1 Stunning AI Stock Down 21% That Could Boost Your Portfolio

A Closer Look at a Promising Canadian AI Stock

Artificial Intelligence (AI) is becoming increasingly integrated into everyday life, from smartphones and online shopping experiences to complex systems in industries like logistics and healthcare. While many AI stocks are gaining attention, some are quietly working on scalable solutions that could have a lasting impact. One such company is Descartes Systems Group (TSX:DSG), a Canadian firm that has caught the interest of investors for its innovative approach to logistics and supply chain management.

Despite a recent drop of 21% from its 52-week high, DSG stock is currently trading at $140.53 per share with a market cap of $12.1 billion. This decline may present an opportunity for long-term investors who recognize the company's potential.

Strong Performance Amid Economic Uncertainty

Even during challenging economic times, Descartes has shown resilience. In its first quarter of fiscal 2026 (ended April 2025), the company reported a 12% year-over-year increase in revenue to US$168.7 million. The majority of this growth came from its high-margin services business, which accounted for nearly 93% of total revenue. This indicates strong customer retention and continued demand for its services.

On the profitability front, Descartes saw a 12% increase in adjusted EBITDA to US$75.1 million and a 4% rise in net profit to US$36.2 million. Although higher restructuring costs and seasonal softness affected sequential growth, the company ended the quarter with over US$176 million in cash, highlighting its financial strength.

Real-World Applications of AI

What sets Descartes apart is its practical use of AI to solve real-world logistics challenges. Its Route Planner AI Advisor platform uses machine learning to suggest optimal delivery configurations, reducing manual input and improving efficiency. By incorporating real-time GPS data, vehicle type, traffic patterns, and other factors, the system continuously refines its performance.

In the realm of global trade intelligence, Descartes has developed AI-powered tools that automate screening, classification, and risk assessment for cross-border shipping. These tools are particularly valuable as global trade policies and sanctions become more complex.

A Strategic Investment Opportunity

While the market may be focused on more flashy AI stocks, Descartes is building solid long-term value through its recurring revenue model, continuous innovation, and a stock price that remains 21% below its recent peak. For investors looking for a strategic entry point, DSG presents a compelling opportunity.

Considerations Before Investing

Before making any investment decisions, it's essential to evaluate your financial goals and risk tolerance. While the Motley Fool Canada’s Stock Advisor team has identified several top stocks for 2025 and beyond, Descartes Systems Group was not among them. However, the team emphasizes the importance of a well-diversified portfolio and regular updates from analysts.

For those interested in exploring investment opportunities, services like Stock Advisor Canada offer guidance on building a successful portfolio, including two new stock picks each month. Since 2013, the service has outperformed the S&P/TSX Composite Index by 30 percentage points, according to available data.

Investing in the right stocks can lead to significant returns over time, and understanding the fundamentals of companies like Descartes Systems Group is crucial for making informed decisions. Whether you're looking to grow your wealth or explore new opportunities, taking the time to research and analyze potential investments can make all the difference.