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CSPI Shares Decline 10.3% as Hardware Delays Hurt Q3 Results
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Shares of CSP Inc. (CSPI - Free Report) have lost 10.3% since reporting results for the third quarter of fiscal 2026. This compares with the S&P 500 index’s 1.7% decline over the same time frame. Over the past month, the stock has fallen 6.3% against the S&P 500’s 3.4% return.
Earnings & Revenue Performance
For the fiscal third quarter ended June 30, 2026, CSP posted revenues of $14.4 million, down 6.8% from $15.4 million a year earlier. The net loss widened to $846,000, or 9 cents per share, from $264,000, or 3 cents per share. Gross profit slipped 2.7% to $4.3 million from $4.5 million, although the gross margin expanded 100 basis points to 30.1% from 28.8%.
Product revenues declined 2% year over year to $9.9 million, while service revenues fell 15.9% to $4.5 million. The product gross margin improved to 20.7% from 15.7%, whereas the service gross margin narrowed to 51.2% from 53.9%. The operating loss increased 26.1% to $1.5 million from $1.2 million.
For the first nine months of fiscal 2026, revenues decreased 4.1% to $42.4 million. Gross profit rose 2.4% to $13.5 million, and the gross margin improved to 31.9% from 29.9%. CSP recorded a nine-month net loss of $491,000, or 5 cents per share, compared with net income of $100,000, or 1 cent per diluted share, a year earlier.
Cash and cash equivalents totaled $24.7 million at June 30, down from $27.4 million as of Sept. 30, 2025. Current and long-term financing receivables totaled $16.5 million, reflecting CSP’s financing of customer purchases. The company extended terms on more than 20 transactions during the quarter, repurchased about 13,000 shares and declared a quarterly dividend of 3 cents per share.
Management Discusses Services & AZT PROTECT
CEO Victor Dellovo said that the Technology Solutions business performed near expectations, supported by growth in cloud and managed services. CSP signed a six-year, seven-figure managed-service agreement with a professional sports organization and a three-year agreement with a food distributor that is expected to generate mid-six-figure annual recurring revenues.
AZT PROTECT added customers and expanded deployments at existing accounts. All customer sites reaching their one-year renewal point renewed, producing a 100% renewal rate. CSP also completed AZT PROTECT integration with several original equipment manufacturer products, including Acronis software, and reported progress with a telecommunications partner in South Africa.
Factors Affecting CSPI’s Results
Hardware delivery constraints were the main revenue headwinds. Vendor lead times that historically ran 30-60 days have stretched beyond 200 days, leaving the Technology Solutions backlog 65% above its year-ago level and delaying revenue recognition. Larger AZT PROTECT opportunities also carry sales cycles of 18-24 months, while customer testing, budget approvals and procurement processes have slowed site expansion.
Research and development costs rose 5% year over year to $832,000, reflecting AZT customization and OEM integration work. Selling, general and administrative expenses increased 3% to roughly $5 million. Higher variable compensation in Technology Solutions and costs tied to the U.K. pension buyout transaction also widened the operating loss. A 58.7% increase in other income to $330,000 provided a partial offset.
CSPI Provides Qualitative Outlook
Management expects hardware delivery delays to continue through the fiscal fourth quarter and into the first half of fiscal 2027, but believes that the elevated backlog can support the fiscal 2027 results as orders convert to sales.
Several large six-figure AZT PROTECT opportunities are nearing the end of their sales cycles, with potential decisions over the next six months. Acronis marketing materials and product identifiers were expected to be ready for a fall launch. Management also expects multi-year cloud contracts, service retention and broader cloud adoption to support recurring revenues and margins.
Other Developments
CSP modified its direct sales organization during the quarter to better address lengthy enterprise sales cycles and pursue OEM, reseller and Fortune 500 opportunities. Management said that three of four salespeople who had left were replaced or scheduled to start. CSP also incurred a couple hundred thousand dollars of actuarial and legal costs related to the U.K. pension buyout transaction.
