Advanced Energy Industries, Inc. (AEIS) Earnings & Analysis

Latest quarter

Advanced Energy reported Q2 FY2026 revenue of $574.1 million, above the $544.3 million consensus, and adjusted earnings of $2.74 per share, above the $2.19 consensus. Revenue rose 30.0% from $441.5 million a year earlier, while diluted EPS rose to $1.28 from $0.67.

The company’s filing attributed semiconductor equipment growth to AI-driven investment and data center growth to hyperscale customer investment and earlier design wins. It also cited recovering demand after customer inventory rebalancing in industrial and medical markets, and AI-related applications in telecom and networking.

Gross margin rose to 41.1% from 37.0%; the filing attributed the improvement to product mix, tariff refunds and higher volume. Operating margin increased to 16.6% from 7.16%, and free cash flow rose to $35.5 million from $17.1 million. On the call, CFO Paul Oldham said gross margin excluding tariff refunds was 40.7%, with higher volume and a favorable mix of new products contributing.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Stephen Kelley said demand strengthened across Advanced Energy’s target markets in the quarter. In data centers, he told analysts that customers had resolved some supply-chain issues, improving his view of second-half revenue. He said new programs with hyperscale customers were ramping, while wins with customers outside the largest hyperscalers were expected to reach volume the following year.

Kelley said the company was developing modular products for 800-volt data centers and expected initial production revenue in late 2027, followed by a more meaningful ramp in 2028. In semiconductor equipment, he said customers had validated yield and throughput benefits from its plasma-power platforms, while system-power wins included process tools and testing applications. He told analysts that the company was ahead of its previously published share-gain plan.

Asked about supply constraints, Kelley said Advanced Energy was building component inventory as lead times extended and maintaining factory staffing to accommodate parts arriving late in a quarter. CFO Paul Oldham said inventory turns had fallen to about 2.5x, while improvements in payables and receivables mitigated the effect on working capital.

On pricing, Kelley said the company first sought to offset supplier increases through alternative sourcing and negotiation, but passed through costs it could not mitigate. Oldham said the goal was to “remain price cost neutral” and pointed to new-product mix, volume and manufacturing efficiency as margin drivers.

For the quarter ahead, Kelley said the company was qualifying data center and semiconductor customers at its new Thailand factory and expected first production revenue there in Q4. Asked about capacity and growth, Oldham said Thailand would support growth into 2027, but the company had not quantified its contribution or allocated it by market.

Guidance

Oldham raised Advanced Energy’s full-year 2026 revenue growth target to the low to mid-30% range from the low to mid-20% range. He also raised the data center revenue growth outlook to at least 50% from the mid-30% range, citing accelerated hyperscale investment and next-generation program ramps.

Oldham said the company now projected 2026 capital spending of $180 million to $195 million, up slightly from its previous outlook, reflecting accelerated investment.