Earnings call transcript: Data Storage Corp Q4 2025 reveals mixed results

Data Storage Corp (DTST) reported its earnings for Q4 2025, revealing a significant discrepancy between expected and actual results. The company posted a revenue loss of $12.27 million against a forecasted gain of $300,000, reflecting a revenue surprise of -4,190%. Despite this, the stock showed a positive pre-market movement, rising 4.57% to $4.413, possibly influenced by strategic shifts and future growth potential highlighted during the call.

Key Takeaways

• Data Storage Corp reported a significant revenue miss for Q4 2025.
• The company’s stock price rose 4.57% in pre-market trading.
• Strategic focus on AI-enabled solutions and GPU infrastructure was emphasized.
• A significant portion of 2025’s net income was from non-recurring transactions.
• The company remains debt-free with a strong cash position.

Company Performance

Data Storage Corp’s performance in fiscal year 2025 was marked by record net income of $19.2 million, a substantial increase from $500,000 in 2024. However, management clarified that these results were largely driven by non-recurring events, including the sale of its CloudFirst subsidiary. The company’s ongoing operations, represented by its Nexxis subsidiary, showed a modest revenue growth of 13.4% year-over-year.

Financial Highlights

• Revenue: $1.4 million for fiscal year 2025, up 13.4% from 2024.
• Net Income: $19.2 million, a 3,740% increase from 2024.
• Cash Position: $41 million as of December 31, 2025, up from $12.3 million in 2024.
• Gross Margins of Nexxis: 44.4%.

Earnings vs. Forecast

Data Storage Corp reported a revenue loss of $12.27 million for Q4 2025, starkly missing the forecasted revenue of $300,000. This represents a revenue surprise of -4,190%, marking a significant deviation from expectations.

Market Reaction

Despite the earnings miss, Data Storage Corp’s stock rose 4.57% in pre-market trading to $4.413, extending its one-week gain to nearly 10%. This movement suggests investor optimism, potentially driven by the company’s strategic direction and strong cash reserves. According to InvestingPro analysis, the stock appears undervalued at current levels, with the company trading at just 0.23 times book value—one of the most undervalued metrics in its sector. The stock remains within its 52-week range of $3.25 to $5.44.

Outlook & Guidance

Looking ahead, Data Storage Corp forecasts EPS of -$0.32 for the upcoming quarters of fiscal year 2026, with revenue expectations set at $0.4 million for the first two quarters and $0.5 million for the latter half. The company focuses on high-growth technology markets, including AI-enabled vertical SaaS and GPU infrastructure.

Executive Commentary

CEO Charles Piluso emphasized the company’s strategic transformation, stating, "Our repositioning as an acquisition platform allows us to capitalize on emerging technology trends." He highlighted the importance of disciplined capital deployment and the role of strategic acquisitions in driving future growth.

Risks and Challenges

• Dependency on non-recurring transactions for profitability.
• Potential volatility in AI and tech markets impacting strategic initiatives.
• Execution risks associated with acquisitions and integrations.
• Competitive pressures in the rapidly evolving tech landscape.
• Economic uncertainties that could affect capital deployment and market conditions.

Q&A

Analysts questioned the sustainability of the company’s revenue model and the impact of non-recurring gains on future profitability. Management reiterated their focus on operational earnings and strategic acquisitions to drive long-term growth.

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Full transcript - Data Storage Corp (DTST) Q4 2025:

Operator: As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Ms. Alexandra Schilt, Investor Relations. Thank you. You may begin.

Alexandra Schilt, Investor Relations, Data Storage Corporation: Thank you. Good morning, everyone, and welcome to Data Storage Corporation’s 2025 fiscal year business update conference call. On the call with us this morning are Charles M. Piluso, Chairman and Chief Executive Officer, and Christos H. Panagiotakos, Chief Financial Officer. The company issued a press release this morning containing its 2025 fiscal year financial results, which is also posted on the company’s website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at 212-671-1020. Before we begin, please note that today’s call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to various risks and uncertainties described in the company’s filings with the SEC. Except as required by law, the company assumes no obligation to update or revise forward-looking statements.

