Immersion (IMMR) FY2026 10-K: $1.73B Revenue but EPS Fell 92.6% to $0.14
The Hook
Immersion Corporation $IMMR reported $1.73 billion of revenue in fiscal 2026, up 11.2% from $1.56 billion. Diluted earnings per share went the other way: from $1.90 to $0.14, a decline of 92.6%.
That is not a typo, and it is not an accounting scandal. It is a structure. Immersion is a haptics patent-licensing company with roughly 33 million shares outstanding and just under 300 patents worldwide. It also consolidates Barnes & Noble Education, a campus bookstore operator that produced $1.71 billion of that $1.73 billion. Immersion owns 32.6% of it. Under GAAP, control rather than ownership drives consolidation, so 100% of Barnes & Noble Education's revenue lands on Immersion's income statement, and then 67.4% of the profit is handed back out at the bottom. What arrives for Immersion shareholders is $4.5 million. For every $383 of reported revenue, $1 reached them.
Company Snapshot
Immersion was incorporated in 1993 and licenses haptic technology - the vibration and force feedback in phones, game controllers and car interiors. Its licensees include Samsung, Google, Sony, Panasonic, Microsoft and Nintendo. It is a licensing business: no factories, no inventory, historically very high margins.
On June 10, 2024, Immersion acquired 42% of Barnes & Noble Education and control of its board for total consideration of approximately $50.1 million. Barnes & Noble Education runs 1,116 physical and virtual bookstores for colleges, universities and K-12 institutions, and is one of the largest textbook wholesalers in the United States. Immersion is the primary beneficiary of what the filing calls a consolidated variable interest entity, so it consolidates the whole thing. Four of Barnes & Noble Education's seven directors are Immersion appointees. Immersion's stake has since drifted down to 32.6% as Barnes & Noble Education issued shares.
This analysis covers the FY2026 Form 10-K, for the fiscal year ended April 30, 2026, filed with the SEC on July 24, 2026.
The Financial Story
Follow the money from the top line to the shareholder. The chain has three leaks, and each one is large.
| Revenue to shareholders, FY2026 | Amount | % of revenue |
|---|---|---|
| Total revenue | $1,730.7M | 100% |
| Operating income | $25.9M | 1.50% |
| Pretax income | $26.0M | 1.50% |
| Income tax expense | ($16.8M) | (0.97%) |
| Net income, all holders | $9.2M | 0.53% |
| Less: noncontrolling interest | ($4.7M) | (0.27%) |
| Net income to Immersion | $4.5M | 0.26% |
| Diluted EPS | $0.14 |
Source: Immersion Corporation FY2026 Form 10-K, consolidated statements of operations.
Leak one is operating income, which fell 78.0%, from $118.0 million to $25.9 million. Revenue rose $174.8 million while operating expenses rose only $31.7 million, and operating income still collapsed. The segment note explains why, and it is the most important table in the filing.
| Segment | FY2026 revenue | FY2025 revenue | FY2026 op income | FY2025 op income |
|---|---|---|---|---|
| Immersion (haptics licensing) | $15.9M | $74.1M | $3.8M | $48.3M |
| Barnes & Noble Education | $1,714.8M | $1,481.8M | $22.1M | $69.7M |
| Total | $1,730.7M | $1,555.9M | $25.9M | $118.0M |
Source: Immersion Corporation FY2026 Form 10-K, Note 4 Segment Information.
The licensing business - the actual Immersion - shrank 79%. Royalty and license revenue fell from $74.1 million to $15.9 million. The filing splits it cleanly: fixed-fee license revenue fell 95%, from $62.5 million to $3.0 million, driven by a $44.1 million drop in mobile license revenue and a $10.4 million drop in gaming revenue, both tied to one-time perpetual license agreements signed in fiscal 2025 that did not repeat. The recurring half held up. Per-unit royalties, the revenue that actually accrues with every device shipped, rose 12% to $13.0 million. So the collapse is one of lumpy deal timing, not of the underlying royalty stream, but it leaves the licensing segment running at $15.9 million of revenue and $3.8 million of operating income. Segment operating margin went from 65.2% to 23.7%. Management cut costs hard in response: licensing selling and administrative expense fell 53%, from $25.8 million to $12.2 million, on lower compensation and a $6.0 million reduction in legal costs after a patent litigation settlement.
