Advanced Energy Industries, Inc.

Advanced Energy reported second-quarter 2026 revenue of $574 million, up 12% sequentially and 30% year over year, with non-GAAP EPS of $2.74, up from $2.09 in Q1 and $1.50 a year ago. Gross margin was 41.9%, up 380 basis points year over year; excluding the benefit of expected IEEPA tariff refunds, gross margin was 40.7%. Operating margin was 21.9%, operating income was a record $125 million, adjusted EBITDA was $137 million, and operating cash flow was $86 million. Segment revenue included Semiconductor at $278 million, Data Center Computing at $192 million, Industrial & Medical at $80 million, and Telecom & Networking at $24 million. For Q3, the company guided to revenue of approximately $640 million plus or minus $20 million, gross margin of 41% to 41.5% excluding the one-time tariff refund benefit, operating expenses of $120 million to $124 million, and non-GAAP EPS of $3 plus or minus $0.25. For full-year 2026, management raised revenue growth guidance to the low-to-mid-30% range, expects data center revenue growth of at least 50%, expects Q4 gross margin in the 42% range, and increased CapEx guidance to $180 million to $195 million while still targeting 2026 free cash flow at or above 2025.

Steve Kelley struck an upbeat tone, saying demand strengthened across all target markets and the company captured upside through solid factory execution. He emphasized three strategic themes: expanding capacity and inventory to meet demand, accelerating new product adoption, and improving mix toward higher-value products. He also highlighted Thailand as a key future capacity node, with first production revenue expected in Q4 and roughly $5 billion of revenue-generating capacity across the factory network when fully built out.

Paul Oldham focused on the financial step-up and margin bridge. He pointed to $574 million of revenue, 30% year-over-year growth, 41.9% gross margin, 21.9% operating margin, $86 million of operating cash flow, and $1.4 billion of cash and equivalents after the convertible note financing; net cash was $132 million at quarter end. He said Q3 gross margin should rise to 41% to 41.5% excluding tariff refunds, full-year OpEx should be about $470 million, CapEx should be $180 million to $195 million, and 2026 free cash flow should remain at or above 2025 despite higher investment.

Analysts pressed on why data center growth is improving and how 2027 could accelerate; management said customer supply-chain constraints have eased, hyperscale wins are ramping, second-wave customers should add revenue in 2027, and 800-volt products are expected to start producing revenue in late 2027 or 2028. Questions on semiconductors centered on outgrowing WFE and share gains; management said it believes it is ahead of its prior share-gain plan, is gaining share in plasma and system power, and is shipping in line with underlying demand rather than building inventory ahead of customers. Analysts also asked about inventory and gross margin, and management said it is intentionally leaning into strategic piece-part inventory to avoid shortages while keeping pricing broadly neutral and improving margin through mix and efficiency.