Data Storage Corp Posts $16.8M Net Income on Cloud Business Sale

TL;DR

**DTSTW's massive net income is a one-time gain from selling its cloud business; the real story is their pivot to AI and GPU IaaS, which is a high-risk, high-reward bet.**

AI Summary

Data Storage Corp (DTSTW) reported a significant turnaround, achieving a net income of $16,778,342 for the three months ended September 30, 2025, a substantial increase from $123,526 in the same period of 2024. This surge was primarily driven by a $17,471,290 gain on the sale of its Cloud Solutions Business, which was classified as a discontinued operation. Despite this, continuing operations, primarily Nexxis Inc.'s telecommunications services, posted a loss of $1,313,172 for the nine months ended September 30, 2025, though this was an improvement from a $2,016,109 loss in the prior year. Sales from continuing operations increased to $1,057,651 for the nine months ended September 30, 2025, up from $899,135 in 2024, representing an 18% growth. The company's total assets nearly doubled to $47,677,690 as of September 30, 2025, from $25,280,215 at December 31, 2024, largely due to a massive increase in marketable securities to $45,471,979. Cash and cash equivalents, however, decreased to $284,714 from $1,070,097. The strategic shift focuses on high-growth technology sectors like GPU IaaS and AI-driven software, moving away from its former cloud solutions business.

Why It Matters

This filing reveals a pivotal strategic shift for Data Storage Corp, moving from a cloud solutions provider to a focused investor in high-growth tech sectors like AI and GPU IaaS. The substantial gain from the discontinued operation provides a significant capital injection, which could fuel future investments and acquisitions, potentially transforming the company's competitive landscape. Investors should note the underlying loss from continuing operations, as the company's future profitability hinges on the success of its new strategic direction and the performance of its Nexxis subsidiary. Employees and customers of the divested Cloud Solutions Business will transition to the new owner, while those at Nexxis will continue under the new strategic focus.

Risk Assessment

Risk Level: medium — The risk level is medium because while the company reported a significant net income of $16.8 million due to the sale of its Cloud Solutions Business, its continuing operations (Nexxis Inc.) still incurred a loss of $1,313,172 for the nine months ended September 30, 2025. The company is also pivoting into new, high-growth technology sectors like GPU IaaS and AI, which inherently carry higher market and execution risks.

Analyst Insight

Investors should closely monitor Data Storage Corp's capital allocation strategy following the $17.5 million gain from the discontinued operation. Evaluate the performance of the Nexxis subsidiary and any new investments in GPU IaaS and AI for concrete revenue and profit generation, as the current net income is largely non-recurring.

Financial Highlights

debt To Equity

0.21

revenue

$1,057,651

operating Margin

N/A

total Assets

$47,677,690

total Debt

N/A

net Income

$16,778,342

eps

N/A

gross Margin

N/A

cash Position

$284,714

revenue Growth

+18%

Revenue Breakdown

Key Numbers

• $16.8M — Net income (for the three months ended September 30, 2025, primarily from discontinued operations)
• $17.5M — Gain on sale of discontinued operation (net of tax, for the three and nine months ended September 30, 2025)
• $47.7M — Total assets (as of September 30, 2025, up from $25.3M at December 31, 2024)
• $45.5M — Marketable securities (as of September 30, 2025, a significant increase from $11.3M at December 31, 2024)
• $1.06M — Sales from continuing operations (for the nine months ended September 30, 2025, up 18% from $0.9M in 2024)
• $1.31M — Loss from continuing operations (for the nine months ended September 30, 2025)
• $284,714 — Cash and cash equivalents (as of September 30, 2025, down from $1,070,097 at December 31, 2024)
• 7,498,358 — Common stock shares outstanding (as of November 18, 2025)

Key Players & Entities

• Data Storage Corp (company) — registrant
• CloudFirst Technologies Corporation (company) — subsidiary sold as discontinued operation
• CloudFirst Europe Ltd. (company) — subsidiary sold as discontinued operation
• Nexxis Inc. (company) — continuing operations subsidiary
• Nasdaq Capital Market (regulator) — exchange where DTSTW is listed
• FASB (regulator) — Financial Accounting Standards Board
• SEC (regulator) — Securities and Exchange Commission
• GPU Infrastructure-as-a-Service (company) — new strategic focus area
• AI-driven software applications (company) — new strategic focus area

FAQ

Risk Factors

• Marketable Securities Concentration [high — financial]: The company's assets are heavily concentrated in marketable securities, which increased to $45,471,979 as of September 30, 2025. This significant exposure to market fluctuations poses a risk to the company's financial stability.
• Declining Cash Position [medium — financial]: Cash and cash equivalents have decreased substantially to $284,714 as of September 30, 2025, from $1,070,097 at December 31, 2024. This reduction in liquidity could impact the company's ability to meet short-term obligations.
• Dependence on Continuing Operations [medium — operational]: The company's continuing operations, primarily Nexxis Inc.'s telecommunications services, posted a loss of $1,313,172 for the nine months ended September 30, 2025. The profitability of these operations is crucial for the company's future performance.
• Transition to New Business Focus [medium — strategic]: The company is undergoing a strategic shift towards high-growth technology sectors like GPU IaaS and AI-driven software. This transition involves inherent risks associated with entering new markets and divesting existing businesses.

