Advanced Energy Industries AEIS reported second-quarter 2026 non-GAAP earnings of $2.74 per share, up 82.7% year over year and beating the Zacks Consensus Estimate by 25.11%.
Revenues increased 30% year over year to $574.1 million, surpassing the consensus estimate by 5.47%. Results benefited from record Semiconductor Equipment sales, strong data center demand and improved factory execution.
AEIS Posts Broad-Based Market Growth
Semiconductor Equipment revenues reached a record $278.3 million, increasing 26.8% sequentially and 32.8% year over year. Advanced Energy cited stronger demand for leading-edge logic and memory applications.
Customers validated yield and throughput improvements from the company’s eVerest and eVoS plasma power platforms. AEIS also secured system power design wins in semiconductor testing, atomic layer deposition and thermal-sensing applications. Several plasma and system power programs have started production ramps.
Advanced Energy Benefits From AI Demand
Data Center Computing revenues were $191.5 million, down 1.4% sequentially but up 35.2% year over year. Demand improved during the quarter as customers resolved downstream constraints, supporting a stronger outlook for the second half of 2026.
The company continued to secure programs with hyperscale customers and engage with “second wave” customers outside the largest hyperscalers. Management expects these newer customer programs to contribute more meaningfully in 2027. Advanced Energy is also developing modular 800-volt power solutions, with initial production revenues expected in late 2027 and a larger ramp anticipated in 2028.
AEIS Sees Industrial and Medical Recovery
Industrial & Medical revenues rose 11.1% from the prior quarter and 16.6% year over year to $80 million. Higher factory output helped the company address healthy customer demand and reduce overdue backlog.
Distribution trends also improved, with stronger orders, resales and channel inventory metrics. Advanced Energy reported momentum in electrosurgery, supported by its pulsed-power technology and captured design wins in aerospace and defense. Design wins originating from website inquiries increased 40% year over year during the first half of 2026.
Telecom & Networking revenues totaled $24.3 million, declining 4.3% sequentially but increasing 11.5% from the prior-year quarter. Customers continued evaluating the company’s rack-level power solutions for AI-related applications.
Advanced Energy Expands Margins
In the second quarter of 2026, the non-GAAP gross margin was 41.9%, up 380 basis points (bps) year over year and 180 bps sequentially. The figure included a benefit from tariff refunds. Excluding that impact, gross margin was 40.7%, exceeding management’s guidance range due to higher volumes and a favorable product mix.
Non-GAAP operating expenses were $114.8 million, up 10.8% year over year and 7.3% sequentially. As a percentage of revenues, the figure declined 350 bps year over year and 90 bps quarter over quarter to 20% in the reported quarter.
Non-GAAP operating income reached a record $125.5 million. The non-GAAP operating margin expanded to 21.9% from 19.1% in the first quarter and 14.6% in the year-ago period, reflecting revenue growth and operating leverage.
AEIS Strengthens Cash Position
As of June 30, 2026, cash and cash equivalents were $1.40 billion compared with $699.5 million as of March 31. For the second quarter of 2026, AEIS’s total debt was $1.26 billion.
In the second quarter of 2026, operating cash flow from continuing operations was $86 million compared with an outflow of $6 million in the prior quarter.
Advanced Energy Issues Strong Q3 Guidance
For the third quarter of 2026, Advanced Energy expects revenues of $640 million, plus or minus $20 million. Non-GAAP earnings are projected to be $3 per share, plus or minus 25 cents.
Management expects the non-GAAP gross margin to be between 41% and 41.5%, excluding the second-quarter tariff-refund benefit. Operating expenses are forecasted to be between $120 million and $124 million, reflecting continued investment in product development.
AEIS raised its 2026 revenue growth outlook to the low-to-mid-30% range from the low-to-mid-20% range. Semiconductor revenues in the second half are expected to grow nearly 50% year over year, while full-year Data Center Computing growth is now projected to be more than 50%.
The company expects its gross margin to reach the 42% range by the fourth quarter. It also increased its 2026 capital expenditure forecast to $180-$195 million while maintaining its target for free cash flow to be at or above the 2025 level.
AEIS’s Zacks Rank & Other Stocks to Consider
Advanced Energy currently sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks in the broader Zacks Computer and Technology sector include Applied Materials AMAT, ACI Worldwide ACIW and Analog Devices ADI. Each stock carries a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Materials shares have gained 112.7% in the year-to-date period. Applied Materials is set to report second-quarter 2026 results on Aug. 13.
Shares of ACI Worldwide have gained 19.7% in the year-to-date period. ACI Worldwide is set to report the second-quarter 2026 results on Aug. 6.
Shares of Analog Devices have rallied 40.3% year to date. Analog Devices is slated to report fiscal third-quarter 2026 results on Aug. 19.
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.
Free: See Our Top Stock And 4 Runners UpWant 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
Advanced Energy Industries, Inc. (AEIS): Free Stock Analysis Report
Analog Devices, Inc. (ADI): Free Stock Analysis Report
Applied Materials, Inc. (AMAT): Free Stock Analysis Report
ACI Worldwide, Inc. (ACIW): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
