Advanced Energy Industries (NASDAQ:AEIS) reported first-quarter fiscal 2026 results that exceeded its guidance midpoint, citing record data center revenue and continued progress on margin expansion initiatives. Management also raised its full-year revenue growth target, pointing to strengthening demand across semiconductor, data center computing, industrial and medical, and telecom and networking end markets.
Quarterly results top guidance as gross margin surpasses 40%
President and CEO Steve Kelley said first-quarter revenue came in above the midpoint of guidance, “driven by record data center revenue,” with total revenue up 26% year over year and gross margin exceeding 40%.
Oldham said operating income reached a record $98 million, with operating margin of 19.1%, and non-GAAP EPS was $2.09, up 70% year over year and ahead of guidance. Adjusted EBITDA was $108 million, also a record.
Segment performance: data center records, industrial/medical constrained by factory priorities
In semiconductor, Oldham said revenue was $219 million, up 4% sequentially and “just below our mid-cycle peak last year.” Kelley said customer forecasts strengthened considerably during the quarter, which management believes will support “record performance in 2026 and continued growth in 2027.” He highlighted customer acceptance of the company’s eVoS, eVerest and NavX plasma power technologies, which he said can improve throughput and yield “at the leading edge.”
Data center computing produced record revenue of $194 million, up 9% sequentially and 102% year over year. However, Oldham cautioned that the company continues to see “frequent customer changes in demand mix due to various downstream constraints,” adding that this volatility is expected to limit data center revenue in the second quarter even as the company anticipates a stronger second half supported by program ramps.
Industrial and medical market revenue was $72 million, down 8% sequentially but up 12% year over year. Both Kelley and Oldham attributed the sequential decline to factory prioritization decisions. Kelley said output was limited in the first quarter because the company “build[s] the INM product in the same factories as we build the data center product,” and a surge in data center demand late in the quarter prompted factories to pivot. He said he is focused on catching up over the next two quarters, adding that the company’s backlog is “robust now.”
Oldham said demand indicators improved in industrial and medical, with bookings up 14% sequentially to the highest level since 2023, along with improved distributor sell-through and further normalization of inventory levels.
Telecom and networking revenue rose to $25 million, up 17% sequentially and 16% year over year. Kelley said the segment reached its highest level since 2023 due to production ramps tied to “AI-related wins in the networking space,” and Oldham said results were ahead of expectations on strength in AI-related networking programs.
Capacity expansion and Thailand ramp move forward
Management emphasized manufacturing expansion plans intended to support demand across end markets. Kelley said the company is executing capacity expansions in Malaysia, the Philippines and Mexico, and is now focusing on building out capacity at a new 500,000-square-foot facility in Thailand.
In response to an analyst question, Kelley said Advanced Energy expects “over $2.5 billion” in revenue-generating capacity after completing expansions in its current factory network, and that Thailand, once fully built out, adds “more than $1 billion of revenue-generating capacity,” taking total capacity to “in excess of $3.5 billion.” He said expansion in the existing factory network should be “in place in the second half of this year,” while Thailand investments will begin late this year with some spending pulled into the second half of 2026 to support earlier customer qualifications.
Guidance: Q2 outlook calls for record revenue, data center moderates sequentially
For the second quarter, Oldham guided revenue to approximately $540 million, plus or minus $20 million. He said most of the sequential growth is expected from semiconductor and industrial/medical, while data center will “moderate sequentially based on timing of customer deliveries.”
Advanced Energy expects Q2 gross margin to improve 20 to 50 basis points sequentially, and operating expenses of $112 million to $114 million as the company invests in new products and absorbs annual merit increases. The company guided to non-GAAP EPS of $2.18, plus or minus $0.25, on 40.6 million shares outstanding.
For the full year, Kelley said the company is now expecting year-over-year revenue growth “in the low to mid 20% range,” which he described as the second consecutive year of more than 20% growth. He added that in data center the company is raising its full-year revenue growth expectation to the “mid 30% range” based on adoption of its high-power AI solutions. Oldham said the updated outlook assumes solid demand but also incorporates “some tightening in supply and increasing input costs.”
Product roadmap: semiconductor adoption and 800-volt data center transition
On semiconductor new products, Kelley told analysts the company is seeing “quite a bit of uptake” for eVerest, eVoS and NavX at leading-edge nodes, and said customers are exploring similar improvements at other nodes and device types. He said new product revenue should become meaningful “starting late this year,” with larger contributions expected in 2027 and 2028 as node transitions occur.
On next-generation data center power architectures, Kelley said Advanced Energy is sampling 800-volt solutions with key customers and described 800-volt-to-50-volt modules offering 4,000-watt, 6,000-watt and 8,000-watt output power. He said the company is targeting around 98% efficiency, and expects initial production revenue to start next year, with a “small amount” possible in 2026, ramping “in earnest in 2027” and becoming more meaningful in 2028.
On margins, Kelley said the company believes it can ultimately achieve greater than 43% gross margin, while Oldham said quarterly improvement could put the company in position to reach 41% by the end of the year. He attributed first-quarter margin outperformance to favorable product-level mix—helped by new products with better margins—along with improvements in certain costs of sales such as cost of quality and ramp costs, partially offsetting factory ramp costs and higher material premiums.
Advanced Energy ended the quarter with $700 million in cash and cash equivalents and net cash of $131 million. Oldham said inventory increased by $48 million, largely in “critical piece parts to support growth and improve supply resiliency.” The company reported a $6 million outflow from continuing operations, reflecting higher working capital to support growth and seasonal items.
Looking ahead, Kelley said the company is seeing strong demand across markets, but noted that “supply and cost challenges have begun to surface.” He also said Advanced Energy has “a solid pipeline of potential acquisitions” and will pursue opportunities that make strategic and financial sense, with a stated focus on expanding breadth in the industrial and medical market.
About Advanced Energy Industries (NASDAQ:AEIS)
Advanced Energy Industries, Inc is a global technology company specializing in precision power conversion, measurement, and control solutions. The company designs and manufactures a broad portfolio of products including high-voltage power supplies, RF and microwave generators, digital power controllers, reactive gas control systems, and thin film measurement instruments. These solutions enable advanced processes in semiconductor fabrication, flat panel display manufacturing, industrial coating, data storage, telecommunications and medical device production.
Founded in 1981 and headquartered in Fort Collins, Colorado, Advanced Energy has grown through strategic product development and international expansion.
