IT solutions provider ePlus (NASDAQ: PLUS) beat Wall Street’s revenue expectations in calendar Q3 2026 (fiscal Q2 2027), with sales up 9.7% year on year to $667.9 million. Its non-GAAP profit of $1.82 per share was 23.8% above analysts’ consensus estimates.

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StockStory’s take

ePlus delivered a quarter that surpassed Wall Street’s revenue and non-GAAP profit expectations, with broad-based organic growth across its customer base and a notable increase in gross billings. Management credited expanding demand for AI, cloud, and data center solutions, as well as increased customer investments in cybersecurity and IT modernization, for the company’s performance. CEO Mark Marron highlighted a "record quarter for gross billings" and noted that open orders were up nearly $750 million year-over-year, reflecting ongoing customer momentum. The positive market reaction suggests investors were encouraged by the company’s execution and demand trends.

Looking ahead, ePlus expects ongoing strength from AI-driven infrastructure projects, continued adoption of managed services, and further expansion in high-growth markets such as data centers and cybersecurity. Management raised its full-year outlook, citing robust pipeline activity, a healthy backlog, and the integration of the Daymark Solutions acquisition. Marron emphasized that “AI remains an important catalyst for technology investment and represents a significant long-term growth driver,” while COO Darren Raiguel pointed to customer interest in end-to-end lifecycle services and secure, scalable deployments as key themes for future growth.

Key insights from management’s remarks

Management attributed the quarter’s outperformance to growing AI-related demand, strong execution in managed services, and a diversified customer base.

• Surge in AI and cloud demand: Management cited accelerating adoption of AI and increased investment in cloud infrastructure as central to the quarter’s growth, particularly within data center solutions and networking projects. This demand was described as "significant" and is fueling both sales and open orders.
• Daymark Solutions acquisition: The recently closed acquisition of Daymark expands ePlus’s footprint in the Northeast and brings new competencies in highly regulated industries, including Microsoft Tier 1 Cloud Solution Provider (CSP) certification. Management views Daymark as a lever to scale expertise across all ePlus markets.
• Managed services expansion: Strong growth in managed services was driven by storage-as-a-service and enhanced maintenance offerings, with recurring contracts supporting long-term customer relationships and contributing to the company’s recurring revenue base.
• Security integration with infrastructure: Security product sales rose as customers increasingly prioritized cybersecurity alongside broader IT modernization. Management noted that security is now often integrated with AI and infrastructure projects, reflecting demand for holistic solutions addressing evolving threats.
• Professional services headwinds: While managed services grew, professional services revenue declined due to project delays with large retail customers and an exceptionally strong prior-year comparison. Management indicated ongoing investment in technical talent to drive future strategic service engagements, despite current softness in this area.

Drivers of future performance

ePlus’s guidance is driven by continued demand for AI and cloud projects, stronger managed services adoption, and the anticipated conversion of a large order backlog.

• AI as a growth engine: Management believes that customer investments in AI and data center modernization will remain a core driver, with open orders and pipeline activity signaling sustained momentum into next year.
• Order conversion and backlog realization: The company expects a significant portion of its elevated inventory and open orders to convert to revenue in upcoming quarters, supporting upper single-digit growth in net sales and gross profit, and double-digit non-GAAP EBITDA growth.
• Margin and cost considerations: While operating leverage is expected to improve, management acknowledged elevated third-party costs in services and potential supply constraints in high-end compute and networking components, which could affect pricing and margin mix if these trends persist.

Catalysts in upcoming quarters

Looking forward, the StockStory team will be watching (1) the pace at which ePlus can convert its large open order backlog into revenue, (2) the continued expansion of AI-driven and cloud infrastructure projects across key verticals, and (3) the integration and performance impact of the Daymark Solutions acquisition. We will also monitor margin developments as third-party costs and potential supply chain constraints remain areas of uncertainty.

ePlus currently trades at $83.79, up from $82.43 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

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