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CSPI Shares Decline 10.3% as Hardware Delays Hurt Q3 Results
Shares of CSP Inc. (CSPI - Free Report) have lost 10.3% since reporting results for the third quarter of fiscal 2026. This compares with the S&P 500 index’s 1.7% decline over the same time frame. Over the past month, the stock has fallen 6.3% against the S&P 500’s 3.4% return.
Earnings & Revenue Performance
For the fiscal third quarter ended June 30, 2026, CSP posted revenues of $14.4 million, down 6.8% from $15.4 million a year earlier. The net loss widened to $846,000, or 9 cents per share, from $264,000, or 3 cents per share. Gross profit slipped 2.7% to $4.3 million from $4.5 million, although the gross margin expanded 100 basis points to 30.1% from 28.8%.
CSP Inc. Price, Consensus and EPS Surprise
CSP Inc. price-consensus-eps-surprise-chart | CSP Inc. Quote
CSPI’s Other Key Business Metrics
Product revenues declined 2% year over year to $9.9 million, while service revenues fell 15.9% to $4.5 million. The product gross margin improved to 20.7% from 15.7%, whereas the service gross margin narrowed to 51.2% from 53.9%. The operating loss increased 26.1% to $1.5 million from $1.2 million.
For the first nine months of fiscal 2026, revenues decreased 4.1% to $42.4 million. Gross profit rose 2.4% to $13.5 million, and the gross margin improved to 31.9% from 29.9%. CSP recorded a nine-month net loss of $491,000, or 5 cents per share, compared with net income of $100,000, or 1 cent per diluted share, a year earlier.
Cash and cash equivalents totaled $24.7 million at June 30, down from $27.4 million as of Sept. 30, 2025. Current and long-term financing receivables totaled $16.5 million, reflecting CSP’s financing of customer purchases. The company extended terms on more than 20 transactions during the quarter, repurchased about 13,000 shares and declared a quarterly dividend of 3 cents per share.
Management Discusses Services & AZT PROTECT
CEO Victor Dellovo said that the Technology Solutions business performed near expectations, supported by growth in cloud and managed services. CSP signed a six-year, seven-figure managed-service agreement with a professional sports organization and a three-year agreement with a food distributor that is expected to generate mid-six-figure annual recurring revenues.
AZT PROTECT added customers and expanded deployments at existing accounts. All customer sites reaching their one-year renewal point renewed, producing a 100% renewal rate. CSP also completed AZT PROTECT integration with several original equipment manufacturer products, including Acronis software, and reported progress with a telecommunications partner in South Africa.
Factors Affecting CSPI’s Results
Hardware delivery constraints were the main revenue headwinds. Vendor lead times that historically ran 30-60 days have stretched beyond 200 days, leaving the Technology Solutions backlog 65% above its year-ago level and delaying revenue recognition. Larger AZT PROTECT opportunities also carry sales cycles of 18-24 months, while customer testing, budget approvals and procurement processes have slowed site expansion.
Research and development costs rose 5% year over year to $832,000, reflecting AZT customization and OEM integration work. Selling, general and administrative expenses increased 3% to roughly $5 million. Higher variable compensation in Technology Solutions and costs tied to the U.K. pension buyout transaction also widened the operating loss. A 58.7% increase in other income to $330,000 provided a partial offset.
CSPI Provides Qualitative Outlook
Management expects hardware delivery delays to continue through the fiscal fourth quarter and into the first half of fiscal 2027, but believes that the elevated backlog can support the fiscal 2027 results as orders convert to sales.
Several large six-figure AZT PROTECT opportunities are nearing the end of their sales cycles, with potential decisions over the next six months. Acronis marketing materials and product identifiers were expected to be ready for a fall launch. Management also expects multi-year cloud contracts, service retention and broader cloud adoption to support recurring revenues and margins.
Other Developments
CSP modified its direct sales organization during the quarter to better address lengthy enterprise sales cycles and pursue OEM, reseller and Fortune 500 opportunities. Management said that three of four salespeople who had left were replaced or scheduled to start. CSP also incurred a couple hundred thousand dollars of actuarial and legal costs related to the U.K. pension buyout transaction.