Smaller Players in the AI Race: Why EVLV Could Be Your Next Top AI Penny Stock Pick

While the artificial intelligence revolution has been dominated by household names—Microsoft, Meta, Alphabet, Apple, Amazon, and Nvidia—leading the charge with innovations like ChatGPT, Gemini, and Llama, the AI sector’s explosive growth is creating unexpected opportunities for smaller-cap players. One name catching analyst attention is Evolv Technologies (EVLV), a company that’s applying AI to an entirely different sector: physical security screening.

A Different Kind of AI Play

Unlike the chatbot-focused mega-cap companies, Evolv Technologies has carved out a niche in AI-powered touchless security screening systems. The company’s core offering? Advanced detection systems that identify firearms, explosives, and tactical weapons without requiring visitors to stop or empty their pockets. Using ultra-low frequency electromagnetic fields combined with machine learning algorithms, Evolv’s systems can process roughly 4,000 people per hour—and it’s already detecting over 1,000 weapons daily across 750 customer locations including schools, hospitals, and sports venues.

The technology has already been deployed across 4,000 units, showcasing real-world traction in a market where legacy metal detectors remain the industry standard.

The Business Model Shift Is Paying Off

Trading at $3.86 per share with a market cap of $602.49 million, EVLV classifies as a penny stock (stocks trading below $5). What’s notable is how the company has transformed its revenue structure.

In Q2 2024, Evolv reported $25.5 million in quarterly sales—a 29% year-over-year increase driven by aggressive customer acquisition. The quarter saw 84 new customer additions, marking the highest intake since Q4 2022. More importantly, the company’s shift toward a subscription-based recurring revenue model is working: annual recurring revenue (ARR) reached $89 million, up 64% year over year.

Revenue growth metrics show the company’s evolution: from $23.4 million in 2021 to $55.2 million in 2022, and $89.2 million over the trailing twelve months. While this represents a deceleration from earlier hypergrowth phases (last year’s growth was 17.7% year-over-year), the subscription pivot is strengthening fundamentals.

Margins Are Expanding—And So Is Profitability

The real story is in the operational metrics. Gross margins expanded from 38% to 58% over the past twelve months as the subscription model took hold. This margin expansion has translated directly to the bottom line: adjusted EBITDA losses narrowed from $14 million to $8 million. Management targets reaching positive EBITDA by Q2 2025—a critical milestone for demonstrating sustainable profitability.

What Analysts Are Saying About Top AI Penny Stocks Like EVLV

Out of five covering analysts, four rate EVLV as a “strong buy,” with only one recommending a “hold.” The consensus target price sits at $5.35, implying 43% upside potential from current trading levels. That said, the stock currently trades 71% below its all-time highs, reflecting the market’s cautious stance on smaller AI-exposed companies.

Competition from firms like Athena Security could pressure pricing and margins, though Evolv’s first-mover advantage and expanding customer base provide defensibility.

The Bottom Line

Evolv Technologies represents the type of smaller-cap AI opportunity that existed before companies like Apple, Amazon, and Nvidia became household names. The company operates in a large, underserved security market, has achieved meaningful customer traction, and is transitioning to a more profitable recurring revenue model. While penny stocks carry inherent risks, the analyst consensus and margin trajectory suggest this AI-focused security play deserves consideration for those with higher risk tolerance.