ePlus Q3 2025: Navigating Contradictions in Demand, AI Growth, and Margin Expectations

These are the key contradictions discussed in ePlus' latest 2025 Q3 earnings call, specifically including: Product Sales Demand and Revenue Recognition, Growth in Professional Services, AI Business Growth Expectations, and Gross Margin Normalization:



Revenue and Service Revenue Growth:
- ePlus reported consolidated revenues of $511 million for Q3, flat year-over-year, with a 5.3% rise in gross profit.
- This trend was driven by a 52% increase in services revenue, which reached a new high of $114 million, and was partially offset by lower product sales.

Challenges in Hardware Sales and Consumer Demand:
- The company experienced softer-than-expected hardware sales and lower demand from some enterprise customers.
- This was primarily due to customers digesting purchases from last year's inventory flush and the evolving industry transition to more ratable consumption and subscription-based models.

Impact of Gross to Net Adjustments:
- ePlus faced a year-over-year increase in gross to net adjustments, impacting net sales by approximately $60 million.
- The higher gross to net adjustments were attributed to increased headcount from the Bailiwick acquisition and investments in the business to support growth.

AI and Machine Learning Initiatives:
- The company is focusing on AI and machine learning, with 76% of IT leaders indicating their organizations have yet to reach AI maturity.
- ePlus is expanding its AI Ignite and Secure Gen AI programs to deliver services and solutions, aiming to improve customer satisfaction and efficiency.