One Stop Systems Raises Revenue Growth Outlook to 40% After Quarterly Increase of 35.9%

Key Facts

One Stop Systems raised its 2026 revenue growth outlook to about 40%, from a previous range of 25% to 30%, after third-quarter sales and orders exceeded management’s expectations. Revenue from continuing operations was $12.6 million in the three months ended September 30, up 35.9% year over year, compared with $9.3 million in the same period of 2025. The company said in its results statement published on October 28 that the higher guidance reflects quarterly performance, with the new outlook above the previous range. In the first nine months, revenue reached $30 million, versus $20.2 million in the same period last year, a year-over-year increase of 48.3%. That puts the quarter’s acceleration within a pattern of growth since the start of the year, with full-year revenue depending on the company meeting management’s outlook.

The company attributed quarterly growth to new customers and higher production volumes at some existing customers. Drivers included initial deliveries to a new customer developing a network of autonomous power nodes designed to run computing workloads. Deliveries of in-flight entertainment systems and sales of medical imaging equipment used in breast cancer screening also increased. Over the nine months, sales tied to the P-8A Poseidon reconnaissance aircraft supported revenue, along with military applications on ships and aircraft. The company also cited medical imaging equipment sales and customer-funded development programs as growth factors for the period, reflecting demand across military and commercial uses.

Gross margin from continuing operations did not keep pace with revenue growth in the third quarter, reaching 42.6% compared with 45.6% in the same period a year earlier. The company attributed the decline mainly to product mix, partly offset by improved absorption of manufacturing costs. For the nine months, margin was 43.9%, compared with 44.4% a year earlier; the company also attributed the slight decline to product mix. Management expects a gross margin of between 40% and 42% for 2026. It also expects adjusted earnings before interest, taxes, depreciation and amortization of between $0.5 million and $1 million, a non-GAAP measure the company presented alongside its margin outlook.

The company reported a $593,734 loss from continuing operations in the third quarter, compared with a loss of $380,719 a year earlier. Quarterly adjusted earnings before interest, taxes, depreciation and amortization rose 33.7% to $0.3 million from $0.2 million in the comparable period. The company said it recorded a $0.5 million bad-debt expense and $0.4 million in legal expenses related to a prior settlement; adjusted earnings would have been about $1.2 million excluding the two items. For the nine months, the loss from continuing operations widened to $8.3 million from $5.1 million, while operating expenses rose 56.5% to $22.4 million from $14.3 million. The figures offer a parallel view of sales growth, as expenses and reported losses also increased over the same period.

The year-to-date book-to-bill ratio was 1.46 times through September 30, and management said orders exceeded revenue in each quarter through the third quarter. Cash used in continuing operating activities was $12.4 million over the nine months, compared with $5.9 million in the same period of 2025. The company said cash flow included a $6.25 million legal settlement and a $7.8 million increase in inventory to support expected revenue growth. Cash, cash equivalents and short-term investments totaled $18.9 million on September 30, and the company had no outstanding debt on that date. Management expected to complete several large, multimillion-dollar orders in the fourth quarter, but said those orders were not included in its 2026 guidance.

Management said long lead times remained for some components, including memory, switch chips and graphics processing units. It added that inventory accumulated during the year supports deliveries in the fourth quarter and early 2027. The company also continues to monitor potential supply constraints for components, including memory, as well as developments in the federal government budget, and said changes in these assumptions could affect 2026 results positively or negatively. OSS shares closed at $6.76 on October 27, according to EL7 data. The company had scheduled its third-quarter results call for October 28 at 10:00 a.m. Eastern Time and made a recording available after 1:00 p.m. through November 11.