Industry Context

Data Storage Corp operates in the technology sector, with a stated focus on high-growth areas like GPU IaaS, AI-driven software, cybersecurity, and telecommunications. The company is strategically shifting away from its former cloud solutions business to concentrate on these emerging technologies. This pivot suggests an ambition to capitalize on rapid advancements and increasing demand in specialized tech niches.

Regulatory Implications

The company's financial reporting adheres to U.S. GAAP and SEC regulations, as evidenced by its 10-Q filing. The classification of the Cloud Solutions Business as discontinued operations follows specific accounting rules. Future regulatory considerations may arise as the company invests in and potentially expands its operations in AI and GPU IaaS sectors.

What Investors Should Do

1. Monitor performance of continuing operations (Nexxis Inc.)
2. Analyze the strategy and execution in new tech sectors
3. Assess the risk associated with marketable securities
4. Evaluate the company's liquidity

Key Dates

• 2025-09-11: Closing of Cloud Solutions Business Sale — This event generated a significant gain of $17,471,290, contributing to the company's net income for the period and marking a strategic divestiture.
• 2025-09-10: Shareholder Approval for Cloud Solutions Business Sale — Indicated shareholder support for the strategic shift away from the cloud solutions business.
• 2025-07-11: Definitive Agreement to Sell Cloud Solutions Business — Initiated the process of divesting the cloud solutions business, signaling a major strategic pivot.
• 2025-09-30: End of Q3 2025 — Reporting period for the 10-Q, showing a significant net income driven by the sale of discontinued operations and a large increase in marketable securities.

Glossary

Discontinued Operations

A component of a business that the reporting entity has disposed of or classified as held for sale, and that represents a separate major line of business or geographical area of operations. (The gain on the sale of the Cloud Solutions Business, classified as discontinued operations, significantly impacted the company's net income for the period.)

Marketable Securities

Financial instruments that are easily bought or sold on a public exchange, such as stocks and bonds. (A substantial increase in marketable securities to $45,471,979 represents a significant portion of the company's assets and a key area of investment.)

Continuing Operations

The ongoing business activities of a company that are not classified as discontinued operations. (The financial performance of continuing operations, primarily Nexxis Inc., is important for assessing the underlying health of the company's core business.)

GPU Infrastructure-as-a-Service (IaaS)

A cloud computing service that provides virtualized computing resources, specifically graphics processing units (GPUs), over the internet. (This is identified as a target high-growth technology sector for Data Storage Corp's future strategic investments.)

Year-Over-Year Comparison

Compared to the prior year's filing (likely the 2024 10-K or prior 10-Q), Data Storage Corp has undergone a significant transformation. The most striking change is the substantial net income of $16.8M for the three months ended September 30, 2025, primarily driven by the $17.5M gain on the sale of its Cloud Solutions Business, a stark contrast to the prior period's results. While continuing operations remain in a loss position ($1.31M for nine months), this loss has narrowed from the previous year. Total assets have nearly doubled, largely due to a massive increase in marketable securities, while cash reserves have dwindled significantly, indicating a strategic reallocation of capital.

Key Financial Figures

• $0.001 — ch registered Common Stock, par value $0.001 per share DTST The Nasdaq Capital M

Filing Documents

• e7018_10q.htm (10-Q) — 841KB
• e7018_ex31-1.htm (EX-31.1) — 12KB
• e7018_ex31-2.htm (EX-31.2) — 12KB
• e7018_ex32-1.htm (EX-32.1) — 5KB
• e7018_ex32-2.htm (EX-32.2) — 5KB
• 0001731122-25-001568.txt ( ) — 4505KB
• dtst-20250930.xsd (EX-101.SCH) — 36KB
• dtst-20250930_cal.xml (EX-101.CAL) — 52KB
• dtst-20250930_def.xml (EX-101.DEF) — 120KB
• dtst-20250930_lab.xml (EX-101.LAB) — 313KB
• dtst-20250930_pre.xml (EX-101.PRE) — 256KB
• e7018_10q_htm.xml (XML) — 631KB

