Advanced Energy’s (NASDAQ:AEIS) Q2 Sales Beat Estimates But Stock Drops

Manufacturing equipment and systems provider Advanced Energy (NASDAQ:AEIS) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 21% year on year to $441.5 million. On the other hand, next quarter’s revenue guidance of $230 million was less impressive, coming in 45.3% below analysts’ estimates. Its non-GAAP profit of $1.50 per share was 14.7% above analysts’ consensus estimates.

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“Second quarter results were at the higher end of our guidance driven by strong customer demand for our AI data center solutions,” said Steve Kelley, president and CEO of Advanced Energy.

Company Overview

Pioneering technologies for radio frequency power delivery, Advanced Energy (NASDAQ:AEIS) provides power supplies, thermal management systems, and measurement and control instruments for various manufacturing processes.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Advanced Energy grew its sales at a mediocre 7% compounded annual growth rate. This was below our standard for the industrials sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Advanced Energy’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 5.9% annually. Advanced Energy isn’t alone in its struggles as the Electronic Components industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

Advanced Energy also breaks out the revenue for its most important segments, Semiconductor Equipment and Industrial and Medical Equipment, which are 47.5% and 15.5% of revenue. Over the last two years, Advanced Energy’s Semiconductor Equipment revenue (i.e., plasma power) averaged 1.6% year-on-year growth. On the other hand, its Industrial and Medical Equipment revenue (i.e., robotics) averaged 22.7% declines.

This quarter, Advanced Energy reported robust year-on-year revenue growth of 21%, and its $441.5 million of revenue topped Wall Street estimates by 5%. Company management is currently guiding for a 38.5% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 5.1% over the next 12 months. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below the sector average.

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Operating Margin

Advanced Energy has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 8.8%, higher than the broader industrials sector.

Analyzing the trend in its profitability, Advanced Energy’s operating margin decreased by 8.4 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Advanced Energy generated an operating margin profit margin of 7.2%, up 3.6 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Advanced Energy’s unimpressive 7.4% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Advanced Energy, its two-year annual EPS declines of 9.9% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q2, Advanced Energy reported adjusted EPS at $1.50, up from $0.85 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Advanced Energy’s full-year EPS of $5.01 to grow 11.6%.

Key Takeaways from Advanced Energy’s Q2 Results

We were impressed by how significantly Advanced Energy blew past analysts’ adjusted operating income expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. On the other hand, its revenue guidance for next quarter missed and its EBITDA fell short of Wall Street’s estimates, which weighed on shares. Zooming out, we think this was a mixed quarter. Investors were likely hoping for more, and shares traded down 5.7% to $132 immediately after reporting.

So do we think Advanced Energy is an attractive buy at the current price? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.