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    TDY
    Earnings call· Mar 2026(Q1 FY26)

    TELEDYNE TECHNOLOGIES Q1 FY26 earnings call TDY

    Apr 22, 2026 Source

    Executive summary

    Teledyne Q1 FY26 — Record Sales, EPS, and Operating Margin

    Teledyne commenced FY26 with robust performance, delivering record first-quarter sales, EPS, and operating margin, driven by strong organic growth and record orders. The company raised its full-year sales and earnings outlook, reflecting confidence in its backlog-driven businesses, particularly defense and digital imaging. Strategic investments in R&D and capacity, coupled with a low leverage ratio, position Teledyne for continued growth and M&A, despite some segment-specific margin pressures and a conservative approach to foreign exchange impacts in its guidance.

    Highlights

    5

    • Achieved record first quarter sales, earnings per share, and operating margin, with sales increasing 7.6% and non-GAAP EPS up 17.2%.

    • Non-GAAP operating margin expanded by 58 basis points year-over-year, despite a 30 basis point increase in R&D expense.

    • Reported record orders and backlog, with a book-to-bill ratio of 1.16, marking the tenth consecutive quarter above 1.

    • Digital Imaging segment non-GAAP operating margin increased 107 basis points to 23.2%, driven by balanced growth.

    • Leverage ratio declined to its lowest level in 5 years, enabling active pursuit of acquisitions.

    Concerns

    3

    • Instrumentation segment non-GAAP operating margin decreased due to product mix, with lower-margin autonomous underwater vehicles growing faster than higher-margin test and measurement products.

    • Sales of electronic test and measurement systems decreased 3.7% year-over-year, primarily due to a decline in protocol analyzers.

    • Second quarter EPS guidance reflects lower projected tax benefits compared to Q1, impacting sequential earnings.

    Guidance & targets

    16
    CategoryTargetConfidence
    Full-year 2026 Sales
    $6.415 billion
    high materiality
    High
    Full-year 2026 Non-GAAP EPS
    $23.85 to $24.15
    high materiality
    High
    Q2 2026 GAAP EPS
    $4.75 to $4.90
    medium materiality
    High
    Q2 2026 Non-GAAP EPS
    $5.70 to $5.80
    medium materiality
    High
    Full-year 2026 Organic Sales Growth
    about 4%
    high materiality
    High
    Full-year 2026 Sales Growth from Acquisitions
    about 0.9%
    medium materiality
    High
    Full-year 2026 Digital Imaging Sales Growth
    about 5%
    medium materiality
    High
    Full-year 2026 Aerospace and Defense Sales Growth
    probably over 6%
    medium materiality
    High
    Full-year 2026 Instrumentation Sales Growth
    over 4%
    medium materiality
    High
    Full-year 2026 Non-GAAP Operating Margin Increase
    about 60 basis points above last year
    high materiality
    High
    Full-year 2026 Digital Imaging Operating Margin Increase
    over 100 basis points, 105, 107 basis points
    medium materiality
    High
    Full-year 2026 Aerospace & Defense Operating Margin Increase
    about 70 basis points
    medium materiality
    High
    Full-year 2026 Instrumentation Operating Margin
    closer to 27.5%
    medium materiality
    High
    Full-year 2026 Capital Expenditures
    about $150 million
    medium materiality
    High
    Full-year 2026 Free Cash Flow
    over $1 billion
    high materiality
    High
    H2 2026 Revenue as % of Total
    51%
    low materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Digital Imaging
    Well-balanced growth throughout the segment, including Teledyne imaging sensors, Delta e2v, and Teledyne FLIR. Non-GAAP operating margin increased 107 basis points despite a 59 basis point increase in R&D expense.
    Visible light sensors sales: double-digit increaseInfrared detectors sales: double-digit increaseSpecialty semiconductors for space applications sales: double-digit increaseFLIR infrared cameras for unmanned air vehicles sales: double-digit increaseOwn complete unmanned aerial systems revenue: increasedIndustrial imaging: returned to year-over-year growthX-ray businesses: returned to year-over-year growthMEMS growth: >20%
    		—7.9%—23.2%
    Instrumentation
    Overall sales increased, but non-GAAP operating margin decreased primarily due to product mix, with a decline in higher-margin test and measurement and growth in lower-margin autonomous underwater vehicles in marine.
    Marine instruments sales: +8.3%Unmanned subsea vehicles sales: >20%Interconnects for U.S. Virginia and Columbia class submarines: increasedInterconnects for offshore energy production: continued to growEnvironmental instruments sales: +6.7%Electronic test and measurement systems sales: -3.7%Oscilloscopes sales: greaterProtocol analyzers sales: lower
    		—5.3%—decreased
    Aerospace and Defense Electronics
    Growth due to 1 additional month of results from the Qioptiq acquisition and strong organic growth across defense electronics, partially offset by slightly lower sales from commercial aerospace. Margin improvement due to higher sales, operating leverage, and improved margins at acquired companies.
    Organic growth: 8.4%
    		—14.4%—increased nearly 200 bps
    Engineered Systems
    Revenue decreased, but segment operating margin increased.
    		—-2.6%—increased 113 bps

