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TSS Stock Skyrockets 74% on Y/Y Q1 Earnings Surge & AI Demand
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Shares of TSS, Inc. (TSSI - Free Report) have gained 31.9% since reporting results for the first quarter of 2025. This compares with the S&P 500 index’s 0.8% growth over the same time frame. Over the past month, the stock has surged 74.1% compared with the S&P 500’s 12.7% rally, reflecting investor enthusiasm around the company’s latest results and advancements in AI infrastructure.
Robust Revenue & Earnings Growth
For the first quarter ended March 31, 2025, TSS reported a dramatic surge in financial performance, underpinned by escalating demand for AI infrastructure. Revenues soared 523% to $99 million from $15.9 million in the same period last year. Net income ballooned to $3 million from just $15,000 in the prior-year quarter. Diluted earnings per share were 12 cents, up from the breakeven level. Adjusted EBITDA rose more than tenfold to $5.2 million from $475,000 a year earlier, reflecting improved operational leverage and scale.
TSS’s segment-level performance highlighted the breadth of its growth. Procurement services generated $90.2 million in revenues, skyrocketing 676% from $11.6 million in the first quarter of 2024, driven by a surge in AI hardware sourcing. This represented 77% of the total procurement revenues recorded for 2024.
Systems Integration revenues, including AI rack integration, skyrocketed 253% to $7.5 million, supported by expanding demand for high-performance infrastructure. Notably, the gross margin in this segment would have increased to 32% (up from 28% last year) when excluding the non-cash rent costs from the company’s new Georgetown, TX-based facility.
Facilities Management, though a smaller contributor, declined 40% year over year to $1.3 million. Despite this, TSS noted high margins and recurring revenues from modular data center (MDC) maintenance, and sees potential for a rebound as MDCs become more relevant in AI-driven edge computing environments.
Management Commentary
CEO Darryll Dewan emphasized the “extraordinary” nature of the quarter and framed it as an inflection point for the company. He pointed to strong execution across service lines and reiterated TSS’s strategic focus on the AI infrastructure market. CFO Daniel Chism highlighted the gross margin dynamics and noted that while lower-margin procurement services expanded, systems integration margins are expected to improve in subsequent quarters as production ramps up at the new facility.
Chism also explained that the unusually low consolidated gross margin of 9.3% (versus 17.1% in the first quarter of 2024) was largely the result of procurement mix, with gross profit still skyrocketing 239% year over year. SG&A costs rose to $4.9 million, reflecting ongoing investment in talent and infrastructure.
Factors Influencing the Headline Numbers
Much of revenue growth stemmed from expanded AI investments by enterprise clients, as well as ramped-up infrastructure spending from OEM partners. TSS has capitalized on this by scaling its procurement and integration capabilities. The gross margin was affected by the mix shift toward procurement but is expected to improve as higher-margin integration ramps further.
In addition, TSS cited increasing complexity in AI rack integration, including demands for direct liquid cooling and power testing, as growth drivers for its integration business. These complexities elevate the company’s value proposition as a strategic integrator, according to Dewan.
Guidance
TSS reiterated its expectation that first-half 2025 revenues will exceed that reported in the second half of 2024. Management also maintained its guidance for 2025 adjusted EBITDA to be at least 50% higher than that of 2024. The company remains confident in robust demand and anticipates growing contributions from its new Georgetown facility as it nears full production capacity.
Other Developments
In May 2025, TSS began production at its new 213,000-square-foot facility in Georgetown, TX. This site, more than twice the size of its prior facility, is optimized for high-volume AI rack integration. It currently has 6 megawatts of power, expected to scale to 15 megawatts, addressing the growing power demands of modern AI infrastructure.
The company invested $14.9 million in the quarter as part of a planned $25-$30 million capital build-out. Management expects the investment to be profitable within a two-year payback period. Notably, TSS also finalized a multi-year customer agreement tied to the new site, with fixed fees designed to offset lease and occupancy costs, thus securing predictable revenues from this expansion.
TSS’s first-quarter results mark a continuation of its transformation into a key infrastructure enabler for the AI era. While some margin pressures remain due to the business mix, the company’s aggressive capacity expansion, operational visibility through long-term contracts and deepening relationships with OEMs paint a favorable picture for sustained growth.
