How Is X2M Turning a Revenue Slump into Growth in AI and Middle East Markets?
X2M Connect reports a 43% revenue decline in FY25 but improves gross margins and expands into the Middle East and renewable energy sectors, setting a positive outlook for FY26.
- Revenue down 43% to $6.5 million due to market slowdown and exit from low-margin hardware sales
- Gross profit margin improved to 47% driven by SaaS and maintenance revenue growth
- China operations discontinued; Middle East market entered via 10-year licensing deal
- Operating expenses reduced by 14%, enterprise/government customers increased 12%
- Post-year-end capital raise strengthens balance sheet with $5.4 million raised
FY25 Financial Overview
X2M Connect Limited’s FY25 results reveal a company in transition. Revenue from continuing operations fell sharply by 43% to $6.5 million, reflecting a deliberate strategic shift away from low-margin hardware sales and a challenging Korean market environment. Despite this top-line contraction, the company managed to improve its gross profit margin to 47%, up from 42% the previous year, largely due to a higher proportion of recurring SaaS and maintenance revenues.
Operating expenses were tightly controlled, falling 14% to $6.9 million through cost discipline, reduced headcount, and operational efficiencies. However, the adjusted EBITDA loss widened slightly to $3.6 million, as the decline in gross profit offset these savings. Net debt increased to $4.7 million, driven by lower cash inflows and ongoing investment in growth initiatives.
Strategic Market Moves and Operational Changes
In a significant move, X2M discontinued its China operations, marking a retreat from a market that had not met expectations. Conversely, the company expanded its footprint in the Middle East through a 10-year exclusive licensing agreement with Dubai-based Dicode Smart Connect Electronics. This partnership has already yielded contracts for smart gas meter installations in the UAE, signaling promising regional traction.
South Korea remains a core market despite softness, with X2M securing new municipal water metering contracts and a major public safety project with the City of Seoul involving 100,000 IoT safety devices. The company’s enterprise and government customer base grew 12% to 84, underscoring steady demand from institutional clients.
Innovation and Growth Prospects
X2M is also pushing into renewable energy with the launch of Hive.AI, an AI-driven platform developed in collaboration with Sirius Digitech. Initially deployed in Taiwan, this platform aims to optimize operational efficiency and energy yield for renewable energy operators, representing a strategic diversification beyond traditional IoT device connectivity.
CEO Mohan Jesudason highlighted the company’s momentum entering FY26, with secured contracts for the first half already exceeding the full-year revenue of FY25. The strengthened balance sheet, following a $5.4 million capital raise and conversion of borrowings into equity, provides a solid foundation for executing growth plans across new and existing markets.
Looking Ahead
While FY25’s financials reflect the pains of transformation, X2M’s focus on high-margin SaaS revenues, geographic diversification, and innovative AI applications position it well for a rebound. The company’s ability to convert its pipeline into sustained revenue growth and manage costs will be critical as it navigates competitive and market challenges in FY26.
Bottom Line?
X2M’s FY25 transformation lays the groundwork for growth, but execution risks remain as it scales new markets and technologies.
Questions in the middle?
- How quickly will Hive.AI scale beyond Taiwan and contribute materially to revenue?
- What impact will the China exit and impairment charge have on future earnings and cash flow?
- Can X2M sustain margin improvements while growing its Middle East and renewable energy businesses?
