Hidden within One Stop Systems' recent earnings call lies a tantalizing hint about their future - a hint that might have slipped past even the keenest Wall Street analysts. It's not the impressive billion-dollar pipeline or the growing gross margins, though those are certainly noteworthy. No, the real revelation lies in a subtle shift in their revenue model, a shift that points to an imminent surge in what OSS calls "customer funded development" projects.

This isn't just a technicality. It's a potential game-changer for OSS, indicating that major players in both the defense and commercial sectors are increasingly tapping OSS's expertise to create bespoke, highly integrated AI solutions. Think of it as a behind-the-scenes arms race, where companies are vying to leverage OSS's cutting-edge technology to gain a strategic advantage in the AI-driven future.

Historically, OSS's bread and butter was selling more standardized compute, storage, and switching systems. These were essentially off-the-shelf solutions, powerful and ruggedized, but still components within a larger system. Customer funded development, however, suggests a move towards full-fledged AI platform solutions. In these partnerships, OSS isn't just supplying the hardware; they're deeply embedded in the design and development process, creating tailor-made AI ecosystems for their clients.

What makes this so significant? First, it establishes OSS as an indispensable partner, deeply ingrained in its clients' long-term AI strategies. Second, it shifts OSS's revenue model from one-off sales to recurring, multi-year contracts, creating a predictable and stable income stream. And third, it points to a rapidly accelerating demand for edge-based AI solutions, a demand OSS is uniquely positioned to capitalize on.

The numbers tell a compelling story. While the exact revenue figures for customer funded development haven't been disclosed yet, Mike Knowles, OSS's CEO, stated that they expect to see this revenue stream "grow throughout 2024." This is more than just a passing comment. It's a clear signal that OSS anticipates a substantial increase in these projects, a surge driven by the burgeoning demand for ruggedized, edge-based AI solutions.

Consider the recent announcements:

<ul>

<li>A multi-year program with Leidos' Dynetics to power a specialized mobile AI signal collection application.</li>

<li>A pilot project for a liquid immersion cooled data storage system for a deployable ground station.</li>

<li>A development contract with Daimler Truck partner Torc Robotics.</li>

</ul>

These are not isolated incidents. They are harbingers of a broader trend, a sign that OSS is becoming the go-to partner for companies seeking to deploy AI in the most challenging and demanding environments.

Hypothetical Revenue Projection with Customer Funded Development

Based on Mike Knowles' statement about customer funded development revenue growing "throughout 2024," let's assume a conservative estimate of a 10% contribution to OSS's revenue by the end of the year. With projected Q1 revenue at $12.5 million and sequential growth throughout the year, a 10% contribution from customer funded development could translate to an additional $5 million to $7 million in revenue for 2024. This is on top of their existing revenue base, suggesting a potentially explosive growth trajectory for OSS.

Of course, challenges remain. The defense sector, a key market for OSS, is notorious for its lengthy procurement cycles and the ever-present threat of budget cuts. And competition is heating up, with established players like <a href="https://www.mrcy.com/" alt="Mercury Systems">Mercury Systems</a> and <a href="https://www.curtisswrightds.com/" alt="Curtiss-Wright">Curtiss-Wright</a> also vying for a slice of the ruggedized AI pie.

But here's the thing: OSS has a unique advantage. They have a proven track record of delivering high-performance, ruggedized solutions. They have a deep understanding of the demanding requirements of edge-based AI deployments. And perhaps most importantly, they have a clear vision for the future, a vision that sees them at the forefront of the "AI Transportable" revolution.

So, keep your eye on One Stop Systems. While they may not be a household name yet, they are quietly positioning themselves to become a dominant force in the rapidly evolving world of AI. And if their bet on customer funded development pays off, it could be a very profitable ride for early investors.

"Fun Fact: Did you know that One Stop Systems is a major supplier to the Raytheon P-8 Poseidon [https://www.raytheonintelligenceandspace.com/capabilities/products/p-8a-poseidon] program, providing critical compute and storage systems for this advanced maritime patrol aircraft? It's just one example of how OSS's technology is being used to power some of the most sophisticated and demanding applications in the world."