Small Caps | 11:00 AM
Cost reductions, recovering core demand and new ways to monetise Dante's vast installed base are raising hopes of a revival for Audinate Group.
- Audinate Group’s destocking pain gives way to recovery
- FY26 results and FY27 guidance exceed market expectations
- Potential leverage via workforce reduction/flat FY27 operating costs
- Software Opens a Larger Opportunity
By Mark Woodruff
Long-suffering shareholders in Audinate Group ((AD8)), a global provider of professional audio-visual (AV) networking technologies, have heard no shortage of bullish narratives, only to watch the share price endure a spectacular fall from grace.
Since surging to an all-time high of $23.51 in March 2024, shares cratered by more than -90% to a June 2026 low of $1.71, and are currently trading around $2.40, following a rally post FY26 results.
Several important shifts in management’s strategy, revealed within those results, suggest the foundations may finally be emerging for a revival in both the company and its investors’ fortunes.
A brief look back shows Audinate benefited materially from pandemic-era semiconductor shortages, as AV manufacturers placed unusually large orders to secure scarce components and protect future production.
As a result, the group’s customers and distributors accumulated excess inventory, while Audinate earned temporarily elevated sales.
Once supply chains normalised, customers reduced orders while using the chips and modules already sitting in inventory. This “destocking” caused Audinate’s sales to fall sharply even though the number of Dante-enabled products in use continued to increase.
Audinate’s Dante platform distributes digital audio and video signals over computer networks and is designed to bring the benefits of IT networking to the professional AV industry.
As well as providing hardware and software that connect AV devices, the group offers network-management software tools.
Overall, Audinate benefits from growing demand to transmit AV signals over Internet Protocol networks, known as AV-over-IP (AVoIP), which generate efficiencies for end-users including universities, corporates, convention centres, theatres, stadiums, theme parks and recording studios.
Original equipment manufacturers (OEMs), including Bosch, Bose, and Yamaha, license the Dante protocol to enable digital delivery and management of audio for products, such as microphones, mixers, and speakers.
These OEMs on-sell Pro-AV products (speakers, amplifiers, and mixers) to systems integrators.
What has changed?
Aided by a -10% reduction in workforce, Moelis finds the FY26 result demonstrated control over costs, illustrating a roadmap towards positive free cash flow (FCF) beyond FY27.
Apart from FY26 results and FY27 guidance exceeding market expectations, Audinate’s business has somewhat evolved in two main ways.
Moelis highlights the importance of expanding the ecosystem of Dante-connected devices.
AVIO Adaptors, sold through distributors and integrators, are progressively removing a key adoption bottleneck by connecting existing equipment to Dante networks without requiring new OEM design wins.
Following Audinate’s FY26 result, Macquarie expects continued growth in AVIO Install volumes during FY27 to support unit growth at around three to four times the broader market rate.
AVIO Adaptors also command an average selling price (ASP) approximately twice the group average, providing an additional revenue tailwind, the broker suggests.
Strong demand for the group’s two-channel AVIO Install Adaptors, launched in January 2025 and distributed globally from May 2025, was a key driver of US-dollar gross profit growth, which accelerated to 17% in 2H26 from 12% in 1H26, UBS explains.
Management subsequently expanded the range in June 2026 with new four-channel and bidirectional models, which are expected to make a fuller contribution in FY27.
As a second tailwind for Audinate’s business, Shaw and Partners highlights management’s strategy is evolving beyond monetising embedded components towards capturing a greater share of the value generated across an entire AV installation.
The group’s installed base of more than 8m Dante devices provides the foundation to add control as the “third leg of the stool” alongside audio and video, Shaw points out, while supporting recurring software and services revenue from products such as Dante Director and Iris, which offers remote camera control.
Dante Director is cloud-based subscription software that allows an organisation to monitor, manage and secure Dante networks remotely.
The Dante Virtual Soundcard turns an ordinary Windows or Mac computer into a Dante-enabled audio device without requiring a separate physical soundcard.
Put simply, the Soundcard connects a computer to the audio network, while Dante Director remotely controls and manages the network itself.
If successful, Shaw suggests this new strategy could materially expand Audinate’s total addressable market (TAM), increase revenue per installation and support a higher valuation multiple.
While Macquarie agrees Iris has exciting potential, it is expensive and still at a very early stage.
Iris’s operating expenditure could limit Audinate’s scope for further cost reductions as it invests to grow subscribers beyond FY27, this broker cautions.
Audinate announced the acquisition of US-based Iris Studio Inc. on 25 June 2025 for -US$20m upfront, with up to a further -US$8m payable subject to revenue and service conditions.
FY26 results
Morgan Stanley views Audinate’s FY26 operating metrics as broadly solid, supported by design wins, growing OEM adoption and continued expansion of the Dante product ecosystem, although Iris and video remain at an early stage.
While revenue and gross profit were in line with the consensus estimate, the result indicates to the broker management's intentions remain on track.
Better-than-expected guidance for flat FY27 operating costs implies to the analysts earnings (EBITDA) of approximately $3m (compared to the $0.4m forecast by consensus) weighted toward the second half.
Gross profit increased to US$20.3m in 2H26 from US$17.4m in 1H26.
To Macquarie, guidance implies operating leverage, with FY27 US dollar gross profit growth expected to match or slightly exceed FY26’s rate while gross margin and underlying costs remain broadly flat.
Note: Audinate reports operating costs and earnings in Australian dollars, while revenue and gross profit are reported in US dollars.
Morgan Stanley also sees potential for Audinate to exit FY27 around cash-flow breakeven, probably six to 12 months earlier than expected.
While Macquarie points out orders for Audinate’s chips, cards and modules (CCM) are inherently lumpy, a recovery in tariff-affected Ultimo chips would provide a material and visible source of upside to both the broker’s FY27 forecasts and management's guidance.
Ultimo is Audinate’s low-channel-count Dante chip used in products such as speakers, microphones and amplifiers.
The investment case
To broadly summarise the views expressed by the brokers mentioned, Audinate’s investment case rests on Dante’s position as the dominant professional AV networking standard, supported by more than 8m installed devices and strong design-win momentum.
Core revenue is recovering after post-pandemic destocking, while AVIO adaptors accelerate adoption without relying on OEM product cycles.
A -10% workforce reduction and flat FY27 operating costs create operating leverage as gross profit grows.
Longer term, Dante Director, Iris and other software could monetise the installed base through recurring revenue across audio, video and control.
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