I’d now like to turn the call over to Chuck Piluso. Please go ahead, Chuck.

Charles M. Piluso, Chairman and Chief Executive Officer, Data Storage Corporation: Thank you, Alexandra Schilt. Good morning, everyone, and thank you for joining us. First, I would like to acknowledge the delay in reporting our fiscal year 2025 results, which was necessary to allow additional time to complete our year-end audit. This was primarily driven by the complexity of several significant transactions during the year, including the sale of our CloudFirst subsidiary, the classification and settlement of many of our outstanding warrants, and the completion of a tender offer. However, we are pleased to be here today to discuss our results in more detail. 2025 was the most consequential year for Data Storage Corporation’s 25-year history. It was a year defined not just by strong financial results, by decisive action that fundamentally reshaped our company, strengthened our balance sheet, and positioned us for a new phase.

Over the past year, we made deliberate choice to unlock the value we had spent more than two decades building and redirect that value towards what we believe is a significantly larger opportunity ahead. We executed on that strategy in three critical ways. First, we monetized CloudFirst for a total transaction value of $40 million. That transaction generated approximately $31.6 million in net proceeds and a $20.1 million gain. We sold a strong asset at full value because we believed that capital could be deployed into opportunities with greater long-term potential. At closing, we had an estimated $41 million in the bank, based on our cash balance of $10 million plus the sale of CloudFirst. Second, we returned $29.3 million of that capital directly to shareholders through a tender offer at $5.20 per share, reducing our outstanding share count by approximately 72%.

That level of capital return is rare for a company of our size and reflects a core principle of ours. Capital belongs to the shareholders, and when we generate it, we allocate it responsibly, whether that means returning it or investing it for growth. Third, we reset the company. We entered 2026 debt-free with over $10 million in capital, a clean balance sheet, and at this point, a simplified operating structure. From a financial standpoint, these actions resulted in record performance. We reported a net income of $19.2 million for the year, compared to $500,000 for 2024. At the same time, I want to be very clear with investors. This level of profitability reflects the CloudFirst transaction and other non-recurring events. It does not yet represent earnings power of DTST, and we are being intentional and transparent.

What it does demonstrate is our ability to create value and recognize when to realize that value, and to act with discipline in how we allocate capital. Today, our core operating business is Nexxis, and it’s performing. In 2025, Nexxis generated $1.4 million in revenue, representing a 13.4% year-over-year growth. Gross margins expanded to 44.4%, and importantly, we improved the quality of the business by reducing customer concentration, with no single customer accounting for more than 10% of the revenue. Nexxis is lean, subscription-based, recurring revenue business with improving margins and real operating leverage. That brings us to the most important part of our story. What comes next? We have deliberately positioned DTST as a Nasdaq-listed acquisition platform with capital, flexibility, and a clear mandate to identify, acquire, and scale high-quality businesses in large and growing technology markets.

We are actively evaluating opportunities in areas where we believe we have both a strategic alignment and the ability to add value, including AI-enabled vertical SaaS, GPU infrastructure, cybersecurity, and SOC-related services, as well as scalable technology businesses with recurring revenue models. These are not abstract targets. These are markets with significant tailwinds, where disciplined capital deployment can drive meaningful long-term returns. In fact, we have already identified and are actively pursuing a number of strategic opportunities with an emerging GPU infrastructure segment in enterprise technology. These areas are being shaped by strong tailwinds, including the rapid adoption of AI-driven workloads, ongoing data architecture, monetization, and increasing demand for scalability, resilient digital infrastructure.

