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    ITRI
    Earnings call· Jun 2026(Q2 FY26)

    ITRON Q2 FY26 earnings call ITRI

    Jul 28, 2026 Source

    Executive summary

    Itron Q2 FY26 — Record Gross Margin and Strong Earnings on In-Line Revenue

    Itron delivered a high-quality second quarter, showcasing structurally improved earnings power with record gross margin and strong free cash flow, despite in-line revenue. The company is benefiting from durable market trends driven by utility needs for grid intelligence and efficiency, with a growing pipeline and increasing contribution from higher-value software and services. The integration of recent acquisitions is on track, further enhancing its market position.

    Highlights

    5

    • Achieved a record adjusted gross margin of 41.4%, representing a 460 basis point increase year-over-year.

    • Delivered non-GAAP earnings per share of $1.59, which was well ahead of expectations.

    • Generated strong free cash flow of $81 million in the second quarter.

    • Annual recurring revenue (ARR) grew by 21% year-over-year, reaching $417 million.

    • Adjusted EBITDA increased 8% year-over-year to $97 million.

    Concerns

    3

    • Revenue of $563 million was in-line with outlook but decreased year-over-year due to project deployment timing in Network Solutions.

    • Non-GAAP net income and EPS declined year-over-year, primarily due to a $0.13 per share impact from lower interest income and a $0.12 per share impact from a higher tax rate.

    • Total debt stood at $1.6 billion, resulting in a net leverage ratio of 2.3x.

    Guidance & targets

    6
    CategoryTargetConfidence
    Q3 FY26 Revenue
    $590 million to $600 million
    high materiality
    High
    Q3 FY26 Non-GAAP EPS
    $1.50 to $1.60 per diluted share
    high materiality
    High
    Full Year FY26 Revenue
    $2.37 billion to $2.41 billion
    high materiality
    High
    Full Year FY26 Non-GAAP EPS
    $6.30 to $6.50 per share
    high materiality
    High
    Resiliency Solutions Revenue
    $65 million to $70 million
    medium materiality
    High
    Resiliency Solutions Gross Margin
    approximately 70%
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Device Solutions
    Adjusted gross margin increased 500 basis points year-over-year, and operating margin was up 570 basis points due to favorable mix and operational efficiencies. Revenue decreased due to lower electricity product sales.
    		$111 million-3% constant currency—34.8% adjusted gross margin; 28.3% operating margin
    Network Solutions
    Adjusted gross margin increased 430 basis points year-over-year, and operating margin was up 340 basis points due to favorable mix and operational efficiencies. Revenue decreased due to project deployment timing.
    		$339 million-17%—42.8% adjusted gross margin; 33% operating margin
    Outcomes
    Adjusted gross margin increased 30 basis points year-over-year due to a higher margin revenue mix. Operating margin increased 290 basis points due to higher operating leverage. Revenue driven by higher services revenue.
    		$96 million13%—38.8% adjusted gross margin; 21.3% operating margin
    Resiliency Solutions
    New segment, includes Urbint and Locusview acquisitions.
    		$16 million——75% adjusted gross margin; 28% operating margin

    Operational metrics

    17
    Non-GAAP EPS
    $1.59vs $1.62 a year ago
    Q2 FY26

    Decreased $0.03 year-over-year.

    Non-GAAP Net Income
    $71 million
    Q2 FY26

    Compared to $68 million GAAP net income. Year-over-year decline due to lower interest income and higher tax rate, partially offset by higher non-GAAP operating income.

    Adjusted EBITDA
    $97 millionup 8% YoY
    Q2 FY26

    Both adjusted EBITDA and non-GAAP operating income increased 8% year-over-year.

    Annual Recurring Revenue (ARR)
    $417 millionup 21% YoY
    Q2 FY26

    Clear evidence of continued adoption of Itron's higher-value offerings and durability in the revenue base.

    Share Repurchase Amount
    $52 million
    Q2 FY26

    Purchased on the open market under share repurchase authorization.

    Net Leverage
    2.3x
    Q2 FY26

    Total debt was $1.6 billion.

    Total Debt
    $1.6 billion
    Q2 FY26

    Used to calculate net leverage of 2.3x.

