Kopin Q2 Revenue Jumps 51% as Defense and MicroLED Programs Drive Growth
Kopin (NASDAQ: KOPN) is coming off a second quarter that shows how government-funded development and defense work are increasingly driving the top line. Revenue for the period ending June 27 rose 51% year over year to $12.7 million, helped by a surge in non-product revenue tied to MicroLED R&D, the Fabric.AI collaboration, an augmented-reality thermal clip-on partnership and Army research programs. Management also cited early orders for its Sentinel first-person-view drone headset as a reason for optimism in the second half.
Product revenue was essentially flat at $7.6 million, with higher defense sales from thermal weapon sights and liquid-crystal displays offset by weaker industrial demand. Non-product revenue climbed to $5.1 million from $1 million, reflecting grants, collaboration income and funded research and development.
The quarter also brought margin improvement. Cost of product sales came to 86% of net product revenue, down from 94% a year earlier, a shift CFO Erich Manz attributed to product mix. Research and development spending rose to $4.5 million from $1.9 million, largely because of funded costs tied to the government award for ultra-bright, full-color MicroLED displays. SG&A expense increased modestly to $5.1 million from $4.9 million.
Kopin's operating loss narrowed to $3.5 million from $5.5 million, and the company reported net income attributable to common shareholders of $0.9 million, or $0.00 per share, against a net loss of $5.2 million a year earlier. The improvement included roughly $2.3 million in investment gains and a $2.1 million tax benefit tied to the expiration of a statute of limitations on an uncertain tax position.
Cash remained healthy. Kopin ended June with $50.3 million in total cash, restricted cash and marketable securities, including $24.3 million in cash and equivalents. That total includes $26 million of restricted cash, with $24.2 million collateralizing a supersedeas bond tied to the BlueRadios litigation appeal. The company does not expect an update on that federal appeal until around mid-2027.
Management kept its outlook for a stronger second half, declining to provide a new numerical range, and repeated its expectation for GAAP profitability and positive free cash flow in the fourth quarter. That target matters because it would come before any meaningful production revenue from Neural I/o, which Kopin sees as a 2028 opportunity.
On the MicroLED front, CEO Michael Murray said Kopin completed three milestones under the U.S. government's Industrial Base Analysis and Sustainment, or IBAS, program. The company has now demonstrated more than 150,000 nits of single-panel full-color brightness, above the program's threshold, and has made early progress integrating the displays for Army ground-soldier vision applications. New MicroLED bonding equipment also arrived at its Westborough, Mass., headquarters, where it will be used to attach MicroLED arrays to digital backplanes. Kopin expects to move to manufacturing product in mid-2027.
Murray said the technology could support Army programs such as Soldier Borne Mission Command, as well as heads-up displays, weapon sights and helmet-mounted systems. Three additional IBAS milestones are scheduled for the fourth quarter, which would allow Kopin to provide Color MicroLED samples to industry and government customers in 2027. The company sees awards and potential low-rate initial production in 2027, with main production for the Army program still slated for 2028.
Kopin is also making a push into the drone-headset market. It received multiple Sentinel FPV prototype orders from customers participating in evaluations tied to the Pentagon's Drone Dominance Program. Sentinel, unlike fully enclosed goggles, is designed to deliver drone video while keeping the user's peripheral awareness intact. Murray said program winners could need tens of thousands of FPV goggles, with volume orders potentially beginning in late 2026 after Phase II evaluations. He described the 2027 Sentinel opportunity as tens of millions of dollars but cautioned that the outcome depends on which drone manufacturers win their own program awards.
The company said it has received more than $45 million in orders so far in 2026. Defense activity includes a $21.5 million follow-on thermal imaging production contract, European helmet-mounted display programs, a DarkWAVE development order with Theon and initial Sentinel production orders.
Kopin also plans to bring OLED deposition in-house, with its line expected to come online in early 2027. Murray said the move should improve gross margin by at least 15 percentage points next year by cutting external margin costs, and should cover expected demand through 2028. The company is also opening an optics and photonics design center in Dallas before year-end, focused on its Neural I/o platform and custom optical solutions.
Neural I/o is one of the longer-range opportunities. Under a $15 million initial development order with Fabric.AI, Kopin is developing GPU-to-GPU connectivity technology and expects to complete a demonstrable chiplet by the end of 2026. The company plans to show the platform at CES in January, with real-time transmission through a transceiver tile and a roadmap toward a 1.6-terabit-per-second solution. Management has signed several new nondisclosure agreements, including with current NVIDIA NVLink partners, and has seen early interest from quantum-computing and semiconductor prospects. Still, Murray said 2027 is likely to be a development and R&D revenue year, with chip-program orders in the $20 million to $30 million range; production revenue would more likely begin in 2028.
Kopin, based in Westborough, Massachusetts, designs and manufactures high-resolution microdisplays and optical components for wearable electronics, including AR/VR, industrial, medical and defense systems. Both phases of its optical automation program are now operational, and the company says they are on track to deliver roughly $1 million in annual operating-expense savings while increasing production capacity as utilization rises.