Our focus remains on large, evolving markets where demand visibility is high, and we believe we can deploy capital in a disciplined, accretive manner, with an emphasis on opportunities that offer compelling, risk-adjusted returns, and clear avenues for long-term value creation. We are actively advancing these initiatives, positioning ourselves to stay agile and selective as they’re developed. We expect to provide meaningful updates in the near term as these opportunities evolve. Importantly, we are only pursuing opportunities where we understand the consumer behavior and business deeply, and where we see a clear and credible path to value creation. At the same time, we are focused internally on improving efficiency. As we move through 2026, we expect corporate overhead to decline meaningfully as CloudFirst divestiture is completed. Our objective is to ensure that the earning power of this company is driven by operations, not one-time events.

When you step back and you look at DTST today, what you see is a company that has undergone a complete transformation. We have moved from a traditional cloud-based managed service model to a streamlined, well-capitalized platform with flexibility to pursue higher growth, higher margin opportunities. We have demonstrated that we can build value, that we are willing to realize it when the timing is right. Now we are focused on the next phase, building a company defined by sustainable growth, disciplined execution, and long-term shareholder returns. 2025 was about realizing value. 2026 and beyond will be about seeking opportunities, bringing together synergistic companies, and creating shareholder value. Now I’d like to turn the call over to Christos H. Panagiotakos for a review of our financial results. Christos?

Christos H. Panagiotakos, Chief Financial Officer, Data Storage Corporation: Thank you, Chuck. Good morning, everyone. As discussed on our last call, on September 11th, 2025, we closed the sale of our CloudFirst business for $40 million. As a result of the transaction, and in accordance with auditing and reporting standards, our ongoing financial reporting now reflects only our continuing operations, specifically our Nexxis subsidiary. Sales from continuing operations were $1.4 million for the year ended December 31st, 2025, an increase of $164,000, or 13.4%, compared to $1.2 million in the prior year. The increase was primarily attributable to continued growth in our Nexxis voice and data solutions business, driven by the addition of new customers and increased spending for existing customers. Revenue growth during the period reflects continued demand for our voice and data connectivity solutions and expansion of services within our existing customer base.

Selling, General, and Administrative expenses for the year ended December 31st, 2025, increased $348,000, or 9.1%, to $4.2 million from $3.8 million for the year ended December 31st, 2024. The increase was primarily driven by a $507,000, or 101.6% increase in non-cash stock-based compensation, primarily related to the accelerated vesting of equity awards in connection with the sale of the CloudFirst business, which triggered a fundamental transaction clause in equity award agreements with employees. Salaries and directors’ fees increased $166,000, or 9.8%, attributable to annual merit-based salary adjustments and bonuses. These increases were significantly offset by a $301,000, or 22.8% decrease in professional fees, primarily related to lower legal and consulting expenses in the current year.

We expect expenses to decrease for the year ended December 31st, 2026, as compared to the year ended December 31st, 2025, since a significant number of its employees are no longer working for us and instead are working for the buyer of CloudFirst business, and we anticipate having lower legal and accounting costs. Net income attributable to common shareholders for the year ended December 31st, 2025, was $19.2 million, compared to net income of $523,000 for the year ended December 31st, 2024. The significant increase in net income for the 2025 fiscal year was primarily driven by the gain recognized on discontinued operations. We ended the quarter with cash equivalents, and marketable securities of approximately $41 million at December 31st, 2025, compared to $12.3 million at December 31st, 2024. Thank you. I will now turn the call back to Chuck.

Charles M. Piluso, Chairman and Chief Executive Officer, Data Storage Corporation: Thanks, Chris. Before we open the call to questions, I just want to reinforce what we believe we’re entering into an exciting new phase. We attended the NVIDIA conference a few weeks ago, which reinforced the magnitude of the opportunity emerging across both technology and business. The pace of innovation and the scale of investment underway are substantial, signaling a transformation shift across industries. At the same time, it sharpened our approach. Rather than competing directly in a capital-intensive area, such as the billions being deployed into GPUs, new core infrastructure, we are focused on a disciplined participation. We have identified several key areas to focus to pursue, and we are advancing them deliberately, allocating capital thoughtfully, and concentrating on opportunities we see clear differentiation and the potential to drive meaningful long-term value. Now I’d like to open it up to questions. Operator?

