One Technologies in the first quarter: a record quarter, but growth quality is still the test
One opened 2026 with record revenue and net profit, but gross margin and operating cash flow weakened versus the comparable quarter. The presentation adds a clearer defense and AI angle, yet the next few quarters need to show whether those engines lift margin and productivity rather than only adding volume.
One Technologies opened 2026 with a very strong headline quarter: NIS 1.327 billion of revenue, NIS 72 million of net profit, and net cash of about NIS 536 million. That still does not close the question around growth quality. Revenue rose 17.5%, but gross profit rose only 6.8%, and gross margin fell to 13.3% from 14.6% in the comparable quarter. What held up operating profit was mainly tight control of selling, marketing, general and administrative expenses, not an expansion in the core business margin. The previous annual coverage framed 2026 around two tests: whether growth had become too labor-intensive, and whether capital allocation would become visible through buybacks, dividends and acquisitions. The first quarter confirms that both tests remain open: One Line is already adding volume, defense and AI receive a larger role in management's presentation, but cash conversion weakened and the company has not yet bought back shares under the plan it approved.
Growth Is Strong, But Margins Make 2026 A Proof Year
The headline numbers look clean. Revenue reached NIS 1.327 billion, operating profit was NIS 95.0 million, and net profit rose to NIS 72.0 million. EBITDA also increased to NIS 127.6 million. This is not an operating weakness story.
The issue is the quality of the improvement. Gross profit increased by only 6.8% against revenue growth of 17.5%, so gross margin fell to 13.3%. Operating margin slipped to 7.2% from 7.5% in the comparable quarter, even though selling, marketing, general and administrative expenses fell to 6.1% of sales from 7.1%. In other words, the expense line protected profitability, but the gross business engine did not expand with the revenue base.
The weaker dollar had a negative revenue effect of a few percentage points, and the infrastructure segment is more exposed because inventory is purchased in dollars and sold in shekels. The company hedges material specific transactions and is working to reduce dollar-linked inventory and commitments, but the quarter is a reminder that FX is not only a finance line. It also affects revenue quality in the segment where hardware and infrastructure remain important.
The Segment Mix Matters More Than The Headline Demand
Growth was not evenly distributed. Technology solutions and services remains the central engine, with revenue up 24.0% to NIS 813.7 million. Business-process outsourcing and support centers jumped 63.3% to NIS 149.9 million, mainly because of One Line consolidation alongside organic growth. Computing and communications infrastructure declined 5.9% to NIS 368.3 million, mainly because of the dollar.
| Segment | Q1 2026 Revenue | Revenue Change | Q1 2026 Operating Margin | What Matters |
|---|---|---|---|---|
| Technology solutions and services | NIS 813.7m | +24.0% | 7.6% | The main growth engine, but margin fell from 8.5% |
| Computing and communications infrastructure | NIS 368.3m | -5.9% | 7.4% | Revenue declined, but profitability improved slightly |
| BPO and support centers | NIS 149.9m | +63.3% | 7.6% | One Line adds volume, but margin fell from 10.3% |
The important point is in BPO. In the first quarter it already looks more meaningful inside the group, but its operating margin fell to 7.6% from 10.3% in the comparable quarter. That does not mean the One Line acquisition was a mistake. It does mean the open question from the end of 2025 has not been closed: can the company turn the enlarged labor base into higher profitability, or does growth now require more people for every shekel of revenue?
Even in technology solutions and services, where management emphasizes organic growth, margin fell. So this quarter is not only proof of demand. It is also a test of whether the company is moving from broad IT services into higher-value activities such as data, AI, cyber, ERP and technology consulting. If those layers do not start showing up in margins, they will remain more of a broader service offering than a clear change in the business economics.
Cash Is High, But The Uses Have Not Gone Away
The balance sheet is still strong. At quarter-end the company held NIS 688.4 million of cash and equivalents plus a NIS 9.1 million short-term deposit, versus short- and long-term credit of NIS 161.5 million. Net cash was about NIS 536.0 million. Covenants are also far away: equity to total assets was 35.7% versus a 16% requirement, and the net debt to EBITDA covenant ratio was negative 1.03 versus a maximum of 3. This is not a financial-pressure story.
Still, the all-in cash picture for the quarter is less clean than the cash balance. Operating cash flow was NIS 86.4 million, down 37.7% from NIS 138.8 million in the comparable quarter. Profit rose, but working capital absorbed more cash: customers and contract assets increased by NIS 47.4 million, inventory increased by NIS 26.6 million, and other receivables increased by NIS 16.5 million. A NIS 106.0 million increase in suppliers supported cash flow and prevented a sharper deterioration. The company also derecognized about NIS 120 million of customer receivables sold to a non-related entity, versus about NIS 92 million in the comparable quarter, so the balance-sheet receivables line is not the full working-capital financing story.
This is where the capital-allocation test begins. In March, the board approved a share-buyback plan of up to NIS 50 million, but no purchases had been made under the plan by the report date. The same month, the company declared a NIS 42.3 million dividend that was paid in April, and in May it declared another NIS 45.5 million dividend. The acquisition of 70% of Strauss Strategy was completed on May 12, and the consideration was fully paid. So the first quarter shows high liquidity, but not yet evidence that excess cash is translating into buybacks, higher earnings per share, or acquisitions that improve margin quality.
Defense And AI Got The Spotlight, The Numbers Still Need To Follow
The first-quarter presentation tries to move the discussion toward three engines: a tense security environment, a weaker dollar, and the AI revolution. The most important spotlight is ONE Defense, which is presented with about NIS 400 million of 2025 revenue, more than 500 employees, and 10 authorized sites for classified activity. The presentation also highlights the Kiryat HaTikshuv project, with a NIS 500 million project scope and 21 years of operation and responsibility, with the first units starting to enter the campus in May 2026. These figures support the view that this is an existing activity, not just a strategic direction.
Still, the defense activity is not a separate reporting segment, and the quarterly report does not break out its contribution to revenue, profit or cash flow. The same applies to AI and data: the presentation shows new projects in core systems, infrastructure, data, AI and support centers, but the report still does not show whether those projects are changing gross margin or labor productivity. So the company enters 2026 from a position of strength, but with a clear test: gross-margin stabilization, a halt to margin erosion in BPO, cash flow that is not mainly supported by expanded supplier credit, and an actual capital-allocation choice between buybacks, dividends and Strauss integration. If those pieces connect, the first quarter will look like a successful start to a proof year. If not, the company can keep growing while the question of whether that growth creates more value per share remains open.
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