TLDR
- TSS sees sharp Q3 dip but strong AI demand keeps long-term momentum alive.
- Revenue slips in Q3, yet year-to-date growth shows TSS’s scaling power.
- AI integration strength offsets challenges as TSS eyes a 2026 rebound.
- New facility costs hurt margins, but rising output boosts recovery outlook.
- Despite losses, TSS’s AI infrastructure surge sets up a solid 2026 run rate.
TSS Inc. (TSSI) closed at $15.25, falling 5.63% after posting a 40% revenue decline in the third quarter.
TSS, Inc., TSSI
The data center services firm reported $41.9 million in total revenue for the period ending September 30, 2025. The company cited lower procurement demand and operational challenges in its systems integration segment as key drivers of the shortfall.
The broader financial picture showed ongoing momentum from rapid growth earlier in the year. Despite the quarterly dip, year-to-date revenue surged 88% to $184.8 million. The firm highlighted strong performance in AI infrastructure integration and continued investment in expanding capacity.
The net loss of $1.5 million contrasted with last year’s $2.6 million profit, underscoring short-term operational strain. Diluted earnings per share turned negative at $0.06, compared with $0.10 a year earlier. Gross profit fell 41% to $4.6 million, reflecting cost pressures from the new factory and equipment depreciation.
Systems Integration Strength and New Facility Impact
TSS’s Systems Integration segment delivered $9.2 million in revenue, marking a 20% increase from the prior year. The growth came from heightened demand for AI-related infrastructure and hardware integration. The company expects higher rack output in the fourth quarter following process upgrades.
In contrast, procurement revenue fell 49% to $31.1 million, signaling a tough comparison against a strong 2024 base. Facilities Management dropped 19% to $1.6 million as contracts shifted toward newer engagements. The firm indicated that full-quarter costs from its new facility temporarily pressured margins but will improve with rising production volumes.
Adjusted EBITDA declined 66% to $1.5 million, showing the temporary margin squeeze. Management reaffirmed confidence in achieving a rebound as integration volumes rise. Operational efficiency improvements and higher throughput are expected to lift fourth-quarter profitability.
Outlook Signals Recovery and Strong 2026 Run Rate
The company projected a solid finish to 2025, driven by stronger procurement and systems integration results. It expects adjusted EBITDA growth between 50% and 75% for the full year compared with 2024. Management anticipates that the current run rate will extend into 2026, supporting continued expansion.
Year-to-date figures show net income of $3.0 million, down 27% but supported by higher overall revenue. Gross profit climbed 39% to $21.0 million, reflecting improved execution despite cost pressures. Adjusted EBITDA rose 59% to $10.7 million, showing clear progress in scaling AI infrastructure operations.
TSS Inc. continues to strengthen its position in high-performance computing infrastructure integration. Its ongoing investment in facilities and process enhancements aims to sustain momentum through 2026. The company’s rapid year-to-date growth and operational initiatives suggest a return to profitability in the upcoming quarters.
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