Operator: Thank you. If you’d like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you’d like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Matthew Galinko with Maxim Group. Please proceed with your question.

Matthew Galinko, Analyst, Maxim Group: Hey, good morning. Thanks for taking my questions and congratulations on getting to this point in the transition. Maybe, can you give us some sense of what valuations look like? Is it what you expected when you started this process, particularly as you look towards some of the AI and HPC opportunities? Is it within reason or is it overheated at all?

Charles M. Piluso, Chairman and Chief Executive Officer, Data Storage Corporation: Thanks, Matt, and it’s good hearing your voice. What’s going on is, after attending that conference, Matt, is that this is like nuclear energy. Some people are frightened, but most people are very, very excited. What’s happening on the equipment side of things, you can put your hands on and it’s very, very tangible. On the software side, everyone uses the term, they’re training. They’re training their platforms, their software and all. When we see the valuations, really, you hear things like, someone that’s not even at a beta side of the software, people are hoping to get $700 million, and they’re pre-revenue. For the most part, as I walked through the conference, I would say that NVIDIA has paid for everyone at that conference. It’s huge. Out of San José, it was just amazing on it.

After spending 25 years in disaster recovery and business continuity, I went there with Matt, one of our Board Members, and we think we have an idea on a potential opportunity to be able to carve something out that’s something that we know pretty well. We’re still testing the waters. We still have a lot of research to do on it over a period of time. There are parts that you can play in that you’re not going to get crushed or playing with someone that’s raising or has spent $50 billion on GPUs. There are some opportunities given that based on our past experience that we see. The valuations are all over the place.

Most of the people that we spoke to, and by the way, Matt, since September, when we closed, we’ve spoken to 21 companies that we’ve passed on, that are everything from a SaaS AI offering to an MSP to VoIP companies. We’re both basically seeing on the MSP side, you’re looking, really, it’s non-recurring, usually for the most part, unless it’s software renewals. They’re trading at 1x, but they’re trying to get 2.5x revenue. It’s according to the size that they really are. On some of the AI stuff, I just have to say that 95% of everyone we’ve spoken to, either at that conference and all, they’re waiting to go buy their 120-foot yacht. It’s not there yet, but the excitement of what’s going on is incredible.

I think we potentially have some ideas on where we can play that separates us a little bit. In answer to your question, Matt, it’s just all over the place. They’re hoping to, like I say, get a $700 million value. Not that I’m a bar-goer, but sitting in a hotel bar, locked in with around 15-20 people that have passed through that a lot of people knew. One guy was working on the software on his laptop sitting next to me, and they’re going literally for a $700 million valuation. I think it’s all over the place. Everybody’s trying to create water. It’s a long answer, but it’s that incredible, Matt. It’s that incredible what’s going on.

Matthew Galinko, Analyst, Maxim Group: No, I appreciate the color. Maybe does having cash in the bank ready to deploy get the counterparties a little more interested in the conversation, or is that helping to move things along in some of these conversations?

Charles M. Piluso, Chairman and Chief Executive Officer, Data Storage Corporation: Two of the things that we’re looking at, well, three things which we always laid out. Oh, is there a reverse merger out there that gives stockholder value, great value and all? We’re not rushing to that, but people are approaching us, and we’re saying, "Well, gee, why can they do that and we can’t? Why can they build something that has $100 million market cap and more, and why can’t we?" We’re really not so focused on that now. We’ll look at opportunities because they’re approaching us. There’s also, I’m going to call it the medium tech, the stuff that’s not on fire, where you could get burned. There are some really good MSPs out there, and some of them have developed some AI software.

