One Stop Systems NASDAQ: OSS reported a strong start to 2026, posting significant year-over-year gains in both revenue and profitability as demand increased for its ruggedized, enterprise-class compute platforms across defense and commercial markets. Management also reaffirmed full-year guidance, citing solid bookings momentum but noting that extended component lead times—particularly for memory—could affect shipment timing through the year.
Business reshaped after Bressner sale
President and CEO Mike Knowles said the company’s first-quarter results reflect the sale of its wholly owned subsidiary Bressner in December 2025 for proceeds of $22.4 million, subject to final closing working capital balances. Because Bressner is now reported as discontinued operations, the quarter’s discussion focused on the remaining “core OSS business,” which Knowles described as a “pure-play provider of ruggedized AI compute platforms for edge applications.”
Knowles said the transaction “unlocked value for shareholders, simplified our operating structure, strengthened our balance sheet, and sharpened our focus on higher margin, higher growth opportunities within our core business,” adding that the first quarter “is already demonstrating the benefits of this transition.”
Revenue up 55% as defense and commercial demand increases
For the first quarter of 2026, OSS reported revenue of $8.1 million, up 55% from $5.2 million in the prior-year quarter. Knowles said the increase reflected growth in both defense and commercial.
In defense, Knowles highlighted increased shipments supporting the P-8 Poseidon aircraft and increased activity tied to “the design, development, and delivery of prototype compute systems for next-generation enhanced vision systems for U.S. Army combat vehicles.”
On the commercial side, he said OSS saw increased demand from a medical imaging OEM, including shipments of liquid-cooled server platforms.
Chief financial officer Dan (last name not provided in the transcript) said the revenue growth was “primarily due to higher sales to a defense prime customer of data storage products to support the P-8 aircraft,” higher sales to the medical imaging OEM, and sales tied to the enhanced vision prototype compute systems.
Bookings approach $15 million; management points to larger, more programmatic orders
Knowles said OSS generated “nearly $15 million in new bookings” in the quarter, which he said was one of the strongest quarters in company history and produced a book-to-bill ratio of 1.8x. He added that first-quarter bookings nearly equaled the company’s total bookings for all of 2023, and that average order size has increased nearly three times since 2023.
Management detailed several program wins and expansions, including:
- P-8 Poseidon awards: Knowles said OSS announced aggregate new awards of $10.5 million from the U.S. Navy and a U.S.-based prime defense contractor supporting the P-8 platform, with $0.5 million booked in the first quarter and the remainder in fourth-quarter 2025. He said the company has secured more than $65 million in total contracted revenue tied to the aircraft to date, including over $23 million awarded since the start of 2025.
- Commercial aerospace: A $1.1 million initial order from a “top-tier commercial aerospace prime contractor” supporting next-generation in-flight entertainment systems, expected to be delivered by the fourth quarter of 2026. Knowles said OSS believes the platform could generate more than $6.5 million over five years.
- Commercial robotics: A new engagement with a customer manufacturing autonomous construction and mining equipment, expected to generate about $2 million in orders in 2026, with a five-year opportunity of $10 million to $15 million. Knowles said OSS “displaced an incumbent solution” to win the business.
- Autonomous energy nodes for data centers: In April 2026, OSS announced a relationship with a company building a network of autonomous energy nodes for alternative energy-powered data centers. Knowles said the initial order was valued at over $500,000 and could scale to an aggregate $10 million opportunity over five years.
During Q&A, Knowles said the robotics program has completed prototype and early prototype build, delivery, and validation and is expected to transition to production in 2026. He also said the commercial aerospace program “has actually transitioned into production,” with deliveries starting in 2026 and continuing through the year and into 2027.
Margins improve; free cash flow reaches record level for continuing operations
Gross margin in the first quarter was 51.6%, up from 45.5% a year earlier. The CFO called it a first-quarter record and said the improvement reflected “a more profitable mix of products shipped,” engineering efficiencies in customer-funded development programs, and improved manufacturing absorption due to higher volume. He cautioned gross margin can vary by quarter based on mix, absorption, and program life cycle, adding the company continues to target “mid-30s to mid-40s” margins on a sustaining basis and expects second-quarter gross margins to normalize into that range.
Operating expenses rose 2.5% to $4.8 million, which management attributed mainly to higher general and administrative expense, partially offset by lower marketing and selling and R&D expenses.
On the bottom line, OSS reported a GAAP net loss from continuing operations of $0.4 million, or $0.01 per diluted share, compared with a loss of $2.3 million, or $0.11 per share, in the prior-year quarter. On a non-GAAP basis, the company reported net income from continuing operations of $0.3 million, or $0.01 per diluted share, compared with a non-GAAP net loss of $1.7 million, or $0.08 per share, a year earlier. Adjusted EBITDA from continuing operations was $0.2 million, versus an adjusted EBITDA loss of $1.6 million in the prior-year first quarter.
The CFO also pointed to a “record amount of free cash flow from continuing operations.” Net cash provided by continuing operations was $4.0 million for the three months ended March 31, 2026, compared with net cash used of $1.5 million in the prior-year period. OSS ended the quarter with $34.4 million in cash equivalents and short-term investments, $2.2 million of restricted cash, and no debt outstanding.
Guidance reaffirmed amid supply chain constraints; pipeline and development activity expand
Management reaffirmed 2026 guidance, calling for revenue growth of 20% to 25%, gross margin of approximately 40%, and positive EBITDA. Knowles said the outlook is supported by a growing pipeline of opportunities, increasing customer engagement, higher customer-funded development activity, and the transition of development programs into production deployments.
Customer-funded development increased 145% year-over-year in the first quarter, and Knowles said the company expects additional growth through 2026. He also discussed the company’s technology roadmap, noting OSS introduced a next-generation PCIe Gen 6 product portfolio in the fourth quarter of 2025 to address rising bandwidth requirements for AI, machine learning, and sensor-driven workloads.
However, management emphasized supply chain risk around component availability and lead times. Knowles said OSS is seeing longer lead times for certain components, including memory, which “may impact the timing of certain shipments throughout the year.” The CFO said memory remains a key constraint and noted extended lead times for other components, including CPU. He also said pricing has risen but OSS generally aims to pass increases through to customers.
In response to a question about guidance philosophy, management said demand strength could have supported a higher outlook, but they are maintaining guidance due to the “dynamic supply chain environment” and because “the timing of revenue conversion remains our biggest risk for the year.”
Knowles also addressed questions about defense activity in the Middle East and around Iran, saying OSS has not seen a major impact on bookings or planned orders for 2026, while acknowledging there could be slight delays in award timing due to increased logistics and contracting activity.
About One Stop Systems NASDAQ: OSS
One Stop Systems, Inc NASDAQ: OSS develops and manufactures high-performance computing and storage systems tailored for mission-critical and harsh-environment applications. The company's solutions are designed to deliver accelerated processing, high-throughput data handling and reliability in confined or ruggedized form factors. OSS leverages advanced cooling, power management and custom enclosures to support demanding workloads in settings where off-the-shelf hardware may fall short.
The company's product portfolio includes GPU-accelerated servers, embedded single-board computers, high-speed RAID storage arrays and integrated system solutions.
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