While the TSX index is trading near all-time highs, several small-cap stocks have underperformed the broader markets in the last three years. One such TSX tech stock is Tucows (TSX:TC), which is down 77% from its record high.
Valued at a market cap of US$215 million, Tucows provides internet services across three segments:
- Ting delivers fibre and wireless internet.
- Wavelo offers billing, network management, and developer platforms for communication providers.
- Tucows Domains supplies wholesale and retail domain registration through OpenSRS, eNom, Ascio, EPAG, and Hover brands, plus email hosting, security services, and publishing tools to internet service providers and web hosting companies.
Let’s see why I’m bullish on this TSX tech stock right now.
Is this small-cap TSX stock a good buy?
Tucows reported consolidated revenue of US$98.5 million in the second quarter, representing a 10% year-over-year increase. Moreover, it was the fourth consecutive quarter of double-digit top-line expansion for the diversified internet services company.
In the June quarter, Tucows reported an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of US$12.6 million, representing a 37% year-over-year increase. In the first six months of 2025, it reported an adjusted EBITDA of US$26.2 million and is on track to end the year with an EBITDA of US$47 million.
The Domains business continues to deliver steady growth, with revenue rising 8% to US$67.6 million, while adjusted EBITDA increased 12% to US$12.5 million. Gross margin expanded 14% driven by healthy wholesale demand, strong value-added services performance, and steady retail growth.
The company landed two transformative registry services contracts that position Tucows as an infrastructure provider for some of the world’s largest registries. Management also completed the migration of NIXI’s four million domains in May and signed Radix to migrate just over 10 million domains across 11 top-level domains, including .online, .store and .tech, starting in November.
The Radix deal makes Tucows the backend provider for two of the largest registries globally. Wavelo recorded its best quarter since inception with revenue reaching US$12.7 million, up 21% year over year, while adjusted EBITDA surged 37% to US$5.4 million. Growth originated from existing customer subscriber expansion and the introduction of the new EchoStar rate card as part of a four-year renewal.
Management is focusing sales efforts on larger tier-one and tier-two opportunities, while deprioritizing smaller deals where pricing pressure is dominant. The company is leveraging AI tools aggressively, with over 40% of code now written by AI among the most engaged engineers.
Ting delivered 12% revenue growth to US$16.4 million, driven by an 8% increase in subscribers to 52,100 total customers and improved average revenue per user.
The fibre ISP (Internet service provider) business reported an adjusted EBITDA loss of US$600,000 before a non-cash lease adjustment, representing a significant improvement from a US$6.4 million loss in the prior year period.
Management sold nonstrategic assets totalling over US$15 million across three transactions in Arizona and Colorado, accelerating the transformation to a pure-play ISP model.
Corporate net debt declined for the fifth straight quarter to US$190.3 million, with net leverage at 3.14 times and interest coverage at 3.99 times.
What is the TSX stock price target?
Analysts tracking the TSX stock forecast sales to rise from US$368 million in 2024 to US$545 million in 2027. In this period, its free cash flow (FCF) is forecast to expand from US$19.50 million to US$45.6 million. If the Canadian stock is priced at 10 times forward FCF, it should more than double over the next 18 months.
While Tucows has underperformed its tech peers in the last four years, it is well-positioned to deliver outsized returns to investors in the next 12-18 months.
