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    AEIS
    Earnings call· Mar 2026(Q1 FY26)

    ADVANCED ENERGY INDUSTRIES Q1 FY26 earnings call AEIS

    May 4, 2026 Source

    Executive summary

    Advanced Energy Q1 FY26 — Record Data Center Revenue and Raised Full-Year Outlook

    Advanced Energy delivered a strong Q1 FY26, surpassing revenue guidance with record data center performance and achieving a 40.1% gross margin, the highest since 2019. The company raised its full-year revenue growth target to the low to mid-20% range, driven by strengthening demand across all markets, particularly semiconductor and data center. While Q2 data center revenue is expected to moderate due to customer-specific downstream constraints, the company is proactively managing inventory and capacity to capitalize on anticipated second-half growth and long-term opportunities, including the 800-volt transition and new semiconductor products.

    Highlights

    5

    • Q1 revenue of $511 million exceeded the midpoint of guidance, driven by record data center revenue.

    • Total revenue increased 26% year-over-year.

    • Non-GAAP gross margin reached 40.1%, the highest level since the Artesyn acquisition in 2019.

    • Non-GAAP earnings per share were $2.09, exceeding guidance and up 70% year-over-year.

    • Full-year 2026 revenue growth target raised from high teens to low to mid-20% range, with data center revenue growth expectation raised to mid-30% range.

    Concerns

    3

    • Industrial Medical revenue was down 8% sequentially due to factory prioritization to meet demand in other markets.

    • Data center demand volatility is expected to limit Q2 revenue sequentially.

    • Supply and cost challenges have begun to surface, including tightening supply and increasing input costs.

    Guidance & targets

    17
    CategoryTargetConfidence
    Q2 FY26 Revenue
    $540 million, plus or minus $20 million
    high materiality
    High
    Q2 FY26 Gross Margin
    improve 20 to 50 basis points sequentially
    medium materiality
    High
    Q2 FY26 Operating Expenses
    $112 million to $114 million
    medium materiality
    High
    Q2 FY26 Other Income
    approximately $1 million
    low materiality
    High
    Q2 FY26 Non-GAAP Tax Rate
    16% to 17%
    low materiality
    High
    Q2 FY26 Non-GAAP EPS
    $2.18 and plus or minus $0.25
    high materiality
    High
    Full-year 2026 Revenue Growth
    low to mid-20s
    high materiality
    High
    Full-year 2026 Semiconductor Revenue Growth (2H)
    up over 30% from the prior year
    medium materiality
    High
    Full-year 2026 Data Center Revenue Growth
    mid-30s
    high materiality
    High
    Full-year 2026 Industrial Medical Revenue Growth
    revenue growth throughout the year
    medium materiality
    Medium
    Full-year 2026 Earnings Growth
    meaningfully faster than revenue
    high materiality
    Medium
    Full-year 2026 CapEx
    $170 million to $180 million
    medium materiality
    High
    Full-year 2026 Free Cash Flow
    at or above '25 levels
    medium materiality
    Medium
    Long-term Gross Margin
    greater than 43%
    high materiality
    High
    Long-term Revenue Generating Capacity (current network)
    over $2.5 billion
    medium materiality
    High
    Long-term Revenue Generating Capacity (with Thailand)
    over $3.5 billion
    medium materiality
    High
    Full-year 2026 Operating Expenses
    $460 million range
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Semiconductor
    Customer forecasts strengthened considerably, expected to drive record performance in 2026 and continued growth in 2027. Benefiting from widespread customer acceptance of EBOs Everest and NavX plasma power technologies and an uptick in system power products.
    		$219 millionflattish4%—
    Data Center Computing
    Delivered record revenue. Overall demand remains very strong. Expect second half revenue to be stronger than first half. Secured multiple new wins with second wave data center customers.
    		$194 million102%9%—
    Industrial Medical
    Revenue was down sequentially due to factory prioritization for other markets. Demand is strengthening, with bookings reaching the highest level since 2023. Secured multiple wins in therapeutic, diagnostic, life science, test and measurement, factory automation, and battery backup applications.
    Bookings: 14% sequential increase
    		$72 million12%-8%—
    Telecom and Networking
    Revenue grew to its highest level since 2023, driven by production ramp of several AI-related wins.
    		$25 million16%17%—

    Operational metrics

    24
    Non-GAAP Gross Margin
    40.1%up 40 bps QoQ, up 220 bps YoY
    Q1 FY26

    Highest level since Artesyn acquisition in 2019, driven by better product mix and lower other cost of sales.

