Cognex (CGNX) Q2 FY26 earnings call: guidance and Q&A

What is driving the current data center opportunity, given its prior existence, and how are new products like OneVision enabling this growth?

The data center market is experiencing aggressive build-out of new AI-oriented facilities, driving demand for Cognex vision in component manufacturing, assembly, and deployment. The majority of current revenue is from quality assurance and visual inspection for componentry. AI-enabled technologies like OneVision are crucial for solving complex inspections with hundreds of points and fine features, which were not technically feasible a few years ago. The opportunity is still nascent but aligned with powerful secular trends.

“What's changed, obviously, is a very aggressive build-out of new facilities and in particularly, very high-tech AI-oriented facilities that are placing demands on the supply chain that are driving demand for Cognex vision.”

asked by Joe Ritchie · answered by Matt Moschner

Will OpEx continue to be down year-over-year through the second half of FY26, given strong organic growth?

Yes, OpEx is expected to remain well below prior year levels and also below first-half levels, in line with the $35 million net cost reduction target. This reflects strong execution of cost reduction initiatives and contributes to the high revenue flow-through (100% in Q2, 87% for full year midpoint). The focus is shifting from cost reduction to productivity optimization with existing resources.

“So in short, yes, we definitely expect OpEx to stay well below prior year's levels. And also in the second half also below the first half.”

asked by Joe Ritchie · answered by Dennis Fehr

Which demos at the Automate Show generated the strongest customer reactions, and how is that translating into pipeline and deal ASP?

The strongest reactions were to the latest generation of AI tools running on embedded systems (OneVision, In-Sight 3900, 6900) within the In-Sight Vision suite. Specifically, complex PCBA inspections using the 3900 and nuanced defect detection on highly variable art pieces with the 6900 resonated well. These AI advancements are solving problems previously not technically feasible with machine vision, driving strong demand and pricing commensurate with the ROIs.

“I'm not sure we could have solved these problems a couple of years ago without technologies like OneVision.”

asked by Tomohiko Sano · answered by Matt Moschner

Beyond net customer adds, what KPIs are available for win rates or conversion speed, and what is the outlook for hiring additional sales personnel?

The company is happy with new customer acquisition, particularly in packaging. The focus is shifting to 'land and expand' by better understanding customer potential and directing resources. While significant investment was made in direct sales over the last five years, the expectation is not to continuously hire new sales staff. Instead, the company is revitalizing its channel partner program (resellers, SIs, machine builders, services partners) to drive productivity and diversify the growth basis, complementing direct sales.

“But I would say, at the same time, our expectation is not necessarily to continue to invest in that area as we expand our customer count.”

asked by Tommy Moll · answered by Matt Moschner

What has changed to give Cognex the confidence and visibility to issue full-year guidance for the first time alongside Q2 results?

The decision to issue full-year guidance stems from strong demand across most end markets, leading to increased outlooks. While Cognex remains a short-cycle company with 3-4 months visibility, there is good visibility into a significant portion of the remaining five months of the year. This is part of an effort to enhance investor communications and transparency, despite some remaining uncertainties like memory prices and year-end demand.

“But nevertheless, we felt as part of our efforts over the last 1.5 years to enhance investor communications and being as transparent as forthcoming as we are, we felt like that we want to provide that view if we are able to.”

asked by Joseph Giordano · answered by Dennis Fehr

How does Cognex balance the expectation of slowing consumer electronics volumes due to memory price increases with new data center business and internal growth efforts?

While memory price increases are a risk, Cognex is not yet seeing evidence of downward pressure on demand from electronics customers. The growth plan in electronics is multifaceted, including shifts in supply chain locations (out of China), technology developments enabling deeper penetration into 2D inspection, and broadening the customer base with new entrants. Historically, end-user demand is only one factor; changes in production, new form factors, and technology adoption are larger drivers for electronics demand.

“I know it's certainly a risk we're thinking about, but I would say it's not one we're really seeing evidence of playing out in the business today, meaning higher memory prices putting downward pressure on demand for automation with our electronics customers.”

asked by Jacob Levinson · answered by Matt Moschner

Does the data center server rack inspection, which appears more station-based, represent a shift from Cognex's traditional focus on online, high-speed applications?

It is not a departure from the focus on in-line manufacturing. While Cognex excels at sub-second cycle times for continuous flow, in-line manufacturing can also include station-based assembly with high cycle time demands (seconds or minutes). The data center example shows automation in a manufacturing process transitioning from manual labor to robotic assembly, where Cognex's vision systems work natively with robotic manipulation. This expands the types of in-line manufacturing applications addressed.

“So Jairam, I wouldn't say it's really a departure from where we focused, which, as you rightly point out, is in-line manufacturing. But the types of that in-line manufacturing can be variable from continuous flow to more station-based manufacturing, which we would have featured in the data center example.”

asked by Jairam Nathan · answered by Matt Moschner