    Operational metrics

    21
    Non-GAAP Operating Margin Increase
    58YoY
    Q1 FY26

    Despite a 30 basis point increase in R&D expense.

    Leverage Ratio
    lowest levelsince before FLIR acquisition in 2001
    Q1 FY26

    Declined to the lowest level in 5 years.

    Organic Sales Growth (excluding acquisitions)
    5.3%YoY
    Q1 FY26

    Excluding the impact of acquisitions.

    MEMS Growth
    20%YoY
    Q1 FY26

    Primarily due to demand for micromirrors used for optical switching and high-speed networking applications.

    Unmanned Subsea Vehicles Growth
    20%YoY
    Q1 FY26

    For applications such as anti-submarine warfare and mine countermeasures.

    Capital Expenditures
    $29.7 millionvs $18 million in 2025
    Q1 FY26

    Increased investment.

    Depreciation and Amortization Expense
    $87.2 millionvs $80.7 million in 2025
    Q1 FY26

    Increased.

    R&D Expenditures Increase
    $10 million
    Q1 FY26

    Added in investments, equivalent to about $0.14 a share.

    International Businesses as % of Portfolio
    48%vs <15% 20 years ago
    Q1 FY26

    Significant growth in international domain.

    U.S. Government Organic Growth
    9%YoY
    Q1 FY26

    Strong growth in U.S. government contracts.

    Non-U.S. Government Organic Growth
    4%YoY
    Q1 FY26

    Total non-U.S. government growth.

    International Organic Growth
    8.5%YoY
    Q1 FY26

    Growth in international domain.

    Short-Cycle Industrial Growth
    3% to 4%YoY
    Q1 FY26

    Lower single digits growth.

    Defense Growth
    high single digitsYoY
    Q1 FY26

    Strong growth in defense businesses.

    Foreign Exchange Benefit
    2%
    Q1 FY26

    Nice benefits in Q1.

    Foreign Exchange Benefit
    0.6%
    Q2 FY26

    Projected to drop in Q2.

    Foreign Exchange Benefit
    0
    H2 FY26

    Projected for the last two quarters of the year.

    Acquisitions Spend
    $900 million
    last 12-13 months

    Total spend on acquisitions.

    Acquisitions Spend
    $12.8 billion
    last 25 years

    Total spend on acquisitions, with $4 billion in stock and $10.8 billion in cash.

    Acquisitions Made
    75
    last 25 years

    Number of acquisitions completed.

    Defense Revenue as % of Total
    30% to 35%
    FY26

    Big chunk of revenue for the year, including global defense, U.S. defense, drones, EW, missiles, munitions.

    Industry KPIs

    9
    MetricValueDetails
    M a contribution0.9%%
    Orders book to bill1.16
    Segment revenue growth—
    Ai data center content revenue—
    Design wins product cycle ramps—
    Order visibility backlog policy$4.6 billionUSD
    Capacity expansion internal sourcing—
    End market revenue mix organic growth—
    Operating margin incremental leverage58bps

    Orderbook & backlog

    2
    Book-to-bill1.16Q1 FY26

    10th consecutive quarter of book-to-bill of over 1

    Led by Digital Imaging at about 1.38; Instruments slightly over 1; A&D and Engineered Systems just below 1.

    Total Backlog$4.6 billionQ1 FY26

    Backlog includes orders with durations of 2, 3, 4 years, and some immediate. Expected to translate into revenue.

    Product announcements

    2
    ProductTypeDetails
    Black Hornet 4launch
    Rogue 1milestone

    Deals & partnerships

    3
    DD-Scientificacquisition

    Acquired in January 2026.

    Qioptiqacquisition

    Acquired in 2025.

    MicroPactacquisition

    Acquired in 2025.

    Capital programs

    1
    Capacity Increase Investmentsunderway
    Period spend: $29.7 million

    Benefit: Increased production capacity in certain specific areas where demand exceeds capacity.

    Increased capital expenditures by 35% over last year in Q1. Includes investments in inventory and machining facilities for germanium, driven by strong demand and supply chain considerations.

