One Stop Systems Raises Revenue Growth Outlook to 40% After 35.9% Quarterly Increase
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 came in stronger than expected. In results published on October 28, the company said revenue from continuing operations reached $12.6 million in the quarter ended September 30, up 35.9% year over year. Revenue was $9.3 million in the third quarter of 2025. This is the second outlook revision during the year, after the company raised its range in August to 25%–30% from 20%–25%. The October guidance reflects an acceleration in sales and orders, while the annual growth estimate remains dependent on management's expectations for the rest of the year.
For the nine months ended September 30, revenue from continuing operations reached $30.0 million, compared with $20.2 million in the same period of 2025, an increase of 48.3%. Revenue drivers during the period included higher sales supporting the P-8A Poseidon surveillance aircraft, as well as military applications on ships and aircraft. Customer-funded development programs also contributed to sales. In the third quarter, the company said growth came from new customers and higher production volumes at some existing customers. Initial deliveries included a new customer developing a network of independent power nodes designed to run computing workloads, alongside increased deliveries of in-flight entertainment systems and sales of medical imaging equipment for breast cancer screening.
The company reported year-over-year revenue growth of 55.0% in the first quarter and 62.3% in the second quarter, as announced in August. Second-quarter bookings were $15.1 million, while the book-to-bill ratio was 1.6 times for the quarter and 1.7 times year to date through June 30. The year-to-date ratio, however, declined to 1.46 times through September 30, as third-quarter bookings were affected by the timing of customer orders. Management said, "Our order pipeline remains robust," and described the ratio as reflecting "strong underlying demand" for the company's solutions. It added that it expects to complete several large, multimillion-dollar orders during the fourth quarter, making the timing of converting orders into billings an important factor in the revenue trajectory.
Despite sales growth, gross margin for continuing operations declined to 42.6% in the third quarter from 45.6% a year earlier. The company attributed the decline primarily to product mix, partly offset by improved absorption of manufacturing costs. The company expects a gross margin of 40% to 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. First-half gross margin was 44.9%, compared with 43.3% in the first half of 2025, with the improvement then attributed to engineering efficiency and better absorption of manufacturing costs as production increased.
The company said in August that several opportunities that began as development initiatives in prior years are increasingly turning into larger, multi-year production orders. In June, it announced an initial $8.4 million contract to supply 91 short-depth servers to a defense customer, with potential program value of about $44 million over four years. It also announced a $1.3 million award from the U.S. Navy in August, then disclosed in October a $1 million follow-on production order from a defense and intelligence contractor, the ninth since the relationship began in May 2025, bringing cumulative orders to nearly $5 million. In trading, OSS closed at $6.76 on October 27, according to EL7 data. The company scheduled an earnings review call for October 28 at 10:00 a.m. Eastern time and announced that a recording would be available after 1:00 p.m. through November 11.