IDT Corporation's Q3 2025 Earnings: A Structural Shift to Tech-Driven Profitability

The IDT Corporation's Q3 2025 earnings report has unveiled a compelling narrative of operational transformation and strategic innovation, positioning the company as a leader in high-margin, recurring-revenue-driven sectors. With gross profit margins hitting a record 37.1% and Adjusted EBITDA surging 57% year-over-year, IDT has demonstrated that its shift toward technology-enabled solutions is delivering sustainable profitability. For investors prioritizing cash flow resilience and scalable growth, this report marks a critical inflection point.

The Power of Operational Efficiency: Margins and Cost Discipline

IDT's Q3 results underscore a relentless focus on operational excellence. Gross profit rose 15% to $112 million, with margins expanding to 37.1%—a 400-basis-point improvement from the prior year. This reflects disciplined cost management, particularly in its Traditional Communications segment, which delivered a 30% jump in Adjusted EBITDA to $19.3 million while maintaining its role as a cash generator. Meanwhile, net2phone's AI-driven efficiency initiatives reduced SG&A expenses, enabling a $1.4 million increase in operating income.

The National Retail Solutions (NRS) segment exemplifies this efficiency. Its “Rule of 40” score—a metric balancing growth and profitability (growth % + EBITDA %)—hit 49, with 23% recurring revenue growth and 29% operating income expansion. This is a testament to NRS's ability to scale its SaaS and merchant services, now serving over 100 retailers and processing 2,000 weekly delivery orders via new online integration platforms.

Strategic Innovation: AI, Fintech, and Recurring Revenue Dominance

IDT's true edge lies in its strategic bets on high-margin, recurring-revenue streams:

1. BOSS Money's Fintech Leap:
2. Remittance transactions rose 27% to 6 million, with digital channels (apps) accounting for over 80% of volume. Revenue grew 25%, while Adjusted EBITDA skyrocketed 20x to $5 million, proving the segment's scalability.

3. By prioritizing gross profit over market share, BOSS Money is optimizing margins in cross-border payments—a critical move in an increasingly competitive space.

4. net2phone's AI Revolution:

5. The launch of AI Agents reduced customer service costs while boosting retention. Plans for an AI-powered “Coach” service aim to further monetize this technology, expanding into vertical markets like healthcare.

6. Subscription revenue grew 7% to $21.5 million, with margins at 15%—a baseline that AI enhancements could elevate further.

7. NRS's Tech-Driven Retail Play:

8. Integrating online ordering and delivery platforms into independent retailers' operations is a defensible moat against big-box competitors. SaaS fees grew 33%, and merchant services rose 37%, creating sticky revenue streams.

Valuation: A Hidden Gem at 8.5x EBITDA

Despite these strides, IDT trades at just 8.5x trailing 12-month EBITDA, far below peers in telecom, fintech, and SaaS sectors. Analysts estimate a $300 million revenue run rate and $30 million+ EBITDA, suggesting significant upside as the market recognizes IDT's transition to a tech-led firm. With $224 million in cash and no debt, the balance sheet offers flexibility for share buybacks, dividends (currently a sustainable 3% yield), or acquisitions—such as its recent purchase of Leachie, a move to bolster NRS's retail tech offerings.

Risks and Considerations

Regulatory scrutiny in fintech remains a wildcard, particularly for BOSS Money's cross-border operations. Additionally, telecom competition could pressure margins if rivals copy IDT's AI strategies. However, the recurring revenue models in NRS and BOSS Money provide a stable base, while net2phone's cost discipline mitigates downside risks.

Investment Thesis: A Buy for Growth at a Value Price

IDT's Q3 earnings signal a structural shift from commoditized services to high-margin, tech-driven solutions. The combination of:
- Scalable EBITDA growth (up 57% YoY),
- Recurring revenue streams (now 49% of NRS's Rule of 40 score), and
- Strategic AI/fintech investments with clear monetization paths

makes this a compelling opportunity. At 8.5x EBITDA, the stock is undervalued relative to its peers and growth trajectory. Investors seeking a blend of safety (via cash flows and dividends) and innovation should consider IDT a top pick in the small-cap tech/value space.

In conclusion, IDT Corporation's Q3 results are more than just a strong earnings beat—they represent the culmination of a years-long strategic pivot. For those willing to look past short-term volatility, this is a company primed to capitalize on the twin engines of operational discipline and technological disruption.