    Cash and Equivalents Balance
    $745 million
    Q2 FY26

    Part of total liquidity of $1.5 billion.

    Available Revolving Line of Credit
    $707 million
    Q2 FY26

    Part of total liquidity of $1.5 billion.

    Operating Income Contribution to EPS
    $0.15YoY increase
    Q2 FY26

    Contributed to non-GAAP EPS change.

    Interest Income Impact on EPS
    -$0.13YoY decrease
    Q2 FY26

    Offset operating income contribution to EPS.

    Tax Expense Impact on EPS
    -$0.12YoY decrease
    Q2 FY26

    Offset operating income contribution to EPS.

    Share Count and Other Impact on EPS
    $0.07YoY positive impact
    Q2 FY26

    Positive impact on non-GAAP EPS change.

    Cost of Outages (US)
    $67 billionper year
    7-year total

    Annualized basis. Savings of double-digit percentage can be achieved through grid edge intelligence.

    Outage Duration Reduction
    12% to 15%null
    null

    Achieved through deploying distributed intelligence.

    Outage Frequency Reduction
    3% to 5%null
    null

    Achieved through deploying distributed intelligence.

    Apps Licensed
    28 millionup 15% YoY
    Q2 FY26

    Getting close to this number.

    Industry KPIs

    9
    MetricValueDetails
    M a contribution$16 millionUSD
    Orders book to bill$550 millionUSD
    Segment revenue growthDevice Solutions $111 million; Network Solutions $339 million; Outcomes $96 million; Resiliency Solutions $16 million.USD
    Design wins product cycle rampsLADWP expanding use of Itron's platform and services; SMUD expanding deployment of Riva solution.
    Order visibility backlog policy80%-85%%
    Recurring software services mix$417 millionUSD
    Supply demand imbalance lead timesPockets of tightness, memory pricing in particular.
    End market revenue mix organic growthDevice Solutions decreased 3% constant currency; Network Solutions decreased 17%; Outcomes increased 13%; Resiliency Solutions contributed $16 million.%
    Operating margin incremental leverage41.4%%

    Orderbook & backlog

    3
    Bookings$550 millionQ2 FY26

    in line with expectations

    Project-based bookings are uneven quarter-to-quarter due to regulatory processes.

    Total Backlog$4.4 billionQ2 FY26

    Backlog is healthy and converts, it doesn't get canceled.

    12-month Backlogup quarter-over-quarterQ2 FY26

    up QoQ

    Deployments will ebb and flow through the natural cycle within the quarter itself.

    Deals & partnerships

    3
    1789 Lux partners and several municipalitiesDeployment of Platform as a Service offering

    These programs demonstrate that Itron's technology is expanding its reach and gaining market share within the mid-market utility segment.

    Los Angeles Department of Water and Power (LADWP)Expansion of Itron's platform and services

    Deploying Itron's operations management solution.

    Sacramento Municipal Utility District (SMUD)Expansion of Riva solution deployment

    Will expand its deployment of Itron's Riva solution.

    Risks & headwinds

    5
    Project deployment timing in Network SolutionsQ2 FY26

    Caused 17% YoY revenue decrease in Network Solutions for Q2 FY26.

    Mitigation: Second half revenue is underpinned by deployments already under contract; no anticipated labor or supply constraints limiting deployment.

    Lower interest incomeQ2 FY26

    Resulted in a $0.13 per share decrease in non-GAAP EPS year-over-year.

    Mitigation: Partially offset by higher non-GAAP operating income.

    Higher effective tax rateQ2 FY26

    Resulted in a $0.12 per share decrease in non-GAAP EPS year-over-year.

    Mitigation: Partially offset by higher non-GAAP operating income.

    Pockets of tightness in supply chainQ2 FY26

    Specifically memory pricing.

    Mitigation: Proactively managing; not seeing broad labor or material constraints that would change deployment activity view. Supply chain is steady.

    Lumpiness in bookings due to regulatory cycleOngoing

    Bookings are always going to be a little bit lumpy.

    Mitigation: Disciplined booking process; pipeline continues to grow at record levels; win rates remain strong; backlog is healthy and converts.