We’ve been talking to them, some of these companies, about, well, how about we separate it and what’s the meat and potatoes at your MSP? We look at doing something there, and then anything on the software side that for the term that everybody is still training, still working on, we’ll create something as a joint venture or something where we have the opportunity to buy it if you actually deploy it. You need to really get creative because most of the folks that are in this MSP space, as well as VoIP companies as well, they’ve caught on, and they’re trying to develop the software so they can roll it out to their customer base that they have. I think that’s pretty good. I don’t think we have to give any value yet to that software.

It might be something that’s good because organic growth is very tough and there might be some good cross-selling that goes on. That’s some of the stuff that we’re looking at. Let’s call it M&A, while we’re still looking at this other thing that we feel that might be a good opportunity in the AI infrastructure GPU space.

Matthew Galinko, Analyst, Maxim Group: Got it. Thank you. Maybe just last question for the existing business, is it possible to give us a sense of what the quarterly run rate or burn would look like operating without a transaction currently, and generally what your expectations for Nexxis are over the next year as operating independently?

Charles M. Piluso, Chairman and Chief Executive Officer, Data Storage Corporation: Sure. I’ll handle the Nexxis. I’ll turn the burn over to Chris. Go on, Chris. You have an idea of what our run rate was, typically a range of where you think it might be.

Christos H. Panagiotakos, Chief Financial Officer, Data Storage Corporation: I think the burn rate for 2026 will be probably about $2 million for the year, being a public company.

Charles M. Piluso, Chairman and Chief Executive Officer, Data Storage Corporation: Yeah. We think we can reduce some of that, Matt, in certain areas because the legal fees were pretty high. We’re still incurring some of them, as we go through it. We’ll give it a range. That’s an estimate. Don’t hold us to it, but that’s kind of what we’re expecting on that. On the Nexxis side of things, they’re growing. We own 80% of Nexxis. John Cannella runs that, does a great job. He has a small staff. He’s adding some folks to it. We have to allocate a little bit more money, not much, but to improve his inbound leads. He does a great job with agents and with shows, associations and all of that.

I think we have to spend a little bit of money, not much, to improve the SEO side of things. He’s profitable. He turned a profit. We never really allocated a lot of money, in a sense, to growth. It’s been around for a while. We put money in as he needed it. We haven’t said, "Here’s $100,000. Get a digital marketing agency, get the lead flow going." We’re trying to hold on to the cash we have, be very disciplined with it for the first acquisition. Along with, we have 2.1 million shares outstanding, give or take. It’s a little bit more than that. We want to be careful with that if we’re going to say, "Hey, we’re going to go raise money," which we would, that it’s going to be an increase in value.

Matthew Galinko, Analyst, Maxim Group: Got it. Very good. Well, hey, appreciate the color and look forward to seeing what you do.

Charles M. Piluso, Chairman and Chief Executive Officer, Data Storage Corporation: Thanks very much, Matt. Thanks for spending the time. Hope to see you soon.

Operator: Thank you. Ladies and gentlemen, as a reminder, if you’d like to join the question queue, it’s star one on your telephone keypad. We’ll pause just a moment to allow for any other questions. Mr. Piluso, I see no other questions at this time. We’ll turn the floor back to you for final comments.

Charles M. Piluso, Chairman and Chief Executive Officer, Data Storage Corporation: Thank you. Thanks for the questions, Matt. As we enter this next phase from a position of real strength with capital on the balance sheet and a clean, simplified structure and a clear strategic mandate, that combination gives us the ability to be selective, to be disciplined, and to focus only on opportunities that we believe can create meaningful long-term value for our shareholders. At the same time, we remain grounded in execution. Our priorities are clear. Continue improving performance of Nexxis, deploy capital thoughtfully into areas that enhance our scale, expand our margins, and strengthen the overall quality of our earnings. We are building with intention, and we are building for durability, and we do appreciate the trust and support of our shareholders. We look forward to updating you on our progress as we move through 2026 and execute on the opportunities ahead. Thank you.

Operator: Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.

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