TSS Inc. (TSSI) Is Quietly Rewiring Its Business Around AI Data Centers

On August 13, TSS Inc. (NASDAQ: TSSI ) reported second-quarter results that look worse on the top line and better underneath it. Revenue fell 20% year over year to $35.1 million, yet gross profit rose 11% and adjusted EBITDA climbed 12%. The company is deliberately walking away from lower-margin procurement work and leaning into systems integration for AI and HPC infrastructure, a business that grew 46% in the quarter. That trade-off is the whole story right now, and it cuts both ways.

Systems integration revenue reached $13.9 million in the quarter, up 46% from a year earlier, and now makes up 39% of revenue, versus just 22% in last year's second quarter. Facilities management grew even faster, up 84% to $2.7 million. CEO Darryll Dewan said systems integration is expected to keep outpacing the rest of the business given strong demand and the company's track record on complex technology projects.

TSS has started deploying capital toward a planned $17 million investment aimed at the next wave of AI data center technology, a buildout the company expects to start converting into higher systems integration revenue in the third quarter. The company has also put an idle asset back to work: its former Round Rock integration facility began warehouse operations on May 1, generating $0.3 million in operating lease income during the quarter.

Management is also pointing to stronger months ahead. TSS expects the second half of 2026 to outperform the first half, with accelerated systems integration growth, and it maintained guidance for full-year adjusted EBITDA to land between $20 million and $22 million, at the high end of that band.

The revenue decline is not small. Procurement revenue, still TSS's largest segment by dollars, fell 45% to $18.2 million in the quarter and is down 53% to $58.2 million for the first six months of the year. That drop pulled total revenue down 20% in the quarter and 37% for the year to date, to $90.5 million, even as the higher-margin segments expanded.

Profitability also slipped on a per-share basis. Second quarter net income was $1.4 million, or $0.05 per diluted share, compared with $1.5 million and $0.06 per diluted share a year earlier, after the company began recording a full tax provision following the removal of a deferred tax asset valuation allowance in the fourth quarter of 2025. For the first six months of 2026, net income fell to $3.7 million and diluted EPS to $0.13, down from $4.5 million and $0.17 in the prior year period.