    What to watch in Q3 FY26

    5

    Network Solutions deployment ramp

    Q3 FY26
    CurrentQ2 revenue down 17% YoY due to timing.
    TargetQ3 revenue $590M-$600M (midpoint up 2% YoY, 6% sequentially), driven by Network Solutions.

    Why it matters

    Verifies the expected back-end loaded⚖️ revenue profile and the recovery of the Network Solutions segment, crucial for full-year guidance achievement.

    I would say it's the story we've now had for the last several quarters. It's really dependent on network solutions increased deployment. So we've been really lucky and fortunate and have a lot of outcomes growth for the last couple of years year-over-year. We expect that to continue. But the real driver going to be an uptick in Network Solutions from the first half to the second half.

    Q&A highlights

    5

    What drives the sequential revenue step-up in H2, and what are the margin implications for the back half of the year?

    The sequential revenue step-up in the second half is primarily driven by increased deployment in Network Solutions, with continued growth expected in Outcomes. Margins for the full year are anticipated to remain close to 40%, potentially ticking down slightly from Q2 due to mix, but overall remaining strong.

    “I would say it's the story we've now had for the last several quarters. It's really dependent on network solutions increased deployment. So we've been really lucky and fortunate and have a lot of outcomes growth for the last couple of years year-over-year. We expect that to continue. But the real driver going to be an uptick in Network Solutions from the first half to the second half.”

    asked by Noah Kaye · answered by Joan Hooper

    2 min read6 chapters

    Detailed Narrative

    01

    Structural Operating Model Improvements

    Itron's operating model now delivers structurally better earnings power, evidenced by a record adjusted gross margin of 41.4% and strong free cash flow of $81 million, despite in-line revenue of $563 million. This improvement is attributed to a better mix, strong execution, and embedded operational efficiency measures, which management believes are sustainable. The company's adjusted EBITDA increased 8% year-over-year to $97 million, further highlighting the enhanced profitability.

    02

    Durable Market Demand Drivers

    The long-term infrastructure build-out across electricity, gas, and water systems is driven by persistent challenges such as rising reliability and resiliency requirements, affordability pressures, and new demand patterns including industrial load growth and AI-driven power demand. These pressures are pushing utilities towards solutions that provide better visibility, more automation, and increased intelligence at the network edge, reinforcing demand for Itron's offerings. The regulatory environment is seen as constructive, with affordability, reliability, and resiliency being key focuses for regulators.

    03

    Pipeline Growth and Mid-Market Expansion

    The pipeline of opportunities continues to grow at record levels, fueled by grid expansion, resiliency, and efficiency needs. Noteworthy wins in Q2 included Platform as a Service deployments with 1789 Lux partners and several municipalities, demonstrating market share expansion within the mid-market utility segment. This indicates that grid edge intelligence is moving beyond early adopters and large investor-owned utilities, broadening Itron's customer base.

    04

    Evolution of Utility Modernization

    Utilities are increasingly choosing between full-scale technology replacements and continuous, focused programs to address specific needs like affordability, capability building, and risk reduction. The continuous model contributes to a steady extension of the installed base and recurring revenue, strengthening Itron's business model by deepening customer relationships and increasing the contribution from software, services, and recurring revenue, which grew 21% year-over-year to $417 million.

    05

    Resiliency Solutions Integration and Impact

    The integration of the Urbint and Locusview acquisitions, forming the Resiliency Solutions segment, is tracking to plan. This segment contributed $16 million in Q2 revenue with a high adjusted gross margin of 75%. The acquisitions expand Itron's ability to solve mission-critical problems for utilities and deepen network intelligence, with cross-selling activities underway and new functionality, such as AI-integrated digital construction management, showing promise.

    06

    Distribution CapEx and Grid Edge Value

    Contrary to a narrative suggesting generation and transmission investments crowd out distribution capital, distribution CapEx levels continue to grow. Grid edge intelligence offers significant value, such as deferring over $1 billion in transformer upsizing through coordinated EV charging management. Additionally, deploying distributed intelligence has reduced outage duration by 12-15% and frequency by 3-5% for a 1 million endpoint customer, highlighting substantial savings given the estimated $67 billion annual cost of outages in the US over seven years.

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