IDT Corporation: A Triple Threat in Fintech and AI-Driven Growth Ahead of Q3 Earnings

IDT Corporation (IDT) stands at the precipice of a breakout moment, with its Q3 2025 earnings poised to validate its dual-engine growth strategy: National Retail Solutions (NRS) leveraging its expanding point-of-sale (POS) network to capture resilient consumer demand, and net2phone revolutionizing cloud communications through AI-driven efficiency. With prior quarters showing EBITDA surges of 56% year-over-year in Q2 and 31% in Q1, investors are primed to see this momentum accelerate. Here's why now is the time to position ahead of the June 5 earnings report.

NRS: A Data-Driven Moat in Retail Resilience

IDT's NRS segment has emerged as a silent powerhouse, with its 34,800 active POS terminals and 23,900 payment processing accounts (Q2 2025) acting as sensors for real-time consumer behavior. The recurring revenue from this network grew 32% year-over-year in Q2, driven by premium SaaS migrations (up 30%) and Merchant Services revenue (up 45%). This isn't just about scale—it's about diversified product demand from retailers, signaling underlying economic health.

The data tells a story of sticky growth:
- Unit sales per account rose due to premium SaaS plans boosting average revenue per merchant.
- Geographic expansion into high-growth markets like Brazil (launching Q3) and emerging economies (Venezuela, Eritrea) opens fresh revenue streams.
- Merchant Services & Other revenue—which includes data analytics and loyalty programs—now constitutes 55% of NRS's top line, up from 40% in 2024, proving the segment's value-added services are driving margin expansion.

This retail data ecosystem isn't just a revenue generator; it's a predictive tool for macroeconomic trends. With NRS's Adjusted EBITDA up 65% YoY in Q2, there's little doubt the Q3 report will reflect continued margin accretion as scale advantages compound.

net2phone: AI as the Margin Catalyst

While NRS fuels top-line growth, net2phone's AI innovation is the quiet force behind IDT's margin revolution. The segment's launch of an AI virtual agent in Q2—designed to reduce customer service costs and cross-sell cloud solutions—has already delivered a 12% EBITDA margin in Q2 (vs. 旁7% in Q1 2024).

Here's the math behind the magic:
1. Cost Reduction: The AI agent cuts support costs by automating 70% of routine queries, freeing human agents to handle high-value tasks.
2. Upsell Opportunities: The AI's real-time data analysis identifies cross-selling opportunities for advanced cloud services (e.g., CCaaS), boosting revenue per seat.
3. Scalability: With 410,000 seats served (Q2) and plans to expand in the U.S., Brazil, and Mexico, the AI's efficiency gains will amplify as the user base grows.

The result? A 55% YoY EBITDA jump in Q2, with Q3 likely to show further margin expansion as AI adoption scales.

EBITDA: The Fuel for Shareholder Returns

IDT's EBITDA surge isn't a fluke—it's a strategic imperative. With $34 million in Q2 EBITDA (up 56% YoY) and $29.1 million in Q1, the company has already surpassed 2024's full-year EBITDA in half the time. This cash flow machine is underpinning aggressive capital returns:
- Stock Buybacks: $8.5 million in Q2, with $171 million in cash to fuel more repurchases.
- Dividends: A 20% hike to $0.06/share, signaling confidence in sustained profitability.

Why Buy Now? The Earnings Catalyst

The June 5 earnings report will put this narrative to the test. Analysts are forecasting $37 million in Q3 EBITDA, a 9% sequential increase from Q2. Even a modest beat could trigger a rerating, given the stock's current valuation:

With a P/EBITDA of 8.5x versus peers' 12x, there's clear upside if the earnings story holds. Meanwhile, the AI and POS-driven moats are defensible against macro volatility, making IDT a rare blend of growth and value.

Historically, this strategy has paid off. A backtest of buying IDT five days before earnings and holding until the announcement from 2020 to 2025 showed an impressive 57.99% return, far outpacing the benchmark's 10.60% return. The strategy demonstrated strong risk-adjusted returns with a Sharpe ratio of 1.53, while managing a maximum drawdown of -15.03%, underscoring its resilience during market turbulence. These results suggest the market consistently rewards this earnings-driven approach, making the current opportunity even more compelling.

Final Call: Act Before the Catalyst

IDT Corporation is not just a fintech play—it's a data-and-technology hybrid with global expansion, margin upside, and a balance sheet that rewards shareholders. With NRS's retail network acting as a growth lever and net2phone's AI unlocking efficiencies, the Q3 earnings could cement IDT as a leader in the $400 billion cloud communications and payments markets.

Action Items for Investors:
1. Buy IDT shares ahead of June 5, targeting a 20%+ upside if EBITDA beats estimates.
2. Set a trailing stop at 15% below entry to lock in gains.
3. Monitor for catalysts: AI adoption rates in net2phone and NRS's seat growth in Brazil.

This is a rare opportunity to own a company with both top-line momentum and bottom-line discipline. Don't miss the signal—the data is already in the terminals.

The author has no position in IDT Corporation. Always conduct your own research before making investment decisions.