zSpace, Inc. announced a company‑wide restructuring that will trim operating expenses by more than 30% and reduce headcount across its U.S. operations. The plan, which takes effect immediately, is designed to streamline the business, strengthen the balance sheet, and create a leaner operating model that can better support growth in the K‑12 and career‑technical‑education (CTE) markets.
The restructuring comes amid a period of liquidity strain. zSpace has been operating with negative EBITDA and a significant cash burn, and it recently raised $13 million through a senior secured convertible note issued in April 2025. The company also received a Nasdaq listing‑qualification notice for falling below the minimum market‑value threshold, adding regulatory pressure to its financial challenges. The cost cuts are intended to reduce the cash burn rate and improve the company’s ability to meet its obligations while it continues to invest in its headset‑free AR/VR platform.
The company’s strategic focus is shifting toward higher‑margin software and services, which now account for more than 50% of total revenue. Gross margins have expanded from 42.6% in Q2 2025 to 51.2% in Q3 2025, a jump of 8.6 percentage points driven by a stronger mix of software contracts and lower hardware costs. The margin improvement signals that the company’s pivot to software is beginning to pay off, even as overall revenue has declined 38% YoY in Q3 2025 due to a non‑repeating large order in 2024 and ongoing funding uncertainty in the education sector.
CEO Paul Kellenberger said the restructuring “positions zSpace to focus on its core strengths and to build a more resilient operating model.” He added that the company is “optimistic about the future, with a focus on profitability and continued leadership in transforming how people learn and train through AR/VR experiences.” The comments underscore management’s confidence that the cost reductions will free resources for product innovation and market expansion, particularly in CTE where demand for immersive learning tools is growing.
The restructuring signals a turning point for zSpace. While the company faces macro headwinds—such as funding uncertainty in K‑12 schools and a competitive landscape that pressures pricing—the improved margins and reduced operating costs provide a clearer path to profitability. Investors and analysts will be watching how the company balances cost discipline with continued investment in its software platform and international expansion, as these factors will determine whether the company can reverse its revenue decline and sustain long‑term growth.
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