Surge Components Reports Third-Quarter 2026 Results, Maintains Profitability and Expands Global Growth Initiatives
Surge Components, a supplier of capacitors, discrete semiconductors, switches and audible signaling devices, has announced its financial results for the third fiscal quarter ended August 31, 2026. The company reported continued profitability, expanded its commercial presence in Europe and Asia, and continued investing in engineering talent and long-term growth opportunities.
Although quarterly revenue and net income declined compared with the same period last year, Surge recorded higher sales and gross profit for the first nine months of fiscal 2026. Management highlighted the company’s global expansion strategy, competitive pricing and shorter product lead times as important advantages as customers navigate changing supply conditions across the electronics industry.
Third-Quarter Financial Performance
For the three months ended August 31, 2026, Surge Components reported net sales of approximately $10.09 million, compared with $10.27 million in the corresponding period of 2025. The decrease of approximately $184,000, or 1.8%, was primarily attributable to lower sales volumes from certain customers.
Gross profit for the quarter reached approximately $2.74 million, down from $2.84 million a year earlier. Gross margin declined to 27.1%, compared with 27.7% in the prior-year period. The company attributed the decrease to reduced business with existing customers and a greater contribution from certain products with lower gross margins.
Net income available to common shareholders was $218,032, equivalent to earnings of $0.04 per share. In the third quarter of fiscal 2025, the company reported net income available to common shareholders of $469,705, or $0.08 per share.
Despite the year-over-year declines, Surge remained profitable and continued investing in its sales infrastructure and engineering capabilities. Management believes these investments can support future customer acquisition, strengthen relationships with existing customers and expand the company’s presence in international markets.
Nine-Month Results Show Revenue and Profit Growth
For the nine months ended August 31, 2026, Surge Components reported net sales of approximately $27.65 million, representing an increase of $1.22 million, or 4.6%, compared with approximately $26.42 million in the same period of 2025.
The company attributed the improvement to increased business with new customers and stronger sales to existing customers. This performance indicates that the company’s broader commercial efforts have contributed to revenue growth, despite the softer results recorded during the latest quarter.
Gross profit for the nine-month period increased to approximately $8.04 million, compared with $7.58 million a year earlier. That represents an improvement of approximately $459,000. Gross margin also strengthened to 29.1%, up from 28.7% in the prior-year period.
Surge attributed the improvement to higher sales volumes and a more favorable mix of products sold at stronger profit margins.
The company also reported that tariff-related costs included in nine-month sales totaled approximately $443,759 in fiscal 2026, compared with $700,253 in the corresponding period of 2025. Surge said it was able to pass these costs on to customers.
Global Expansion and Investment in Engineering
Ira Levy, President and Chief Executive Officer of Surge Components, said the company was pleased to deliver another profitable quarter while continuing to invest in international sales expansion, engineering talent and long-term business development.
During the quarter, Surge continued expanding its commercial presence across Europe and Asia by adding regional offices and sales personnel. These initiatives are intended to improve customer coverage, strengthen regional relationships and help the company pursue additional opportunities in international markets.
The company is also investing in engineering resources to support its product offerings and customer requirements. Management views these investments as an important part of its strategy to build a stronger commercial platform and establish relationships with a wider range of customers.
In addition to selling directly to customers, Surge works through distribution channels and electronic manufacturing service subcontractors. These subcontractors manufacture products on behalf of other businesses, including companies that do not operate their own manufacturing facilities.
Management considers these relationships an important route to reaching additional end customers. Working with subcontractors can help Surge become an approved component supplier for the businesses whose products they manufacture, potentially creating opportunities that would be more difficult to secure through direct sales alone.
Electronics Supply Constraints Create Opportunities
Surge Components is monitoring supply conditions across the electronics industry, particularly as demand associated with artificial intelligence infrastructure and related technologies continues to expand.
According to management, rising demand across the AI ecosystem could contribute to supply constraints and longer lead times for certain electronic components. Surge believes its relationships with manufacturing partners and comparatively shorter lead times may help it respond to customers seeking essential components.
The company expects to pursue opportunities connected with the AI ecosystem while continuing to serve customers across its broader markets.
Industry-wide shortages of certain components, including memory devices, have also contributed to longer delivery schedules and higher prices. Surge believes its competitive pricing and ability to offer shorter lead times could help it support customers, strengthen its market position and pursue additional business.
However, these opportunities will depend on evolving market conditions, customer demand and the availability of products from manufacturing partners.
Operating Expenses Reflect Growth Investments
Surge’s selling and shipping expenses increased during both the three-month and nine-month reporting periods.
For the first nine months of fiscal 2026, selling and shipping expenses rose to approximately $2.59 million, an increase of $535,303, or 26.1%, compared with the same period in 2025. Quarterly expenses increased to approximately $866,605, up $145,331, or 20.1%, year over year.
The company attributed the increases primarily to higher sales commissions, additional sales payroll, travel and entertainment expenses, automobile costs, outbound freight and trade show expenses. These costs reflect, in part, the hiring of additional sales personnel and the expansion of commercial activities.
General and administrative expenses also increased. For the nine-month period, these expenses reached approximately $4.87 million, up 2.5% from the prior-year period. For the third quarter, they totaled approximately $1.61 million, an increase of 11.6%.
Higher salaries, rent, maintenance, consulting, directors’ fees, public company costs and pension expenses contributed to the increases. Some of these changes were partially offset by lower expenses in areas including insurance, utilities, professional fees and bad debt, as well as lower non-cash stock-based compensation compared with the prior-year period.
The increased spending reflects a combination of operating cost pressures and investments intended to support the company’s expanding commercial activities.
Pricing Pressures and Tariff Considerations
Surge continues to operate in an industry where customers frequently request price reductions, sometimes on a quarterly or semiannual basis rather than through annual pricing agreements. The company noted that it cannot always recover these reductions from its suppliers, creating potential pressure on gross margins.
Surge also provides certain subcontractor customers with periodic cost reductions through rebates of 5%. While these arrangements can affect margins and reduce commissions, management views subcontractor relationships as strategically important because they can provide access to larger end customers.
Tariffs on certain products imported from China have also affected the business. Surge said it has passed along some tariff costs to customers and has been shifting certain customer deliveries directly to Hong Kong to help mitigate expenses. However, the company cautioned that it cannot guarantee that all future tariff costs will be recovered or predict their full effect on revenue and profitability.
Financial Flexibility and Outlook
Management believes Surge’s balance sheet provides flexibility to support growth initiatives, expand its commercial capabilities and invest in engineering resources. The company’s strategy combines competitive pricing, shorter lead times, product expertise and a focus on customer service.
Looking ahead, Surge intends to build on its international expansion, deepen relationships with existing customers and pursue new opportunities across the electronics supply chain, including potential demand associated with AI-related infrastructure.
The company cautioned that its expectations for future growth are subject to risks, including changing economic conditions, customer demand, supply availability, pricing pressures, tariffs and other uncertainties. Its forward-looking statements reflect management’s current expectations and assumptions and are not guarantees of future results.
Overall, Surge Components’ third-quarter results reflect a business that remains profitable while managing lower quarterly sales and margin pressure. Growth over the first nine months of fiscal 2026, combined with continued investments in international sales and engineering, provides the foundation for the company’s efforts to expand its customer base and pursue additional opportunities in the months ahead.
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