    Non-GAAP Operating Income
    $98 million
    Q1 FY26

    Record operating income.

    Non-GAAP Operating Margin
    19.1%up 560 bps YoY
    Q1 FY26

    Result of solid operating leverage.

    Adjusted EBITDA
    $108 millionup 66% YoY
    Q1 FY26

    Record adjusted EBITDA.

    Non-GAAP Tax Rate
    14.5%
    Q1 FY26

    Below target, mainly due to timing of discrete tax items.

    Non-GAAP EPS
    $2.09up from $1.94 QoQ, up from $1.23 YoY
    Q1 FY26

    Exceeded guidance.

    Cash and investments balance
    $700 million
    Q1 FY26

    Total cash and cash equivalents.

    Net cash
    $131 million
    Q1 FY26

    Net cash position.

    Inventory increase
    $48 million
    Q1 FY26

    Mostly in critical piece parts to support growth and improve supply resiliency.

    Inventory days
    135up 10 days
    Q1 FY26

    Increased to support growth and improve supply resiliency.

    Inventory turns
    2.7x
    Q1 FY26

    Corresponding to inventory days.

    DPO
    80%up from 68% QoQ
    Q1 FY26

    Increased from Q4.

    DSO
    66up 6 days QoQ
    Q1 FY26

    Increased on higher revenue.

    CapEx
    $37 million
    Q1 FY26

    Invested in capacity and capability across factory network.

    Dividends paid
    $3.8 million
    Q1 FY26

    Paid during the quarter.

    Common stock repurchased average price
    $209.6
    Q1 FY26

    Average price per share.

    Operating expenses
    $107 milliondown slightly QoQ, up 9% YoY
    Q1 FY26

    At the low end of target range, well below half of revenue growth rate.

    Other income
    breakevenversus $1 million in Q4
    Q1 FY26

    Mainly due to higher realized FX losses.

    Diluted share count
    40.6 million
    Q2 FY26

    Used for Q2 EPS guidance.

    Semiconductor 2H revenue growth
    over 30%from prior year
    2H FY26

    Expected acceleration in the second half.

    Data Center full year revenue growth
    mid-30sraised from over 30%
    FY26

    Raised outlook despite moderating Q2.

    Industrial Medical bookings growth
    14%sequentially
    Q1 FY26

    Reached highest level since 2023.

    Revenue generating capacity (current network)
    over $2.5 billion
    Exiting FY26

    Expected from investments in Malaysia, Philippines, and Mexico.

    Revenue generating capacity (with Thailand)
    over $3.5 billion
    Once fully built out

    Total capacity including the new Thailand facility.

    Industry KPIs

    9
    MetricValueDetails
    Orders book to bill14% sequential increase%
    Segment revenue growthSemiconductor: $219M; Data Center: $194M; Industrial Medical: $72M; Telecom & Networking: $25MUSD
    Content per device per vehicleincreased dollar content per rack
    Design wins product cycle rampswidespread customer acceptance
    Order visibility backlog policyrobust
    Supply demand imbalance lead timesdownstream constraints
    Capacity expansion internal sourcingover $2.5 billionUSD
    End market revenue mix organic growthSemiconductor: $219M; Data Center: $194M; Industrial Medical: $72M; Telecom & Networking: $25MUSD
    Operating margin incremental leverage19.1%%

    Orderbook & backlog

    2
    Industrial Medical bookings14% sequential increaseQ1 FY26

    Reached highest level since 2023.

    Semiconductor backlogrobustQ1 FY26

    Management is very happy with the backlog.

    Product announcements

    2
    ProductTypeDetails
    EBOs Everest and NavX plasma power technologiesupdate
    800-volt solutionsroadmap

    Capital programs

    2
    Capacity expansion (Malaysia, Philippines, Mexico)underway
    Spent to date: underway

    Benefit: over $2.5 billion in revenue generating capacity

    Executing plans in response to strong demand environment. Expected to be at this capacity run rate exiting the year.

    Thailand factory build-outunderway
    Period spend: initial investments in 2026 CapEx
    Start: late 2026

    Benefit: over $1 billion in additional revenue generating capacity (total over $3.5 billion)

    New 500,000 square foot facility. Initial production slated for late 2026 or early 2027, with qualification builds for semiconductor and data center products kicking off this quarter. Investments pulled forward due to strength in data center and semiconductor.

