IDT's Growth Engine Fires on All Cylinders as Higher-Margin Segments Drive Profitability Surge

IDT Corporation IDT delivered a robust first-quarter fiscal 2026 performance, with consolidated earnings significantly outpacing operational metrics. Despite the mixed market reaction—shares retreated 2.1% following the announcement—the company’s three core growth platforms demonstrated exceptional momentum.

Business Momentum Accelerates Across Key Divisions

The company’s strategic pivot toward higher-margin operations is paying dividends. Net income attributable to IDT jumped 29.6% to $22.4 million from $17.2 million year-over-year, while GAAP earnings per share (EPS) surged 30.9% to $0.89 from $0.68. On a non-GAAP basis, diluted EPS advanced 32.4% to $0.94 from $0.71, signaling strengthened operational efficiency.

Gross profitability expanded meaningfully as the company shifted its mix toward higher-margin businesses. Gross profit climbed 9.8% to $118.2 million from $107.6 million, while gross margin expanded 180 basis points to 36.6%. Adjusted EBITDA increased 26% to $37.9 million from $30 million, underscoring the operating leverage that management has been cultivating.

NRS Continues Its Winning Streak

National Retail Solutions emerged as the standout performer during the quarter. Total revenue increased 22% year-over-year to $37.1 million from $30.4 million, driven by merchant adoption gains and higher usage intensity. Recurring revenue surged 22% to $35.3 million from $28.9 million, indicating a growing, predictable revenue base.

Within NRS, Merchant Services revenue jumped 38%, while SaaS Fees expanded 30%. The advertising and data vertical faced headwinds, declining 15% amid industrywide CPM compression from expanded streaming inventory. Gross profit rose 21% to $33.5 million, and operating income jumped 35% to $8.9 million from $6.6 million, with adjusted EBITDA climbing 33% to $10.3 million.

Terminal metrics underscored operational strength. Active POS terminals expanded by 4,800 units year-over-year to reach 37,900, while monthly average recurring revenue per terminal rose 6% to $313 from $295. Management highlighted growing traction from delivery-integration partnerships with DoorDash and Grubhub, which have boosted order volumes for participating retailers.

Fintech’s Digital Transformation Pays Off

Fintech, including the BOSS Money platform, emerged as the quarter’s surprise strength driver. Total segment revenue grew 15% to $42.7 million from $37.1 million, fueled by a 20% surge in digital channel revenue. Digital send volume jumped 34% year-over-year, reflecting both higher transaction counts and greater average dollar amounts per transaction.

Operating income more than doubled, leaping 97% to $6.4 million from $3.2 million, while adjusted EBITDA surged 87% to $7.5 million from $4 million. Management attributed profitability gains to operating leverage and cost discipline—reduced chargebacks, lower payout commissions, and enhanced fraud detection through machine learning drove the expansion.

BOSS Money’s digital channels accounted for 84% of total transactions and grew 22% year-over-year, demonstrating consumer preference for digital remittance solutions. Management expects this segment’s outperformance to accelerate when a federal excise tax on cash remittances takes effect on January 1, 2026.

net2phone’s AI Pivot Gains Traction

The cloud communications platform posted encouraging results, with subscription revenue increasing 10% to $23.0 million from $21 million. Seat expansion supported growth, rising 7% to 432,000 from 406,000, as higher-value CCaaS seats drove deeper customer integration.

Operating income leapt 94% to $1.9 million from $1 million despite increased investment in AI product development, while adjusted EBITDA rose 44% to $3.6 million from $2.5 million. The company recorded its first sales of its newly launched AI agent during the quarter and released Coach AI—a workflow-optimized solution—near period’s end, signaling a strategic shift from standalone products to bundled, AI-enabled offerings.

Traditional Communications Holds Its Ground

The legacy business continued to generate steady cash despite ongoing volume headwinds. Revenue declined marginally by 0.5% to $219.5 million from $220.5 million, yet operating income held flat at $15.8 million, supported by cost management initiatives. Adjusted EBITDA rose 2% to $18.9 million from $18.4 million.

IDT Digital Payments and IDT Global proved bright spots, with the Zendit B2B platform accelerating, posting revenue growth exceeding 90% year-over-year. Payment processing accounts rose by 4,600 units year-over-year, reinforcing the company’s market penetration.

Consolidated Results Reflect Strategic Execution

Total company revenue advanced 4.3% year-over-year to $322.8 million from $309.6 million. Income from operations climbed 30.8% to $30.9 million from $23.6 million, demonstrating operating leverage as the higher-margin businesses scaled.

The company maintained its full-year fiscal 2026 adjusted EBITDA guidance of $141 million to $145 million, implying 7%-10% growth versus fiscal 2025. Management indicated it remains well-positioned to achieve this target and will reassess guidance following second-quarter results.

Market Context and Corporate Actions

While shares have retreated 2.1% since earnings release—underperforming the S&P 500’s 0.2% decline—the pullback may reflect profit-taking rather than fundamental concerns, given the company’s operational strength. Over the past month, IDT shares are down 6.3% while the broad market has risen 0.4%, a divergence that may correct as investors digest the company’s growth acceleration.

The Delaware Supreme Court recently affirmed dismissal of Straight Path class action claims against IDT, resolving the litigation favorably. The company repurchased 158,000 shares for $7.6 million during the quarter and declared a quarterly dividend of $0.06 per share, payable December 23, 2025.

Capital expenditures increased 10.3% year-over-year to $5.8 million from $5.3 million, supporting infrastructure investments aligned with growth initiatives. Operating cash flow was temporarily pressured by working-capital timing related to quarter-end prefunding requirements for BOSS Money, though this represents a timing issue rather than a fundamental concern.