PLUS

ANALYST NOTE: PLUS (ePlus Inc.) Date: 2026-06-13 Event Date: 2026-06-13

1. Structural Readiness

Setup State: Forming Current Price: $81.85 Extension: — (Price is within the base structure, not extended) Breakout Level: $93.98 Entry Classification: Aggressive Entry at $88.24 (Pre-breakout / Forming Entry)

Structural Analysis:

2. Thesis Layer

Primary Secular Theme: AI Infrastructure (Datacenter Capex / Servers / REITs) Exposure Weighting: Moderate (Second-Order Beneficiary)

ePlus Inc. is positioned as a direct beneficiary of the AI Infrastructure theme, specifically through its role as a technology solutions provider enabling datacenter and server deployments. The company explicitly identifies AI as a "transformational force" and a primary driver of investment across its customer base.

While the company does not manufacture AI chips or build hyperscale datacenters itself, it operates as a critical distribution and integration layer. The thesis relies on the "second-order" dynamic: as enterprises and hyperscalers increase capex on AI infrastructure, ePlus captures value through the resale of hardware, cloud integration, and managed services required to operationalize that infrastructure. The company's exposure is broad-based, covering AI, cloud, data center, networking, and security, aligning with the secular shift in IT consumption from legacy infrastructure to cloud-based, AI-enabled outcomes.

3. Business Overview

Business Model & Industry: ePlus Inc. is a holding company providing IT solutions and supply chain processes to optimize client environments. It operates in the Technology sector, specifically within IT solutions and financing. The business is divided into two principal segments: Technology and Financing.

• Technology Segment: Delivers a comprehensive suite of IT products and services, including professional services (consulting, project management), managed services (IT management, security, cloud hosting), and product resale.
• Financing Segment: Specializes in funding solutions (sales-type leases, operating leases, loans) for technology assets, overseeing the lifecycle from underwriting to disposal.

Key Operational Metrics (as of FY2026):

• Gross Billings: Reached a record $3.8 billion for the full year, growing 17% year-over-year.
• Backlog: Ended FY2026 with record backlog, providing momentum into FY2027.
• Segment Performance: Security gross billings grew 23.1% to $842 million, representing 22% of total FY2026 gross billings.
• Customer Concentration: The company serves 4,200 customers. A significant concentration exists with Verizon Communications Inc., which accounted for 24% of net sales and 17% of gross billings in FY2026. Accounts receivable from Verizon represented 36% of the trade balance as of March 31, 2026.
• Geographic & Vertical Mix: Revenue is diversified across Telecom/Media/Entertainment (30%), SLED (13%), Healthcare (13%), Technology (12%), Financial Services (10%), and Retail (6%). Operations span the US, UK, EU, India, and Singapore.

Management Expectations (FY2027 Guidance): Management has introduced guidance for fiscal year 2027, expecting net sales, gross profit, and adjusted EBITDA to grow in the mid-single-digit range. Management noted a "conservative" stance regarding memory shortages and associated lead times, suggesting they are prioritizing stability over aggressive volume projections in the face of supply chain constraints.

4. Archetype and Conviction

Archetype: Growth Leader Fit Analysis: The company fits the Growth Leader archetype due to its sustained double-digit growth in gross billings (17% in FY2026) and the expansion of high-margin service lines like Security (23.1% growth). The shift from a legacy resale model to a recurring revenue model (cloud, managed services) supports a quality compounder narrative, though the heavy reliance on financing and large enterprise contracts introduces cyclical elements.

Conviction Stack:

• Thesis Strength: Moderate. The AI Infrastructure tailwind is real, but ePlus is a distributor/integrator, not a primary innovator. The "second-order" nature limits the upside elasticity compared to pure-play AI hardware manufacturers.
• Evidence Quality: High. Recent earnings transcripts (May 28, 2026) and SEC filings (Feb 2026, May 2026) provide concrete data on billings, backlog, and segment performance. The sale of Expo Holdings (June 2025) for $156.7M net cash proceeds has streamlined the balance sheet.
• Valuation Context: Forward consensus EPS is $5.215 for FY1 and $5.495 for FY2. The current price of $81.85 implies a P/E ratio of approximately 15.7x (FY1) and 14.9x (FY2), which is reasonable for a mid-single-digit growth IT services firm, though not a deep value discount.
• Rerating Potential: Limited by the "conservative" guidance and supply chain headwinds (memory shortages). Rerating would likely require a breakout above $93.98 accompanied by an upgrade in guidance or a reduction in customer concentration risk.

5. Invalidations, Strengths, and Gaps

Invalidation Triggers:

• Fundamental: A significant deterioration in the Verizon concentration (e.g., a major contract loss) or a failure to meet the mid-single-digit growth guidance for FY2027.
• Operational: Escalation of memory shortages leading to a material reduction in backlog or gross billings.

Strengths:

• Record gross billings ($3.8B) and backlog.
• Strong organic growth in the Security segment (23.1%).
• Successful divestiture of non-core assets (Expo Holdings) generating significant cash.
• Broad-based growth across AI, cloud, and data center focus areas.

Evidence Gaps:

• Specific AI Revenue Attribution: While management cites AI as a "biggest driver," the evidence does not break out the specific dollar amount or percentage of revenue directly attributable to AI-specific products versus general IT infrastructure that supports AI.
• Post-Sale Integration: Limited detail on how the $156.7M cash proceeds from the Expo sale are being deployed to accelerate growth or reduce debt in the current fiscal year.
• Customer Diversification: The heavy reliance on Verizon (24% of net sales) is a known risk, but there is no evidence in the current dataset regarding active efforts to diversify this concentration in the near term.

PRIVATE ANALYST CALL

Judgment: Speculative Confidence: medium Key risks: 24% revenue concentration in Verizon; Supply chain lead times for memory creating conservative guidance; Forming coil has not yet fired breakout. Sizing hint: Position size should reflect the "forming" nature of the setup and the high ATR volatility; treat as a partial position pending breakout confirmation. Expected path: Management expects mid-single-digit growth in FY2027; price likely to consolidate near current levels until supply chain clarity improves or a breakout above $93.98 occurs. Expected horizon: 3 to 6 months for structural confirmation or invalidation. Failure mode to watch: A daily close below $81.77, which would invalidate the coil structure and signal a breakdown in the current support base.