Data Storage (DTST) Q1 2026 earnings summary

Executive summary

• Completed strategic transformation with the sale of the Cloud Solution business in 2025, shifting focus to Nexxis and launching the Sovereign AI Solutions (SAIS) subsidiary for regulated AI infrastructure.

• Conducted a major tender offer in January 2026, repurchasing 72% of outstanding shares and significantly reducing share count.

• Nexxis subsidiary continues to deliver stable, recurring revenue and operational support, with strong year-over-year growth in sales and gross profit.

• Focused on disciplined capital allocation, evaluating partnerships, M&A, and joint ventures to enhance competitive positioning and shareholder value.

Financial highlights

• Sales from continuing operations (Nexxis) were $347,000 for Q1 2026, up 10.9% year-over-year.

• Gross profit rose 32.1% to $186,019, with gross margin expanding to 53.7% from 45% in the prior year.

• SG&A expenses increased 71.8% to $1.5 million, mainly due to a 311% rise in non-cash stock-based compensation.

• Net loss attributable to common shareholders was $631,272, compared to net income of $24,078 in Q1 2025.

• Ended Q1 2026 with $1,614,622 in cash and $9,571,837 in marketable securities, with working capital of $11,052,387.

Outlook and guidance

• SAIS platform development is the primary focus for 2026, with initial customer opportunities targeted for late 2026 or early 2027.

• Expect capital expenditures for SAIS to be $250,000–$300,000 for initial development, with further capitalized expenses as the project progresses.

• Confident in having sufficient liquidity to fund operations and SAIS development for at least two years without new revenue.

• Management expects current liquidity and anticipated cash flows to support operational needs for at least the next 12 months.

• Plans to pursue acquisitions in high-growth technology sectors and continue evaluating capital allocation alternatives.