Kidoz Inc. (TSXV: KDOZ) (OTCQB: KDOZF) reported record second-quarter revenue of $3.33 million, marking a 37% year-over-year increase. The Vancouver-based advertising platform saw first-half revenue rise 22% to $6.28 million.

The growth came amid expanding operating expenses and contracting gross margins. Net loss widened to $1.56 million in the quarter, compared to $1.17 million in the prior-year period.

Financial Performance

Revenue acceleration was driven by increased demand for its contextual AI-powered advertising platform. However, the top-line growth was outpaced by higher spending on sales, marketing, and content development.

For the first half of 2026, total revenue reached $6.28 million, up from $5.17 million in H1 2025. Gross profit for the period grew 8% to $2.67 million, with gross margin settling at 42.6%, down from 48.1% in the prior-year half.

Expense Breakdown

Operating expenses for the quarter totaled $2.99 million, a 29% increase from the previous year. Key drivers included:

• Sales and marketing expenditure rose 50% to $665,828.
• Content and software development costs increased 10% to $895,692.
• Bonuses and incentive compensation reached $862,863, up from $687,728 in Q2 2025.

Jason Williams, CEO of Kidoz, noted that the bonus structure is designed to align compensation with annual performance rather than carrying high fixed salaries. He emphasized that these costs are recognized in the second quarter and should not be viewed as a recurring quarterly run rate.

What the Numbers Show

Gross margin compression indicates a shift in cost structure or pricing dynamics. While revenue grew 37%, gross profit expanded by only 22%. This divergence suggests that the cost of generating new revenue has increased relative to prior periods, or that lower-margin revenue streams contributed disproportionately to the growth. Simultaneously, operating leverage remains negative, with operating expenses growing 29% against a 37% revenue increase, though the gap between expense growth and revenue growth narrowed compared to the gross profit lag.

Balance Sheet Position

As of June 30, 2026, Kidoz held cash of $1.33 million and working capital of $2.89 million. This represents a decline from cash reserves of $4.45 million and working capital of $5.08 million as of December 31, 2025, reflecting the cash burn associated with ongoing operational investments and net losses.

Kidoz Inc., a brand-safe advertising platform powered by contextual AI, today commented on the implications of expanding age verification and child protection requirements across the United States. The company emphasized that these regulatory shifts are increasing the importance of advertising performance without personal data tracking.

Recent legislation in Texas, where the Governor signed an online child safety bill requiring Apple and Google to ensure app stores verify user age, mirrors similar initiatives in Utah, Louisiana, France, and Australia. These measures reflect a broader shift toward age-aware digital experiences. In response, platform providers like Google Play have introduced new tools, such as the Play Age Signals API, to help developers support age-appropriate experiences and comply with evolving requirements.

Apple's recent WWDC announcements reinforced this trend with expanded child accounts, parental controls, and child-safety features. For mixed-audience apps and games, these developments increase the importance of understanding how younger users are identified, managed, and monetized.

Kidoz believes these developments highlight the potential benefits of advertising approaches that do not rely on personal data collection or behavioural profiling. Originally built to protect kids, the company's platform enables developers to monetize under-13 audiences without personal data tracking, behavioural profiling, or identity-based targeting.

"As digital platforms become increasingly age-aware, developers and advertisers are navigating a changing operating environment," said Jason Williams, Chief Executive Officer of Kidoz Inc. "We believe this is reinforcing the value of advertising approaches that achieve performance without personal data tracking."

Kidoz works alongside age-assurance and compliance providers including PRIVO and k-ID, supporting developers seeking solutions for age screening, parental consent, and child-appropriate monetization. The platform supports both children's and all-ages audiences through its Kidoz and Prado offerings, enabling brands to scale performance across the global mobile gaming ecosystem using safe, trusted, contextual, privacy-first targeting.