PLUS Q3 Deep Dive: AI, Security, and Cloud Demand Accelerate Growth and Margins

IT solutions provider ePlus (NASDAQ:PLUS) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 18.2% year on year to $608.8 million. Its non-GAAP profit of $1.53 per share was 61.9% above analysts’ consensus estimates.

Is now the time to buy PLUS? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

ePlus delivered a strong Q3, with the market responding positively to results that exceeded Wall Street expectations. Management attributed the outperformance to robust demand in security, networking, and cloud solutions, with CEO Mark Marron noting that security gross billings rose 56% year-over-year, fueled by customers investing in AI-driven infrastructure. Additionally, the company saw broad-based growth across customer segments and verticals, except for state and local government, which faced budget constraints. The successful execution of its automation initiatives and operational leverage also played a critical role in the quarter’s margin expansion and profitability.

Looking ahead, ePlus is focused on building momentum through targeted investments in AI, cloud, and security while leveraging its strong cash position to expand both organically and via acquisitions. Management emphasized the opportunity to capitalize on increased customer demand for AI solutions and infrastructure modernization, with Marron stating, "We are well positioned to build on our momentum, capitalize on new opportunities and deliver value to stakeholders over the long term." The company remains committed to enhancing its recurring revenue base through expanded service offerings and strategic hiring, anticipating continued operating leverage in the near term.

Key Insights from Management’s Remarks

Management pointed to the expansion of AI initiatives, ongoing automation, and robust customer demand as key contributors to the quarter’s strong operational and financial performance.

• AI and security drive growth: Management reported strong momentum in security, with gross billings up 56% year-over-year, driven by customer investments in data classification and AI-related projects. This was paired with increased activity in networking as organizations modernize infrastructure to support AI deployments.
• Broad-based customer and vertical strength: Demand was strong across mid-market and enterprise customer segments, with growth observed in nearly all verticals except state and local government, where budget constraints limited spending. Telecom, Media & Entertainment, and SLED (state, local, education) remained significant contributors.
• Automation and operating leverage: Internal automation initiatives led to faster incident resolution and improved customer experience, while operating leverage allowed adjusted EBITDA to grow at twice the rate of net sales. This demonstrates the effectiveness of aligning resources with high-growth areas.
• Expansion via M&A and new offerings: ePlus completed the acquisition of Realwave, a cloud-based AI software platform, enhancing its ability to deliver real-time, AI-driven insights. The company also highlighted ongoing efforts to build out its recurring revenue base in professional and managed services.
• Capital allocation and share repurchase: With more than $400 million in cash, ePlus maintained significant flexibility to invest in growth or return capital to shareholders. The company repurchased 60,000 shares and announced a quarterly dividend, supporting its capital allocation strategy.

Drivers of Future Performance

Management expects future growth to be propelled by expanding AI, cloud, and security offerings, supported by continued operating leverage and disciplined capital deployment.

• Ongoing AI and cloud investments: The company anticipates AI and cloud adoption to accelerate, with customer demand for infrastructure modernization and advanced security solutions expected to remain high. Management’s industry pulse poll underscored that most IT leaders now see AI as a core revenue growth driver.
• Service expansion and recurring revenue: ePlus is investing in professional and managed services to strengthen its recurring revenue streams, targeting both organic hiring and selective acquisitions to add capabilities in key areas.
• Margin expansion and disciplined spending: Management expects operating leverage to persist in the near term, but signals ongoing investment in growth areas. The sale of the domestic financing business has streamlined operations, allowing more resources to be directed toward technology and service expansion.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely watch (1) the pace of customer adoption for AI and cloud solutions, (2) expansion of professional and managed services as recurring revenue drivers, and (3) deployment of capital toward acquisitions or organic growth initiatives. Progress in these areas will be critical to sustaining the company’s current momentum and achieving its strategic objectives.

ePlus currently trades at $84.88, up from $73.42 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 for active Edge members).

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