Advanced Energy Q2 Earnings Call Signals Broader Growth Into 2027

AEIS Lifts Its 2026 Growth Target

President and CEO Stephen Kelley said that demand strengthened across all target markets, prompting AEIS to raise its 2026 revenue growth outlook to the low-to-mid-30% range from the low-to-mid-20% range.

Executive vice president and CFO Paul Oldham guided third-quarter revenues to $640 million, plus or minus $20 million, with non-GAAP earnings of $3 per share, plus or minus 25 cents.

Oldham said that Advanced Energy expects record revenues in both the third and fourth quarters. Second-half semiconductor revenue is projected to rise nearly 50% year over year, while full-year data center growth should reach at least 50%.

Advanced Energy Sees Semiconductor Share Gains

Kelley said that Advanced Energy is better positioned to gain semiconductor share than at any prior point. He cited customer acceptance of the eVerest and eVoS plasma platforms, and system-power wins in test, ALD and thermal sensing.

A Citi analyst asked about progress in dielectric etch. Kelley said that the company is ahead of the incremental revenue plan presented at its December 2024 Investor Day, with gains spanning etch, deposition and system power.

Kelley added that most second-half semiconductor growth will come from existing products. New products should contribute more meaningfully in 2027 as programs move into production.

AEIS Broadens the Data Center Opportunity

Kelley said that the data center outlook improved after customers resolved downstream supply constraints. More hyperscale programs are expected to ramp, while second-wave customers should add another growth channel in 2027.

In response to a TD Cowen analyst, Kelley said that AEIS serves four hyperscale customers but remains selective because those accounts require substantial engineering support. Second-wave customers can be addressed through derivatives of existing technology blocks.

Kelley expects initial 800-volt production revenue in late 2027 and a more meaningful ramp in 2028. Management sees the architecture increasing content per rack while supporting high-efficiency, high-density power systems.

Advanced Energy Targets Further Margin Gains

Oldham said that second-quarter non-GAAP gross margin reached 41.9%. Excluding tariff refunds, gross margin was 40.7%, above guidance, due to higher volume and favorable new-product mix.

For the third quarter, Oldham expects gross margin of 41-41.5%, excluding the one-time refund benefit, with the fourth quarter reaching roughly 42%.

During Q&A, Oldham said that product mix should drive further improvement, supplemented by manufacturing efficiency. At the current revenue base, each additional $50 million of quarterly sales contributes about 40 basis points of gross-margin leverage.

AEIS Invests Ahead of Customer Demand

Kelley said that the company is building strategic component inventory and maintaining elevated factory staffing to avoid constraining customer ramps. Management described the inventory as healthy, with limited obsolescence risk.

Oldham said that inventory rose to 145 days, with turns near 2.5 times, as the company prepared for higher demand and longer component lead times. Improved receivables and payables partly offset the working-capital impact.

Thailand should produce its first revenue in the fourth quarter, with major semiconductor and data center customers undergoing qualification. Kelley said that the factory network could support roughly $5 billion of revenue when fully built out.

Advanced Energy Keeps 2027 in Focus

Management’s tone centered on converting design wins into production while supporting execution through capacity, inventory and research investments. Kelley also said Industrial & Medical bookings over the past three quarters were nearly double the prior two-year rate.

Advanced Energy remains focused on expanding semiconductor share, diversifying data center growth beyond hyperscalers, and lifting margins through product mix and manufacturing gains.

AEIS’ Rank and Style Scores Diverge

AEIS sports a Zacks Rank #1 (Strong Buy) at present, indicating a favorable earnings-estimate revision trend. However, its Value Score of F, Growth Score of D, Momentum Score of C, and VGM Score of F show weak alignment with the preferred A or B Style Score. You can see the complete list of today’s Zacks #1 Rank stocks here.

The combination points to positive near-term estimate momentum but less attractive characteristics across value, growth and the blended VGM framework. The Zacks Rank can change as analysts revise estimates following the just-reported results.

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research