    Risks & headwinds

    3
    Downstream constraints affecting customer demand mix in Data CenterQ2 FY26

    demand volatility to limit revenue in Q2

    Mitigation: Building inventory to respond quickly to changes in demand; customers working to address their supply constraints.

    Supply and cost challengesFull year 2026

    tightening in supply and increasing input costs

    Mitigation: Well prepared to navigate dynamic environment; proactive inventory management and developing second sources for components.

    Factory prioritization impacting Industrial Medical outputQ1 FY26, catching up in Q2 and Q3 FY26

    Industrial Medical revenue down 8% sequentially

    Mitigation: Management giving personal attention to ensure catch-up on production; robust backlog provides clear demand signals.

    What to watch in Q2 FY26

    5

    Data Center revenue growth

    H2 FY26
    CurrentQ2 moderating sequentially
    TargetSequential growth in H2 FY26

    Why it matters

    Indicates resolution of customer downstream constraints and overall market strength, validating the full-year outlook.

    While demand remains high, we continue to experience frequent customer changes in demand mix due to various downstream constraints. While we expect this demand volatility to limit revenue in Q2, we anticipate the ramp of several programs to support a stronger second half.

    Q&A highlights

    6

    How is qualification and uptake progressing for new semiconductor products (Everest, EVOS, NAVEX) at leading edge and other nodes, and what milestones are being watched?

    The company is seeing significant uptake of its leading-edge technologies (Everest, EVOS, NAVEX) due to improved yield and throughput. Customers are extending these improvements to other nodes and device types. Meaningful revenue from these new products is expected to start late 2026 and accelerate into 2027 and 2028.

    “we're winning every battle that we're engaged in. So we're in a very good spot. And so what these customers see the improvements we can bring at the leading edge, they want to see those same improvements at some of the other nodes they operate at.”

    asked by Jacob Moore · answered by Stephen Kelley

    2 min read5 chapters

    Detailed Narrative

    01

    Gross Margin Expansion and Efficiency Gains

    Advanced Energy achieved a non-GAAP gross margin of 40.1% in Q1 FY26, marking the highest level since the Artesyn acquisition in 2019. This improvement was attributed to a better product mix and lower other cost of sales, highlighting structural improvements in operational efficiency and product portfolio. Management expressed confidence in further expanding gross margins, with a long-term goal of exceeding 43% as higher-margin new products ramp to volume and manufacturing efficiency continues to improve.

    02

    Strategic Capacity Expansion Initiatives

    The company is actively expanding its manufacturing capacity to meet strong demand. Investments in existing facilities in Malaysia, the Philippines, and Mexico are underway, projected to enable over $2.5 billion in revenue-generating capacity by the end of FY26. Additionally, Advanced Energy is accelerating the build-out of a new 500,000 square foot facility in Thailand, with initial production slated for late FY26 or early FY27, which will add over $1 billion in capacity, bringing the total to over $3.5 billion once fully built out.

    03

    Semiconductor Market Strength and New Product Adoption

    The semiconductor segment saw customer forecasts strengthen considerably, leading to expectations of record performance in FY26 and continued growth in FY27. The company is experiencing widespread customer acceptance of its EBOs Everest and NavX plasma power technologies, which improve throughput and yield at the leading edge. These technologies are also seeing wider adoption across multiple process generations and device types, with meaningful revenue contribution expected from late FY26 into FY27 and FY28.

    04

    Data Center Momentum and Next-Gen Solutions

    Data Center Computing delivered record revenue in Q1 FY26, with overall demand remaining very strong. Advanced Energy is making solid progress on next-generation 800-volt solutions, sampling them to key customers. These solutions offer high efficiency (around 98%), power density, and reliability, and are expected to increase dollar content per rack. Initial production revenue for 800-volt solutions is anticipated mostly in FY27, with multiple new wins secured with second-wave data center customers expected to ramp production in FY27.

    05

    Industrial Medical Market Recovery and M&A Strategy

    The Industrial Medical market is showing signs of recovery, with bookings increasing 14% sequentially to their highest level since 2023. Demand is strengthening across test and measurement, aerospace and defense, factory automation, robotics, and AI-related applications. The company is actively pursuing M&A opportunities to expand its breadth in the fragmented Industrial Medical market, noting that valuation mismatches are beginning to close, which could facilitate an acquisition in the near future.

    AI-generated summary of the company’s earnings call. Not investment advice.