Growing pipeline with AI differentiation
Jan - March Highlights
- ARR amounted to MSEK 47.2 (53.7), an annual decrease of 12%.
- Net revenue amounted to MSEK 15.3 (20.4), of which software revenue was MSEK 12.0 (15.1).
- Cash flow from operations amounted to MSEK -2.0 (+3.0).
- Adjusted EBIT amounted to MSEK -7.2 (-8.3).
- Operating expenses were MSEK 23.7 (29.6), including non-recurring items of MSEK 0.5 (0.0) and development costs of MSEK 7.5 (10.6).
- Net profit amounted to MSEK -7.8 (-9.0).
- Earnings per share amounted to SEK -0.43 (-0.52) before dilution.
Comments from the CEO
Business update
Net revenue in Q1 2026 amounted to MSEK 15.3, a decrease of 25 percent compared with that same quarter last year. Annual recurring revenue was MSEK 47.2, down 12 percent in constant currencies from Q1 2025. Adjusted EBIT improved to MSEK -7.2 (-8.3), reflecting a more efficient cost structure. Operating cash flow was MSEK -2.0 (3.0), where last year's figure was positively impacted by multi-year contracts.
The decrease in ARR in the latest quarter continues the negative trend observed since Q1 2025. While last year's decline was driven by reduced business at a few large American accounts, the negative ARR trend in the current quarter was primarily due to several small, one-seat customers that did not renew licenses for our legacy products. The transformation of Modelon into a product-led company, with sales and R&D investments focused on growth areas, is taking longer and has proven more cumbersome than expected. Lower service revenues as well as reduced sales of legacy products are the result of strategic choices and efficiency programs that were executed during 2025. However, we have not yet fully compensated for these losses through new sales, for example in data center cooling, energy, and HVAC applications.
I remain confident that we are on track toward long-term profitable growth. Our core simulation product is stronger than ever, and we are well positioned to leverage AI technologies. Our sales and marketing organization has been revitalized to accelerate new customer acquisition and to increase upselling within the existing customer base. Successes from the quarter include Resalta, a Slovenian energy services company, as well as Kansai Electric Power Co. and a global supplier of home appliances - two large Japanese companies that will use Modelon's simulation platform and libraries for design and optimization. We also secured additional software licenses at Babcock Power, a leading U.S. energy solutions provider.
AI as a differentiator
The rapid development of generative and agentic AI is reshaping engineering practices and workflows across most industries. There are several reasons why our combination of AI and physics-based simulation represents a compelling solution for delivering efficient, predictable, and accessible results. First, physics-based models consistently outperform pure AI and neural-network-based approaches in terms of accuracy and traceability. Second, the Modelica and FMI standards provide an open and AI-friendly technology foundation, enabling seamless interaction between large language models and numerical algorithms and solvers. Third, our proprietary libraries of physics models - developed over more than a decade - give our AI solutions a unique advantage in accurate system modeling. Fourth, our cloud-native simulation platform facilitates integration with AI services from all leading providers, ensuring that customers directly benefit from the latest advancements in AI technology.
Modelon Impact now has an integrated AI assistant that provides users with a context-aware chat interface containing comprehensive information about Modelon's simulation platform and libraries. We expect this AI assistant to increase users' productivity, facilitate onboarding, and shorten troubleshooting time. Initial feedback from pilot customers has been positive, and we are ready to introduce the feature to a broader market.
In addition, advanced Modelon Impact users have built-in access to AI agents from all leading AI providers. This integration enables a completely new way of simulating, analyzing, and solving engineering problems. During the quarter, we have explored multiple application domains, ranging from advanced vehicle dynamics to thermofluid and HVAC systems, achieving remarkably efficient and accurate results. In one case, an AI agent configured and executed a complete vehicle dynamics study in minutes, compared with the hours typically required for manual setup and execution.
System simulation supports data center design and operations
We are proud to count both hyperscalers and leading equipment providers among our customers for data center simulation. We have demonstrated how physics-based simulation in Modelon Impact enables stable and predictable design of liquid cooling systems. We have also shown how simulation models provide powerful support in the operations phase, where real-world behavior is compared with simulation results for purposes such as optimization and troubleshooting.
Our work in data center liquid cooling simulation is still in its early stages, and we are positioning the business to capture significant long-term growth opportunities with both operators and equipment providers. We are investing in our product portfolio and expanding our suite of physics-based simulation libraries with components tailored specifically for data center applications. This includes both single-phase liquid cooling as well as two-phase solutions, the latter becoming increasingly important as the heat density in AI data centers rises with new GPU generations.
Summary and outlook
We have made significant progress in demonstrating the value of combining agentic AI and physics-based system simulation. Customers increasingly recognize that validated physics models provide a more reliable foundation for AI-assisted engineering than approaches based on AI-generated equations. They also acknowledge that we have a leading solution in this space - one we intend to leverage to gain market share and win new contracts.
The data center cooling market continues to grow, and our initial customer engagements provide strong references for expanding business with data center operators and equipment suppliers.
Despite negative revenue trends in recent quarters, I remain optimistic about returning to growth during the year. With a more efficient cost structure, we are well positioned to generate positive cash flow and operating profit over the mid- to long term.
Jan Häglund, CEO Modelon
Lund, April 24, 2026
Investor presentation
Modelon invites investors to a presentation of the Q1 interim report at 11.00am CET on April 24, 2026. CEO Jan Häglund and CFO Jonas Eborn will present the Q1 earnings in a webcast.
The complete Q1 interim report is attached to this press release and is also made available on the company webpage: http://www.modelon.com/investor-relations/FinancialReports.
For further information, please contact:
Jan Häglund, CEO
jan.haglund@modelon.com
Investor Relations: ir@modelon.com
About Modelon
Modelon provides systems modeling and simulation software that accelerates product innovation, development and operations in a range of industries. Modelon's flagship product, Modelon Impact, is a cloud-native system simulation software platform featuring a collaborative browser-based interface and thousands of proven models and components spanning a broad range of applications. Headquartered in Lund, Sweden, and with global reach, Modelon is an expert industry leader in model-based systems engineering with a focus on leveraging open standard technologies.
Modelon AB is listed on Nasdaq First North Growth Market with ticker symbol MODEL. Redeye Nordic Growth AB is appointed the Company's Certified Adviser.
This information is information that Modelon AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 2026-04-24 08:00 CEST.
