Straker Reports 15% Revenue Drop but Secures $28M IBM AI Partnership

Strategic Pivot in a Changing AI Landscape

Straker Ltd’s half-year results for FY26 underscore a deliberate and carefully planned transition from traditional language services to a future centred on specialised AI-driven solutions. The company is moving away from its legacy translation business, which is characterised by slow growth, low margins, and headcount scaling, towards a scalable, high-margin model powered by its proprietary Small Language Model (SLM) technology.

This pivot is not merely theoretical; it is anchored by a substantial $28 million partnership with IBM, marking a significant validation of Straker’s technology and strategy. The deal involves co-developing specialised SLMs for IBM’s watsonx platform, embedding Straker’s AI capabilities within IBM’s extensive ecosystem, and opening new distribution channels that promise scalable growth.

Financials Reflect Transition Challenges and Strengths

Revenue for the half-year declined 15% to $19.3 million, primarily due to softer demand in legacy language services and attrition in traditional translation management system subscriptions. However, the gross margin remained stable at 66.4%, reflecting ongoing production efficiencies. Importantly, adjusted EBITDA stayed positive at $0.53 million, demonstrating disciplined cost management and operational resilience during this transition phase.

Straker’s balance sheet remains robust, with $8.7 million in cash and zero debt, providing a solid foundation to fund ongoing R&D efforts. Capitalised software development increased by 26%, underscoring the company’s commitment to advancing its AI platform, particularly the Tiri SLM factory and Verify AI applications.

Technology and Market Validation

Straker’s focus on specialised Small Language Models contrasts with the broader market hype around large, general-purpose AI models. These smaller, expert models are designed to be faster, more cost-effective, and secure, qualities that enterprises increasingly demand. The Wall Street Journal recently highlighted this trend, reinforcing Straker’s strategic direction.

The IBM partnership is a cornerstone of this validation. Straker’s technology is now embedded within IBM’s watsonx ecosystem, enabling low-cost distribution and access to new enterprise customers. The company is also progressing commercialisation of its Verify and Swiftbridge applications, with pilot activities and customer interest growing, including plans for a December showcase at IBM’s Innovation Centre in Tokyo.

Looking Ahead, Scaling AI-Driven Growth

Straker outlines a clear three-phase roadmap, building the foundation in 2025, executing and delivering on the IBM partnership now, and scaling the SLM factory beyond 2026 into new verticals such as legal and finance. The transition from a services-based margin to a software-as-a-service (SaaS) margin model promises higher scalability and recurring revenue.

For FY26, the company guides to revenue between $38 million and $41 million with positive adjusted EBITDA, reflecting confidence in the ongoing pivot despite near-term revenue pressures. Investors will be watching closely as Straker leverages its AI blueprint and IBM partnership to redefine its growth trajectory.