The customer mix also rotated. Mobile OEMs and integrated circuit customers were 64% of royalty and license revenue in fiscal 2025 and 28% in fiscal 2026. Gaming and VR went from 24% to 45%. The company's mobile franchise, historically its core, is now the smaller half.
Barnes & Noble Education's growth is mostly a calendar. Its revenue rose $233.0 million, and the filing states that approximately $118.0 million of that came from the prior-year period being 40 days shorter, on a linear basis, because consolidation only began on June 10, 2024. Strip that out and the increase is roughly $57 million, driven by growth in its First Day affordable-access course material programs and new stores, partly offset by declining general merchandise and closed stores. Meanwhile cost of sales rose to 79% of revenue from 76%, and a $5.1 million store-level impairment landed. Barnes & Noble Education's operating income fell from $69.7 million to $22.1 million, a 1.3% operating margin on $1.71 billion of sales.
Leak two is a 64.6% tax rate, and it has one cause. Immersion paid $16.8 million of tax on $26.0 million of pretax income. At the 21% federal statutory rate the bill would have been $5.5 million. The rate reconciliation names the culprit in a single line: Korean foreign withholding tax of $16.7 million, worth 64.24 percentage points of the 64.61% effective rate. That one item is essentially the entire tax bill.
The backstory is in the risk factors. Since October 16, 2017, Immersion has been in dispute over LG Electronics' request that Immersion reimburse it for withholding tax the Korean authorities imposed after determining LGE failed to withhold on royalty payments to Immersion Software Ireland from 2012 to 2014. In the quarter ended January 31, 2026, Immersion decided to stop litigating. Because recovering the provisional deposits it had posted depended on winning, it wrote those deposits to zero and booked approximately $5.9 million of additional income tax expense, partly offset by a $0.3 million reversal. Long-term deposits on the balance sheet fell from $6.2 million to $0.2 million. This is a nine-year-old legacy dispute being closed out, not a new operating cost - which matters for how you normalize the rate.
Leak three is the noncontrolling interest. Of the $9.2 million that survived tax, $4.7 million belongs to Barnes & Noble Education's other shareholders. The weighted-average noncontrolling ownership was 67.4% in fiscal 2026, up from 59.7% in the stub prior period. Immersion keeps $4.5 million.
The balance sheet is the reassuring part, and it is two balance sheets. The filing presents them separately because, in its own words, the two segments are not legally or contractually bound to each other: all of Barnes & Noble Education's assets can be used only to settle its own obligations, and none of its liabilities have recourse to Immersion's general credit. On that basis the parent looks nothing like the consolidated statements. Immersion held $129.9 million of cash and $42.2 million of current investments at April 30, 2026, against $44.1 million of total segment liabilities and no debt. Its cash rose from $63.6 million, though mostly by liquidating securities rather than by earning it: current investments fell from $88.8 million and noncurrent investments went to zero. The $71.0 million of borrowings on the balance sheet is Barnes & Noble Education's asset-based revolver, which matures June 9, 2028 and against which it drew $812.9 million and repaid $845.0 million during the year - the seasonal churn of a textbook business.
Consolidated operating cash flow swung to positive $59.1 million from negative $57.6 million, a $116.6 million improvement. Read that carefully: the filing attributes it to a $196.1 million favorable change in working capital, including a $196.7 million swing in accounts payable and accrued liabilities from the timing of vendor payments. That is a timing benefit at Barnes & Noble Education, not cash the parent earned.
One more thing worth flagging: Immersion paid $8.1 million of dividends against $4.5 million of net income, and raised the quarterly rate from $0.045 to $0.075 in December 2025. The payout is running at roughly 178% of earnings, funded from the cash pile.
Valuation
Consolidation makes the usual multiples meaningless in both directions. At $7.42 per share and roughly $244 million of market capitalization (July 27, 2026, per Investing.com), Immersion trades at 0.14 times consolidated revenue and 53 times fiscal 2026 diluted EPS - and at 15.3 times the revenue the licensing business actually generated. It also trades at 0.82 times the $297.2 million of book equity attributable to Immersion shareholders. Pick your multiple and you can tell any story, which is exactly why a sum of the parts is the honest frame here.
