Eplus (PLUS) Q2 2026: Security Billings Surge 52%, AI and Cloud Drive Margin Expansion
Eplus delivered a record-setting quarter, crossing $1 billion in gross billings for the first time, propelled by a 52% surge in security-related sales and robust AI-driven demand across networking and cloud. Operating leverage and a disciplined shift toward high-growth verticals amplified margin expansion, while management raised full-year guidance on the back of a strengthened pipeline and a simplified business model post-financing exit. The company’s momentum in AI, security, and cloud positions it for continued outperformance, but vertical and government exposure will require close monitoring.
Summary
- Security and AI Lead Product Mix Shift: Security billings and AI-related infrastructure drove outsized growth and margin gains.
- Margin Expansion Outpaces Revenue: Operating leverage and product mix fueled EBITDA growth at twice the rate of net sales.
- Guidance Raised on Pipeline Strength: Upbeat outlook reflects robust customer demand and a streamlined technology focus.
Performance Analysis
Eplus posted its first-ever quarter with over $1 billion in gross billings, a milestone that underscores the effectiveness of its diversified model and strategic focus on high-growth technology domains. Security products and services stood out, with gross billings up 52% year-over-year and now representing 24% of trailing 12-month gross billings, up from 21% last year. Networking and cloud segments also delivered strong sequential and year-to-date gains, fueled by customer modernization initiatives and AI adoption.
Margin expansion was a defining feature of the quarter. Adjusted EBITDA rose 62%, growing more than twice as fast as net sales as operating leverage from automation and a favorable product mix came through. Product gross margin expanded by 160 basis points, benefiting from higher sales of third-party maintenance and services, while headcount declined 6% year-over-year as the company focused resources on AI, cloud, and security. The only notable softness was in the state and local government (SLED) vertical, which faced budget constraints, but all other customer segments and industries saw robust growth.
- Security Outperformance: Security billings climbed 52% YoY, now comprising nearly a quarter of total billings.
- Operating Leverage Realized: EBITDA growth far outpaced revenue, reflecting automation gains and cost discipline.
- Cloud and Data Center Strength: Net sales in these areas grew nearly 30% YTD, supporting recurring revenue expansion.
Overall, the quarter reflected broad-based demand, a strategic pivot to high-growth areas, and a business model increasingly insulated from cyclical softness in legacy end markets.
Executive Commentary
"This quarter represents a significant milestone for Eplus as we delivered the first quarter in our history with over $1 billion of gross billings, underscoring the momentum across our business and the strength of our diversified model. Security continues to be a standout performer, with gross billings of security products and services up 52% year-over-year, now representing 24% of trailing 12-month gross billings up from 21% last year."
Mark Marant, CEO and President
"Adjusted EBITDA totaled $58.7 million, up 61.6% from $36.3 million a year ago. Adjusted EBITDA grew more than twice as fast as net sales, underscoring the operating leverage inherent in our business model."
Elaine Marion, CFO
Strategic Positioning
1. Security and AI as Core Growth Engines
Eplus has repositioned its business model to prioritize security, AI, and cloud solutions, areas now driving both top-line growth and improved profitability. The company’s AI-related offerings are increasingly tied to revenue expansion for customers, shifting the narrative from cost savings to strategic enablement. The acquisition of RealWave, an AI-powered cloud platform, further expands Eplus’ ability to deliver real-time, data-driven insights and automation for enterprise clients.
2. Operating Leverage and Internal Automation
Automation initiatives have enabled Eplus to deliver faster incident resolution and improved customer experiences, while maintaining or reducing headcount. This operational discipline has resulted in EBITDA and operating income growth that significantly outpaces revenue, supporting a scalable cost structure as the business grows.
3. Capital Allocation and Balance Sheet Flexibility
With over $400 million in cash and a simplified structure post-financing business divestiture, Eplus is well positioned to pursue both organic and inorganic growth. The company is allocating capital to strategic acquisitions, organic investments in high-growth areas, dividends, and opportunistic share repurchases, balancing aggressive expansion with shareholder returns.
4. Diversified Customer and Vertical Exposure
Growth was broad-based across customer sizes and verticals, with particular strength in mid-market and enterprise segments. While state and local government sales lagged due to budget constraints, other verticals—telecom, healthcare, technology, and financial services—demonstrated resilience, mitigating single-vertical risk.
Key Considerations
This quarter marked a strategic inflection point, as Eplus leverages its simplified business model and strong balance sheet to double down on high-growth, high-margin segments. Investors should focus on the sustainability of margin expansion, the pace of recurring revenue growth, and the company’s ability to convert its pipeline in a dynamic macro environment.
Key Considerations:
- Security and AI Momentum: Security’s share of gross billings continues to rise, reflecting robust demand for advanced solutions tied to AI infrastructure.
- Margin Gains Driven by Mix and Automation: Product mix shift and automation are delivering outsized EBITDA growth and margin expansion.
- Pipeline Visibility Supports Guidance Lift: Management’s raised outlook is underpinned by a healthy pipeline and large deal wins in Q2.
- Capital Deployment Optionality: Strong cash reserves and a more focused model enable flexible capital allocation for growth and returns.
Risks
State and local government (SLED) verticals remain exposed to budgetary pressures, which could limit growth in that segment if fiscal constraints persist. Macroeconomic volatility, inflation, and potential tariff impacts were acknowledged as ongoing uncertainties. The company’s dependence on continued AI and security adoption also introduces execution risk if customer priorities shift or competitive intensity rises.
Forward Outlook
For Q3 2026, Eplus guided to:
- Continued mid-teens net sales and gross profit growth over the prior fiscal year baseline.
- Adjusted EBITDA expected to grow at approximately twice the rate of net sales, reflecting ongoing operating leverage.
For full-year 2026, management raised guidance:
- Mid-teens growth in net sales and gross profit from FY25’s $2.01 billion and $515.5 million, respectively.
- Adjusted EBITDA to increase at roughly twice the rate of net sales, benefiting from margin expansion.
Management highlighted several factors that support this view:
- Healthy end-market demand across most verticals and customer sizes.
- Robust pipeline visibility and strong execution in high-growth areas.
Takeaways
Eplus’ Q2 performance demonstrates a successful pivot to high-growth, high-margin segments, with security, AI, and cloud driving both revenue and profitability. The company’s simplified business model and strong balance sheet provide ample flexibility for further expansion and capital returns.
- Security and AI Are Now Central to Growth: These areas are not only expanding rapidly but also supporting higher margin structure and recurring revenue mix.
- Operating Leverage Is Delivering Tangible Results: Automation and disciplined cost management are translating into outsized EBITDA and margin gains.
- Investors Should Watch for Execution on Pipeline and Government Exposure: Sustained growth hinges on continued delivery in AI/security and managing risk in government verticals.
Conclusion
Eplus’ record quarter and raised outlook underscore the company’s successful transformation into a pure-play technology provider focused on security, AI, and cloud. Margin expansion, pipeline strength, and capital allocation flexibility position Eplus for continued growth, but vigilance is warranted around vertical exposure and macro risks.
Industry Read-Through
Eplus’ results highlight a broader industry acceleration in demand for security and AI-driven infrastructure, with enterprises prioritizing modernization and data-driven automation. The shift from efficiency-led to revenue-led AI initiatives is reshaping IT budgets and vendor priorities. Peer technology integrators and VARs (value-added resellers) should expect similar demand tailwinds, but those with heavy SLED exposure may face headwinds. Margin expansion from automation and product mix is emerging as a key differentiator, signaling that operational discipline will be as critical as top-line growth in the evolving technology solutions landscape.