Financial Statements

Financial Statements Condensed Consolidated Balance Sheets as of September 30, 2025, and December 31, 2024 (unaudited) 1 Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2025, and 2024 (unaudited) 2 Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and nine months ended September 30, 2025, and 2024 (unaudited) 3 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025, and 2024 (unaudited) 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16 Item 3. Quantitative and Qualitative Disclosures About Market Risk 21 Item 4. Control and Procedures 21 PART II- OTHER INFORMATION 22 Item 1. Legal Proceedings 22 Item 1A. Risk Factors 22 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24 Item 3. Defaults Upon Senior Securities 24 Item 4. Mine Safety Disclosures 24 Item 5. Other Information 24 Item 6. Exhibits 25 DATA STORAGE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, 2025 December 31, 2024 ASSETS Current Assets: Cash and cash equivalents $ 284,714 $ 1,070,097 Accounts receivable, net of allowance for expected credit losses of $ 648 and $ 767 , respectively 74,035 59,018 Escrow funds receivable 1,500,000 — Marketable securities 45,471,979 11,261,006 Prepaid expenses and other current assets 127,778 118,538 Current assets of discontinued operations — 2,907,404 Total current assets 47,458,506 15,416,063 Property and equipment, net 4,545 6,077 Other long-term assets 214,639 137,077 Non-current assets of discontinued operations — 9,720,998 Total assets 47,677,690 25,280,215 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accr

Financial Statements

Financial Statements. 3 DATA STORAGE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025, AND 2024 (Unaudited) Preferred Stock Common Stock Additional Paid-in Accumulated Non-Controlling Total Stockholders' Shares Amount Shares Amount Capital Deficit Interest Equity Balance January 1, 2024 — $ — 6,880,460 $ 6,881 $ 39,490,285 $ ( 19,505,803 ) - $ ( 236,948 ) $ 19,754,415 Stock options exercised — — 45,097 45 88,687 — — 88,732 Stock-based compensation — — 88,816 88 564,712 — — 564,800 Net income (loss) — — — — — 235,259 - ( 12,434 ) 222,825 Balance, September 30, 2024 — $ — 7,014,373 $ 7,014 $ 40,143,684 $ ( 19,270,544 ) - $ ( 249,382 ) $ 20,630,772 Preferred Stock Common Stock Shares Amount Shares Amount Additional Paid-in Capital Accumulated Deficit Accumulated other comprehensive loss Non-Controlling Interest Total Stockholders' Equity Balance January 1, 2025 — $ — 7,045,108 $ 7,045 $ 40,417,813 $ ( 18,982,589 ) $ ( 23,214 ) $ ( 247,090 ) $ 21,171,965 Stock options exercised — — 195,651 196 412,578 — — — 412,774 Stock-based compensation — — 224,547 225 1,596,922 — — — 1,597,147 Other comprehensive loss — — — — — — 8,979 — ( 78,250 ) Net income (loss) — — — — — 16,779,013 — 2,725 16,778,342 Balance, September 30, 2025 — $ — 7,465,306 $ 7,466 $ 42,427,313 $ ( 2,912,547 ) $ ( 14,235 ) $ ( 244,365 ) $ 39,263,632 The accompanying notes are an integral part of these condensed consolidated Financial Statements. 4 DATA STORAGE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED (Unaudited) Nine Months Ended September 30, 2025 2024 Cash Flows from Operating Activities: Loss from continuing operations $ ( 1,313,172 ) $ ( 2,016,109 ) Net income from discontinued oper

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS (Unaudited) Note 1 – Basis of Presentation, Organization and Other Matters Headquartered in New York, NY Data Storage Corporation ("DSC" or the "Company") is focused on strategic investments and supporting businesses in high-growth technology sectors, including, but not limited to, GPU Infrastructure-as-a-Service (IaaS), AI-driven software applications, cybersecurity and telecommunications. On July 11, 2025, the Company entered into a definitive agreement to sell its cloud solutions business, comprised of its CloudFirst Technologies Corporation and CloudFirst Europe Ltd. subsidiaries (the "Could Solutions Business"). The sale was approved by shareholders on September 10, 2025, and the transaction officially closed on September 11, 2025. As described in Note 3, the Cloud Solutions Business has been classified as a discontinued operation. The Company's continuing operations consist of the operations of Nexxis Inc. ("Nexxis") subsidiary, which provides voice and data telecommunications solutions. Unless otherwise noted, the following footnotes pertain to the Company's continuing operations. These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods presented. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in its Annual Report on Form 10

View Full Filing

View this 10-Q filing on SEC EDGAR