Eplus Inc ((PLUS)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Eplus Inc.’s latest earnings call struck a clearly upbeat tone as management detailed strong top-line growth, sharp margin expansion, and significantly higher profitability. While acknowledging inventory build, working capital pressure, and select service softness, executives emphasized powerful demand trends in AI, cloud, networking, and security that are driving revised, higher full-year guidance.
Broad-Based Revenue Expansion
Consolidated net sales climbed 24.6% year over year to $614.8 million for the quarter, with year-to-date revenue up 22.2% to $1.86 billion. Management highlighted broad-based demand across customer sizes and verticals, underscoring that growth is not dependent on any single segment or sector.
AI-Fueled Product Revenue Surge
Product sales jumped 32.2% year over year to $501.9 million, led by data center, cloud, networking, and security solutions tied to AI initiatives. The company stressed that AI projects are catalyzing infrastructure upgrades, helping to deepen wallet share with existing clients and attract new enterprise workloads.
Profitability Nearly Doubles
Net earnings from continuing operations surged 129.3% to $33.4 million, up from $14.6 million a year ago, reflecting strong operating leverage. Adjusted EBITDA nearly doubled as well, rising 97% to $53.4 million and lifting the adjusted EBITDA margin to 8.7%, a gain of 320 basis points.
Gross Profit and Margin Strength
Consolidated gross profit increased 26.8% to $158.7 million, outpacing already strong revenue growth and signaling improved mix and execution. Overall gross margin expanded by 40 basis points to 25.8%, while product gross margin rose an impressive 170 basis points to 23.8%.
Recurring and Managed Services Momentum
Managed services revenue grew 10.5%, expanding the company’s recurring revenue base and providing better earnings visibility. Management pointed to steady demand for cloud services and enhanced maintenance offerings, positioning this segment as a stabilizing counterweight to more cyclical project work.
Expense Discipline and Operating Leverage
Operating expenses inched up just 0.1% to $115.2 million despite double-digit revenue and gross profit growth, highlighting tight cost control. Headcount declined 3.4% to 2,166, as the workforce was realigned toward higher-growth areas that support AI, cloud, and security opportunities.
Shareholder Returns and Capital Allocation
The board authorized a quarterly dividend of $0.25 per share and the company repurchased more than 200,000 shares during the quarter, signaling confidence in the business trajectory. Management emphasized that these shareholder returns are being executed while still preserving balance sheet flexibility for strategic investments.
Year-to-Date Earnings and EPS Upside
Year-to-date consolidated net earnings from continuing operations reached $98.7 million, up 68.5% from the prior year. Diluted EPS from continuing operations improved to $3.74 versus $2.19 a year ago, while non-GAAP diluted EPS from continuing operations grew 59% to $4.23.
Security and AI Demand Tailwinds
Security gross billings grew 16.4% year over year and 27.6% on a trailing twelve-month basis, underscoring the durability of cyber demand. Management framed AI as a broad tailwind across data center, cloud, networking, and security, with the company expanding solution, services, and AI-specific offerings to capture more of this spend.
Inventory Build and Working Capital Pressure
Inventory increased to $241.0 million from $120.4 million a year earlier, with a sequential rise of about $85 million as the company positioned for ongoing project demand. This pushed inventory days to 22 from 13 and lengthened the cash conversion cycle to 41 days from 32, creating near-term working capital pressure.
Services Softness and Retail Project Delays
Total service revenue was roughly flat at $112.8 million compared with $113.6 million last year, with professional services declining 7.8% on project delays in the retail sector. Management expects many of these engagements to shift into fiscal 2027 rather than disappear, indicating timing issues more than structural demand weakness.
Decline in Discontinued Operations Income
Net earnings from discontinued operations fell to $1.7 million in the quarter from $9 million in the prior-year period and are down year to date versus last year. This decline reduces overall reported income from non-core items, making the current earnings profile more reliant on continuing operations.
Lower Cash Balance Amid Growth Investments
Cash and cash equivalents decreased to $326.3 million from $389.4 million at the prior fiscal year-end, driven largely by working capital needs associated with higher inventory and project timing. Even with this drawdown, management signaled comfort with liquidity levels given current growth and capital return plans.
Memory Supply Risk in AI Infrastructure
Management flagged an industry-wide memory chip supply squeeze and rising prices for advanced memory used in large AI systems and data centers as a notable near-term risk. These dynamics could affect customer deployment timing and pricing on certain projects, prompting ongoing monitoring and active supply-chain management.
Upgraded Outlook and Forward Guidance
Building on a strong quarter, management raised full-year fiscal 2026 targets to 20–22% net sales growth and 19–21% gross profit growth versus fiscal 2025 continuing operations. Adjusted EBITDA is now expected to grow 41–43%, supported by robust AI and security demand, disciplined costs, and a balance sheet that still funds dividends, buybacks, and inventory to support future projects.
Eplus Inc.’s earnings call painted a picture of a company riding AI, cloud, and security trends to faster growth and significantly higher profitability while staying disciplined on costs and capital returns. Investors will watch how the firm manages inventory, working capital, and the emerging memory supply risk, but current momentum and raised guidance suggest confidence in sustaining this performance trajectory.