Jacksonville’s Duos Technologies posts 45% revenue decline while banking on second-half infrastructure ramp (Courtesy of the Jacksonville Business Journal) — Jacksonville-based Duos Technologies Group Inc. reported a wider first-quarter loss as revenue declined from the prior year, but the company said its AI infrastructure pivot remains on track for a second-half ramp.
The Nasdaq-listed company [Nasdaq: DUOT] reported first-quarter revenue of $2.72 million, down 45% from $4.95 million in the same period a year ago, as Duos continued to wind down work tied to its Duos Energy and New APR Asset Management Agreement.
Still, management reaffirmed its expectation that 2026 revenue will exceed $50 million, with a significant portion expected in the second half of the year as edge data center and GPU hosting deployments come online.
“We entered the year with significant momentum and a clear path to scale our diversified AI infrastructure platform,” CEO Doug Recker (pictured above) said in a statement. “We are now entering the execution phase on several significant projects, most notably our $200 million strategic partnership with Hydra Host, which is slated to come online in the second half and has us well positioned to achieve our $50 million target for 2026. During the quarter, we also made meaningful commercial progress across all business lines, including our edge and high-power EDC solutions as well as our GPUaaS and Technology Solutions divisions, providing us with an increased pipeline and greater revenue visibility as we ramp in the coming quarters.
“Looking ahead, our ability to provide secured power via several different form factors, combined with our rapid deployment capabilities and key strategic partnerships, has us well positioned to meet outsized demand across the spectrum of AI infrastructure.”
The results show a company still in the middle of a strategic transition: moving away from its legacy rail inspection business and toward modular edge data centers, GPU-as-a-service and technology infrastructure services built around growing demand for AI computing capacity.
Duos said it continues to make progress on the planned divestiture of its legacy rail inspection business, which is expected to be finalized in the second half of 2026. The company said Duos Edge AI and Duos Technology Solutions are now primary growth drivers.
While revenue fell, gross margin improved. Duos reported gross margin of $1.61 million, up 23% from $1.31 million in the first quarter of 2025, helped by lower costs across most business lines.
Cost of revenue fell 69% to $1.11 million from $3.64 million a year earlier. The company attributed that decrease largely to lower personnel-related fixed costs tied to the New APR agreement ramp-down and reduced manufacturing activity ahead of field installation work for a contracted high-speed railcar inspection portal.
Operating expenses rose 69% to $5.24 million, driven by increased sales and marketing resources to support business development and higher general and administrative expenses.
Duos reported a net operating loss of $3.63 million, compared with a net operating loss of $1.79 million in the prior-year quarter. Net loss totaled $3.49 million, compared with $2.08 million a year earlier, though net loss per common share narrowed to 15 cents from 18 cents.
A major driver of the company’s 2026 outlook is its Hydra Host relationship. Duos described the relationship as a $200 million strategic partnership, anchored by a $176 million GPUaaS contract announced in March to deploy a high-density NVIDIA B300 GPU cluster for a leading global technology company.
The agreement covers a 36-month term and includes an initial $15 million customer prepayment. Duos expects about $26 million in revenue from the contract to be recognized in the second half of 2026, with about $135 million expected over the balance of the contract period. The company projected gross margins above 80% and annual EBITDA of about $40 million tied to the partnership.
That contract is expected to help validate the company’s broader shift into AI infrastructure.
During 2025, Duos deployed 15 modular edge data center pods and expanded into high-density configurations designed to support hyperscaler and AI workloads. Recker previously told the Business Journal that Duos constructs data center “pods” off site before delivering them to substations where excess power is available, a model designed to shorten deployment timelines.
The company said it now has 10 megawatts contracted, with 15 megawatts planned for deployment in 2026.
Duos also said its balance sheet was strengthened by a $65 million capital raise completed in March.
At the end of the first quarter, the company said bookings represented about $43.5 million in revenue, all expected to be recognized this year.
For Duos, the first-quarter results reflected the cost of a transition still underway. The company’s guidance shows management is betting the payoff will begin later this year, as AI infrastructure contracts move from announcement to deployment.
Photo courtesy of Duos Technologies Group Inc.