    Risks & headwinds

    5
    Lower projected tax benefitsQ2 FY26

    Q2 EPS guidance reflects lower tax benefits compared to Q1

    Mitigation: Not explicitly stated, but management acknowledges it impacts sequential EPS.

    Product mix impacting Instrumentation segment marginQ1 FY26

    Non-GAAP operating margin decreased

    Mitigation: Anticipates margin improvement throughout the year as test and measurement sales recover.

    Timing of PCI Express Gen 6 CPUs and GPUsQ1 FY26

    Protocol analyzer sales were down year-over-year

    Mitigation: Expects chips to come to market in H2, leading to full-year low single-digit growth in test and measurement.

    Tedious government cyclesOngoing

    Even when there's urgent need

    Mitigation: Company has a large backlog ($4.6 billion) and is investing in capacity to meet demand, but acknowledges potential delays in revenue translation.

    Decreasing foreign exchange benefitFY26

    Q1 benefit ~2%, Q2 projected ~0.6%, H2 projected 0%

    Mitigation: Management applies conservatism to full-year revenue outlook due to this trend.

    Q&A highlights

    8

    Clarification on the organic and inorganic components of the revised revenue guidance and which segments are driving outperformance.

    Robert Mehrabian stated that the 4.9% total growth for the year includes about 4% organic growth and 0.9% from acquisitions. He identified Digital Imaging (5% growth, FLIR at 6.5%) and Aerospace and Defense (over 6% growth) as the segments with the highest expected growth.

    “About 4% of [ that solid 4% ] is organic and about 0.9% is from acquisitions, 1 early in 2025 and 1 small one early this year.”

    asked by Greg Konrad · answered by Robert Mehrabian

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q1 Performance and Raised Outlook

    Teledyne reported a strong start to 2026 with record first-quarter sales, non-GAAP earnings per share, and operating margin. Sales increased 7.6% year-over-year, while non-GAAP EPS grew 17.2%. The company's non-GAAP operating margin expanded by 58 basis points, even with a 30 basis point increase in R&D expense. This robust performance, combined with record orders and a book-to-bill ratio of 1.16, led management to increase its full-year 2026 sales guidance to $6.415 billion and non-GAAP EPS guidance to a range of $23.85 to $24.15.

    02

    Defense and AI-Related Growth Drivers

    Defense-related businesses were a significant growth engine, with FLIR infrared cameras for unmanned air vehicles and Teledyne's own unmanned aerial systems, including the Black Hornet nano drone and Rogue 1 loitering munition, showing strong demand. Sales of visible light sensors, infrared detectors, and specialty semiconductors for space applications also saw double-digit increases. The company is actively investing in capacity and R&D to meet the growing demand for these technologies, particularly in counter-drone applications and space-based sensing, with U.S. government organic growth at 9%.

    03

    Digital Imaging Segment Outperformance

    The Digital Imaging segment demonstrated well-balanced growth, with sales increasing 7.9% and non-GAAP operating margin expanding by 107 basis points to 23.2%. This was driven by strong performance across Teledyne imaging sensors, Delta e2v, and Teledyne FLIR. Industrial imaging and X-ray businesses returned to year-over-year growth, and micro-electromechanical systems (MEMS) grew over 20%, primarily due to demand for micromirrors in optical switching and high-speed networking applications.

    04

    Mixed Performance in Instrumentation

    The Instrumentation segment experienced mixed results, with overall sales increasing 5.3%. Marine instruments saw an 8.3% increase, led by strong defense-related sales of unmanned subsea vehicles (up over 20%) and interconnects for submarines. Environmental instruments also grew 6.7%. However, sales of electronic test and measurement systems decreased 3.7% due to lower protocol analyzer sales, which impacted the segment's non-GAAP operating margin due to an unfavorable product mix.

    05

    Strategic Investments and M&A Outlook

    Teledyne is increasing its investments in R&D and capital expenditures to accelerate organic growth, with Q1 CapEx up 35% year-over-year. The company's leverage ratio is at a 5-year low, positioning it to actively pursue acquisitions. Management indicated a focus on tuck-in acquisitions first, followed by mid-sized opportunities, while remaining cautious about larger deals due to high valuations. Acquisitions are being considered across all segments except Engineered Systems.

    06

    International Expansion and Backlog Strength

    The company's international businesses now constitute 48% of its portfolio, reflecting significant international growth of 8.5% organically. Teledyne's total backlog stands at $4.6 billion, providing strong revenue visibility. While some defense orders have long durations, the company expects an acceleration in defense revenues this year, driven by current global conflicts and increased demand for its components and systems.

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