IDT Corporation: Structural Growth and AI Innovation Drive Profitability

IDT Corporation's Q3 2025 earnings underscore a strategic pivot toward high-margin businesses, operational efficiency, and AI-driven innovation. With gross profit margins hitting a record 37.1% and EPS surging 290%, the company is proving that its diversified segments—National Retail Solutions (NRS), Fintech (BOSS Money), net2phone, and Traditional Communications—are not just growth engines but also catalysts for sustained profitability. Here's why investors should take note.

Segment Strengths: A Diversified Engine of Growth

IDT's four segments are operating in concert to deliver both top-line and bottom-line results. The National Retail Solutions (NRS) division stands out for its 23% growth in recurring revenue, driven by premium SaaS migrations and data analytics services now accounting for 55% of NRS's revenue. This focus on high-margin SaaS and the successful pilot of online delivery platforms—generating 2,000 weekly orders for 100 retailers—signals a scalable model to counter retail sector headwinds. Meanwhile, Fintech (BOSS Money) has turned its operations around, posting a 24.7% revenue rise while prioritizing profitability over transaction volume. The shift to digital remittances (80% of transactions) and a focus on gross profit per transaction has enabled an EBITDA jump from $0.2 million to $5.0 million, a testament to disciplined strategy.

The net2phone division exemplifies operational reinvention. Its 7% revenue growth, paired with a 50% surge in Adjusted EBITDA, reflects the power of AI. The launch of AI Agents has automated 70% of support queries, slashing costs while freeing human agents to upsell cloud solutions. The upcoming Coach tool, designed to enhance customer engagement, positions net2phone to capitalize on its 410,000-seat user base across the U.S., Brazil, and Mexico. Lastly, Traditional Communications remains a cash cow, contributing 30% higher EBITDA and a 9.2% margin, proving its resilience as a funding source for high-growth initiatives.

AI as a Strategic Multiplier

IDT's AI investments are not merely cost-cutting tools but engines of competitive advantage. The net2phone AI Agents, for instance, have enabled a 188% surge in operating income while improving cross-selling of cloud-based contact center solutions (CCaaS). This dual impact—reducing costs and boosting revenue—creates a flywheel effect. By embedding AI into customer service and sales, net2phone can scale efficiently as its user base grows. Similarly, NRS's AI-powered analytics services are already driving premium SaaS adoption, a trend that could accelerate as retailers seek data-driven insights to compete with e-commerce giants.

Financial Fortitude and Capital Allocation

IDT's balance sheet is a source of strength. With $223.8 million in cash and a net operating cash flow of $75.7 million, the company has ample liquidity to fund innovation while maintaining discipline. Share buybacks and strategic investments—such as the $6 million purchase of employee shares—signal confidence in long-term value. CEO Shmuel Jonas's emphasis on scaling high-growth segments while leveraging Traditional Communications' cash flow aligns with a clear path to sustained EBITDA growth. The full-year 2025 guidance of $126 million Adjusted EBITDA appears achievable, if not conservative.

Risks and Considerations

No investment is without risks. Digital remittance markets face saturation and regulatory scrutiny, which could pressure BOSS Money's margins. Macroeconomic volatility, particularly in emerging markets, may dampen transaction volumes. However, IDT's diversified portfolio and focus on profitability—not just revenue—mitigate these risks. The company's 37.1% gross margin and 91.3% NRS margin create a buffer against economic downturns.

Investment Thesis: A Compelling Buy at Current Valuations

IDT's Q3 results validate its shift toward high-margin, recurring-revenue businesses and AI-driven efficiency. With a robust balance sheet, a clear path to $126 million EBITDA, and AI initiatives unlocking new growth vectors, the stock appears undervalued. At current multiples—assuming a forward EV/EBITDA of ~8x the 2025 guidance—IDT offers a compelling risk-reward profile. Investors seeking exposure to SaaS, fintech, and AI-enabled operational excellence should consider IDT a top pick. The company's structural advantages position it to outperform in both expansionary and cautious economic environments.

In a market hungry for companies that combine growth with profitability, IDT Corporation is proving it can do both—and then some.