How Magic Software's Record Q3 and Matrix Merger Set the Stage for 2026

Magic Software Enterprises Ltd. (NASDAQ:MGIC) is one of the best-performing small-cap tech stocks in the past three years. On November 18, the company posted record Q3 revenue of $161.7 million, up 13.1% year-over-year, powered by demand across its IT consulting and enterprise software services.

Despite a stable gross margin at 27.3%, the company tightened the screws operationally: GAAP operating income rose 13.6% to $17.1 million, while non-GAAP operating profit hit $19.9 million, up 8.1% from the prior year. Bottom line: net income climbed to $9.9 million, or $0.20 per diluted share, compared to $0.17 last year, a modest but steady gain.

CEO Guy Bernstein said Magic “achieved all-time highs in revenues, gross profit and operating income,” crediting “sustained demand for our digital, AI-driven and cloud transformation solutions” and “disciplined execution across the organization.” He also highlighted the company’s “robust momentum” in the U.S. and called the pending merger with Matrix I.T. “an exciting new phase” that is expected to boost scale, market reach, and tech depth.

Magic Software Enterprises Ltd. (NASDAQ:MGIC), based in Israel, provides IT consulting, cloud integration, low-code development, and automation tools to mid- and large-enterprise clients worldwide.

While we acknowledge the potential of MGIC as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 30 Stocks That Should Double in 3 Years and 11 Hidden AI Stocks to Buy Right Now.

Disclosure: None.