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MELVILLE, N.Y. - Data Storage Corporation (NASDAQ:DTST) has completed the sale of its CloudFirst subsidiary as part of a strategic shift toward high-growth technology markets, the company announced Wednesday. The microcap company, with a market capitalization of approximately $29.5 million, is trading near $4.06 per share.
The transaction generated a gain of approximately $17.5 million net of tax, according to the company's third-quarter financial results. Data Storage reported that the sale provides capital to invest in areas including GPU Infrastructure-as-a-Service, AI applications, cybersecurity, and telecommunications. InvestingPro data shows the company holds more cash than debt on its balance sheet, with a strong current ratio of 5.5.
"This quarter represents a defining period for Data Storage Corporation as we completed the sale of our CloudFirst subsidiary and repositioned the Company for its next phase of disciplined growth," said Chuck Piluso, Chairman and Chief Executive Officer, in a press release statement.
Following the divestiture, Data Storage reported cash and marketable securities of approximately $45.8 million as of September 30, 2025. The company's remaining Nexxis subsidiary continues to operate as a source of recurring revenue. According to InvestingPro analysis, DTST is trading slightly below its Fair Value, with a financial health rating of "GOOD" based on its overall score.
For the third quarter, Data Storage posted net income of $16.8 million, primarily driven by the CloudFirst sale. Revenue from continuing operations reached $417,000, representing a 28.2% increase compared to the same period in 2024.
The company's operating loss from continuing operations widened to $1.1 million from $840,000 in the prior-year quarter, reflecting increased selling, general and administrative expenses.
Data Storage has scheduled a conference call for 10:00 a.m. Eastern Time on Wednesday to discuss the transaction and its strategic outlook.
In other recent news, Data Storage Corporation has completed the sale of its CloudFirst business to Performive, a cloud infrastructure provider backed by Renovus Capital Partners. This transaction, finalized on September 11, generated approximately $40 million in gross proceeds, with an estimated $24 million in net proceeds after fees and adjustments. Following this sale, Data Storage Corp repurchased warrants issued in July 2021, paying $2,049,388 to reacquire warrants exercisable for 858,750 shares of common stock. This buyback was conducted under the fundamental transaction provision of the 2021 warrants, triggered by the sale of the CloudFirst subsidiary.
Maxim Group has downgraded Data Storage Corporation's stock rating from Buy to Hold. The downgrade reflects uncertainty surrounding the company's strategic direction after the major divestiture of its CloudFirst subsidiary, which was a significant revenue source. Additionally, Data Storage Corp has issued supplemental disclosures regarding its proposed divestiture of its cloud solutions business. This action follows requests from shareholders for more detailed financial analyses related to the transaction, specifically those prepared by Cassel Salpeter & Co., LLC, the company's financial advisor. These recent developments are significant for investors monitoring Data Storage Corporation's strategic changes.
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