Bridgeline Digital reported a slight dip in fiscal Q3 revenue and a wider loss as surging sales of its HawkSearch AI platform were offset by declines in legacy products and services.
Executives say the company’s flagship search technology now accounts for more than 60% of revenue and is on track to drive overall growth as soon as 2026.
Bridgeline Digital revenue in Q3
For its Q3 ending June 30, total Bridgeline Digital revenue fell 2.6% to $3.8 million from $3.9 million a year earlier. Subscription and license revenue — which includes SaaS licenses, maintenance, and hosting — rose 3.3% to $3.1 million. It represented 81% of total revenue compared with 77% last year. Services revenue dropped 22% to $700,000, shrinking to 19% of total sales.
Net loss widened to $800,000 from $300,000.
CEO Ari Kahn told analysts on an earnings call that HawkSearch booked $1.7 million in new contracts in the quarter. It added $600,000 in annual recurring revenue (ARR). Year to date, the platform has generated $6 million in contracts and over $2 million in ARR. HawkSearch revenue is growing at a double-digit pace and has a 114% revenue retention rate, the company said. Expansions from existing customers average twice the size of initial contracts, the company added.
“An average customer might start with a $25,000 ARR HawkSearch deal and add another $50,000 for advanced features like our AI-powered SmartSearch,” Kahn said. “There’s no greater proof of value than customers buying more from us after going live.”
Bridgeline Digital launches a new AI agent protocol
In the third quarter, Bridgeline launched HawkSearch’s “model context protocol” (MCP). It enables AI agents to work alongside human merchandising teams, allowing natural-language control of search results, category prioritization and campaign targeting. Customers can also query the system for performance analytics and receive visual data, integrating with enterprise BI tools.
Major new customers included Do It Best, which is using HawkSearch to power AI-enhanced search for more than 3,000 stores with live inventory integration; a Fortune 100 tech company deploying it across global ecommerce sites; and one of the nation’s largest electrical distributors, integrating with both Sitecore and Salesforce Commerce Cloud.
To fuel HawkSearch growth, Bridgeline doubled quarterly marketing spend from $250,000 to $500,000 after a March capital raise. The company said qualified lead generation has more than doubled. It added that sales cycles have shortened from 125 days to 112 days, and some contracts close in under 60 days.
Events such as the company’s first HawkSearch Virtual Summit — featuring Hewlett Packard, BigCommerce and other partners — and co-hosted industry gatherings have driven particularly efficient lead generation, Kahn said.
“HawkSearch is more than 60% of our revenue today and growing strongly,” Kahn said. “With our expanded marketing budget and faster sales cycles, we expect its performance to shine through in our overall results.”
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