market support a long-term growth trajectory. The company has successfully transitioned from a services-led business to a scalable AI-powered platform, with technology revenue representing 80% of ARR and gross margins expanding to 70%.

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