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TSS Stock Skyrockets 74% on Y/Y Q1 Earnings Surge & AI Demand
Shares of TSS, Inc. (TSSI - Free Report) have gained 31.9% since reporting results for the first quarter of 2025. This compares with the S&P 500 index’s 0.8% growth over the same time frame. Over the past month, the stock has surged 74.1% compared with the S&P 500’s 12.7% rally, reflecting investor enthusiasm around the company’s latest results and advancements in AI infrastructure.
Robust Revenue & Earnings Growth
For the first quarter ended March 31, 2025, TSS reported a dramatic surge in financial performance, underpinned by escalating demand for AI infrastructure. Revenues soared 523% to $99 million from $15.9 million in the same period last year. Net income ballooned to $3 million from just $15,000 in the prior-year quarter. Diluted earnings per share were 12 cents, up from the breakeven level. Adjusted EBITDA rose more than tenfold to $5.2 million from $475,000 a year earlier, reflecting improved operational leverage and scale.
TSS Inc. Price, Consensus and EPS Surprise
TSS Inc. price-consensus-eps-surprise-chart | TSS Inc. Quote
Other Key Business Metrics
TSS’s segment-level performance highlighted the breadth of its growth. Procurement services generated $90.2 million in revenues, skyrocketing 676% from $11.6 million in the first quarter of 2024, driven by a surge in AI hardware sourcing. This represented 77% of the total procurement revenues recorded for 2024.
Systems Integration revenues, including AI rack integration, skyrocketed 253% to $7.5 million, supported by expanding demand for high-performance infrastructure. Notably, the gross margin in this segment would have increased to 32% (up from 28% last year) when excluding the non-cash rent costs from the company’s new Georgetown, TX-based facility.
Facilities Management, though a smaller contributor, declined 40% year over year to $1.3 million. Despite this, TSS noted high margins and recurring revenues from modular data center (MDC) maintenance, and sees potential for a rebound as MDCs become more relevant in AI-driven edge computing environments.
Management Commentary
CEO Darryll Dewan emphasized the “extraordinary” nature of the quarter and framed it as an inflection point for the company. He pointed to strong execution across service lines and reiterated TSS’s strategic focus on the AI infrastructure market. CFO Daniel Chism highlighted the gross margin dynamics and noted that while lower-margin procurement services expanded, systems integration margins are expected to improve in subsequent quarters as production ramps up at the new facility.
Chism also explained that the unusually low consolidated gross margin of 9.3% (versus 17.1% in the first quarter of 2024) was largely the result of procurement mix, with gross profit still skyrocketing 239% year over year. SG&A costs rose to $4.9 million, reflecting ongoing investment in talent and infrastructure.
Factors Influencing the Headline Numbers
Much of revenue growth stemmed from expanded AI investments by enterprise clients, as well as ramped-up infrastructure spending from OEM partners. TSS has capitalized on this by scaling its procurement and integration capabilities. The gross margin was affected by the mix shift toward procurement but is expected to improve as higher-margin integration ramps further.
In addition, TSS cited increasing complexity in AI rack integration, including demands for direct liquid cooling and power testing, as growth drivers for its integration business. These complexities elevate the company’s value proposition as a strategic integrator, according to Dewan.
Guidance
TSS reiterated its expectation that first-half 2025 revenues will exceed that reported in the second half of 2024. Management also maintained its guidance for 2025 adjusted EBITDA to be at least 50% higher than that of 2024. The company remains confident in robust demand and anticipates growing contributions from its new Georgetown facility as it nears full production capacity.
Other Developments
In May 2025, TSS began production at its new 213,000-square-foot facility in Georgetown, TX. This site, more than twice the size of its prior facility, is optimized for high-volume AI rack integration. It currently has 6 megawatts of power, expected to scale to 15 megawatts, addressing the growing power demands of modern AI infrastructure.
The company invested $14.9 million in the quarter as part of a planned $25-$30 million capital build-out. Management expects the investment to be profitable within a two-year payback period. Notably, TSS also finalized a multi-year customer agreement tied to the new site, with fixed fees designed to offset lease and occupancy costs, thus securing predictable revenues from this expansion.
TSS’s first-quarter results mark a continuation of its transformation into a key infrastructure enabler for the AI era. While some margin pressures remain due to the business mix, the company’s aggressive capacity expansion, operational visibility through long-term contracts and deepening relationships with OEMs paint a favorable picture for sustained growth.