OneSpan Accelerates Software Pivot Amid 16.6% Hardware Revenue Slump

OneSpan’s Q4 2025 earnings results serve as a definitive case study for the structural transformation currently sweeping the authentication and identity management sector. The company reported a total Annual Recurring Revenue (ARR) of $187 million, representing an 11.5% year-over-year increase. However, the headline figure masks a deeper divergence: while cybersecurity-specific ARR grew by 12%, legacy hardware revenue plummeted by 16.6% for the full year. This shift marks the twilight of the physical hardware token era, as enterprise clients—particularly in the financial services sector—migrate toward software-defined, mobile-first security architectures. For OneSpan, this transition is not merely a change in delivery method but a total re-engineering of its business model toward higher-margin, predictable subscription revenue.

The strategic centerpiece of OneSpan’s evolution is its aggressive M&A activity, designed to build a comprehensive 'Mobile Identity' stack. During 2025, the company completed the acquisitions of Knock Knock and ThreatFabric, with the acquisition of Build38 expected to close in Q1 2026. These are not random additions; they represent a calculated move to own the entire lifecycle of mobile application security. Knock Knock brings FIDO-based passwordless authentication, ThreatFabric provides sophisticated mobile fraud detection and threat intelligence, and Build38 specializes in mobile app shielding. By integrating these technologies, OneSpan is positioning itself as a critical infrastructure provider for mobile banking and high-value digital transactions, moving beyond simple two-factor authentication into proactive threat mitigation.

“

The company reported a total Annual Recurring Revenue (ARR) of $187 million, representing an 11.5% year-over-year increase.

Financially, OneSpan is managing this pivot with remarkable discipline. Despite the heavy costs associated with integrating multiple acquisitions and the drag from declining hardware sales, the company maintained a 32% Adjusted EBITDA margin for the full year, generating $78 million. This profitability is bolstered by a 74% gross margin, a 200-basis-point improvement over the previous year, reflecting the superior economics of software over physical goods. Furthermore, the company’s net retention rate ticked up to 104%, suggesting that existing customers are not only staying but expanding their footprint into new software modules. This is a vital metric for investors, as it proves the cross-sell potential of the newly acquired security assets.