Immersion holds 11,208,746 Barnes & Noble Education shares. Barnes & Noble Education traded at $12.35 (July 21, 2026, per StockAnalysis.com), putting that stake at about $138 million. The parent's own net assets - segment assets of $210.9 million less segment liabilities of $44.1 million, essentially cash and securities - are $166.7 million. Those two pieces alone total roughly $305 million against a $244 million market capitalization. Today's price implies the market assigns the haptics licensing business, patents and all, a value of about negative $61 million.
| Scenario | Licensing business | BNED stake | Parent net assets | Implied total | Per share |
|---|---|---|---|---|---|
| Bear | $0 | $69M (50% haircut) | $167M | $236M | $7.12 |
| Base | $135M | $138M (at market) | $167M | $440M | $13.29 |
| Bull | $263M | $173M (25% premium) | $167M | $603M | $18.19 |
Stated assumptions. Base: licensing normalizes to roughly $28M of revenue and $15M of operating income, taxed at 25%, valued at 12 times, which is equivalent to a no-growth perpetuity at an 11% discount rate and 2% terminal growth. Bull: a FY2025-style licensing cycle repeats and normalizes at $40M of revenue and $25M of operating income, valued at 14 times. Bear: fixed-fee licensing never recurs and the aging portfolio is written to zero. Parent net assets held flat at the FY2026 balance sheet figure. Share count 33.13M diluted. This is implied value under stated assumptions, not a price target and not investment advice.
The useful conclusion is not the range but where today's price sits inside it. At $7.42 the stock is priced essentially at the bear case, which requires you to believe both that the haptics portfolio is worthless and that the Barnes & Noble Education stake is worth half its quoted price. That is a demanding pair of assumptions to hold simultaneously. The counter-argument is equally real: minority stakes in thinly traded, low-margin retailers rarely clear at screen value, the parent's cash is being paid out faster than it is earned, and the licensing business has now missed a full year of fixed-fee deals.
Risks
The concentration risk is severe and structural. Fixed-fee licensing is lumpy by construction, and fiscal 2026 shows what a year without a large deal looks like: revenue down 95% in that line. Patents expire, and the filing warns plainly that patent expiration or adverse validity rulings could impair the ability to enter or renew licenses. The mobile franchise that carried the business has fallen to 28% of licensing revenue. On the other side, Barnes & Noble Education carries a 1.3% operating margin, $164.6 million of lease obligations, a seasonal revolver, and store-level impairments that have already begun.
Control is a genuine risk factor here. Immersion consolidates a business it owns less than a third of, and the ownership percentage has already slipped from 42% to 32.6% through subsidiary share issuance. Further dilution shrinks the economics without necessarily ending consolidation.
Governance deserves a flag. In its Form 10-Q for the quarter ended January 31, 2026, management concluded that disclosure controls and procedures were not effective, citing material weaknesses in internal control related to Barnes & Noble Education's control environment, risk assessment, information and communication, monitoring and multiple control activities, plus a material weakness related to the business combination itself. Barnes & Noble Education also obtained waivers under its credit facility to extend certain financial reporting deadlines, related solely to filing timing rather than financial covenants. Whether these were remediated as of April 30, 2026 is not established by the sections reviewed for this analysis, and a reader should check Item 9A of the 10-K directly.
Finally, the Korean withholding exposure may not be finished. The filing warns that if Immersion is found obligated to further indemnify LGE, or receives similar requests from other licensees, it could incur significant expenses.
The Bottom Line
Immersion's fiscal 2026 is a case study in the gap between a headline and an economic reality. Nothing improper happened - consolidating a controlled subsidiary is standard GAAP, and the filing discloses the structure clearly and separates the two balance sheets. But an investor reading only the top line sees a $1.73 billion company growing 11%, and an investor reading to the bottom sees a $15.9 million licensing business, a $172 million pile of cash and securities, and a minority stake in a campus bookstore chain.
Three things to watch. First, whether fixed-fee licensing returns: per-unit royalties grew 12% and are the honest run-rate, so any new perpetual or renewal agreement is upside against a $3.0 million base. Second, the tax rate: strip out the $16.7 million of Korean withholding, most of which relates to a legacy dispute now being closed, and the underlying rate is a different number entirely. Third, the ownership percentage, because every share Barnes & Noble Education issues moves more of that $1.71 billion into someone else's column.
All financial data in this analysis was pulled directly from Immersion Corporation's SEC filings via the RoboSystems shared data repository. Run your own queries on any public company's filings at robosystems.ai. New customers get 50% off your first month with code ROBO50.
This is not investment advice. No price targets. Market prices are as of the dates noted and are sourced from Investing.com and StockAnalysis.com; all other figures trace to the FY2026 Form 10-K filed July 24, 2026.