ePlus (NASDAQ:PLUS) executives highlighted accelerating demand tied to AI-driven infrastructure modernization and improved operating leverage as the company reported fiscal third-quarter 2026 results and raised full-year guidance. Management pointed to strength across AI, cloud, networking, and security, and said its ability to deliver “integrated solutions” across these areas is resonating with customers and contributing to market share gains.
Quarterly results show strong product growth, flat services
For the fiscal third quarter, ePlus reported net sales growth of 24.6% to about $615 million. CEO and President Mark Marron said product sales rose 32.2% year over year, led by data center and cloud, networking, and security. Services revenue was essentially flat, as growth in managed services was offset by weaker professional services revenue.
Marion added that gross billings grew 15.6% in the quarter to $982.1 million, while year-to-date gross billings increased 18.7% to nearly $3 billion, reflecting the company’s focus on AI, cloud, security, and networking.
Profitability improves as operating leverage builds
Management emphasized that expense discipline and workforce alignment toward higher-growth areas helped expand profitability. Marron said net earnings from continuing operations increased 129.3% year over year to $33.4 million, while adjusted EBITDA rose 97% to $53.4 million. Adjusted EBITDA margin was 8.7%, up 320 basis points from the prior-year quarter.
Marion reported third-quarter consolidated gross profit of $158.7 million, up 26.8% from $125.1 million a year earlier, with gross margin of 25.8% compared with 25.4% in the prior year. Product segment gross margin expanded 170 basis points to 23.8%, which she said benefited from a higher gross margin on sales, partially offset by a lower impact from products recorded on a net basis.
Operating expenses increased 6.1% to $115.2 million, driven mainly by increased variable compensation tied to higher gross profit. Continuing operations headcount declined 3.4% to 2,166 as the company emphasized roles aligned with strategic priorities.
On earnings metrics, Marion said non-GAAP diluted earnings per share from continuing operations more than doubled to $1.45 from $0.71 a year ago. She also noted discontinued operations net income of $1.7 million related to the settlement of a legal matter, compared with $9.6 million in the prior-year quarter.
AI and security highlighted as key demand drivers
Marron said AI adoption is accelerating across the company’s customer base, driving demand in data centers, security, cloud, and networking. He said ePlus is expanding “AI envisioning sessions” and “AI acceleration offerings” to help customers identify use cases, address financial constraints, and supplement workforce needs.
Security was also cited as a growing contributor. Marron said security gross billings for products and services grew 16.4% year over year in the quarter and were up 27.6% for the trailing 12 months. He attributed customer cybersecurity priorities in part to rising threat levels due to AI, and described work around governance and risk frameworks, data governance classifications and permissions, and protection architectures for AI workloads in development and production.
During the Q&A, Marron said AI has shifted from being “somewhat of a headwind” in prior periods to a tailwind, as more customers define use cases and invest to modernize legacy systems. He linked product growth in data center/cloud and networking to AI enablement and refresh cycles, and also pointed to security work in governance, risk and compliance, data governance, and threat protection roadmaps.
Customer trends, enterprise project timing, and retail services delays
Executives said growth was broad-based across customer sizes and verticals, with particular strength in mid-market and enterprise. Marion said telecom, media, and entertainment represented 27% of net sales on a trailing 12-month basis, while technology, SLED, and healthcare were each 13%, financial services was 9%, and the remaining 25% was spread among other end markets that have been growing.
Asked about “outsized projects” from enterprise customers, Marron said a few large enterprise accounts had “fairly large quarters” in Q3. He said the company does not expect a “major slowdown” in Q4, but also does not expect to replicate the same level of outsized enterprise impact, which is reflected in the company’s guidance.
On the decline in professional services, Marron said delays were tied to “a few customers” in the retail and consumer space and that he expects the shifted work to fall more into fiscal 2027 rather than the March quarter. He also cited staffing being down “a little bit,” and noted the prior-year comparison was challenging because services revenue had been up significantly last year due to the Bailiwick acquisition. He emphasized that managed services continued to grow.
Balance sheet, inventory build, capital return, and raised guidance
Marion said cash and cash equivalents totaled $326.3 million at quarter end, down from $389.4 million at the end of the last fiscal year, primarily due to working capital needs. Inventory rose to $241.0 million from $120.4 million at the end of fiscal 2025, which she attributed primarily to an increase in projects in process. Inventory days outstanding increased to 22 days, contributing to an increase in the cash conversion cycle to 41 days from 32 days in the prior-year quarter.
In response to an analyst question about inventory timing, Marron said inventory increased about $85 million sequentially, in line with higher demand and project activity. He said projects “fluctuat[e] in and out” and that inventory should decline over time, but he expects levels to remain “a little more inflated” over the next several quarters as new orders continue, adding that inventory typically ticks up toward year-end.
On capital allocation, Marron said the board approved a quarterly dividend of $0.25 per common share. Marion said the dividend is payable March 18, 2026, to shareholders of record on Feb. 24, 2026. The company also repurchased over 200,000 shares during the quarter.
Looking ahead, Marron said the company is increasing full-year guidance for net sales, gross profit, and adjusted EBITDA growth:
- Net sales: 20% to 22% year-over-year growth (raised from prior “mid-teens”), against fiscal 2025 net sales of $2.01 billion from continuing operations.
- Gross profit: 19% to 21% growth, compared with prior “mid-teens,” against fiscal 2025 gross profit of $515.5 million from continuing operations.
- Adjusted EBITDA: 41% to 43% growth, versus fiscal 2025 adjusted EBITDA of $141 million from continuing operations.
He also flagged a potential near-term risk: an “industry-wide memory shortage,” with a supply squeeze and rapid price increases for advanced memory components used in AI systems and data centers. Marron said the dynamic could impact customer deployment timing, though he believes the company is positioned to manage it through diversified supplier relationships and close coordination with customers.
About ePlus (NASDAQ:PLUS)
ePlus Inc (NASDAQ:PLUS) is a technology solutions provider that helps enterprises and public-sector organizations maximize the value of their information technology investments. The company specializes in designing, implementing and managing complex IT infrastructures, with a focus on security, cloud computing, data center modernization and unified communications. By combining consulting services with software license management and hardware procurement, ePlus delivers end-to-end solutions that align with its clients’ strategic objectives.
The company’s offerings include cybersecurity assessments and managed security services, hybrid and public cloud deployments, network architecture and optimization, and collaboration platforms.
