Advanced Energy Industries Q4 Earnings Call Highlights

Advanced Energy Industries (NASDAQ:AEIS) closed out fiscal 2025 with a fourth-quarter performance that exceeded its guidance, supported by strengthening demand in semiconductor, industrial and medical markets and another record quarter in data center computing. Management said the company’s diversification strategy and improving execution helped drive higher profitability and cash generation, while capacity investments position the business for continued growth in 2026.

Fourth-quarter results topped guidance as demand strengthened

CEO Steve Kelley said fourth-quarter revenue came in at “nearly $490 million,” at the high end of the company’s outlook, driven by improving conditions in semiconductor, industrial, and medical markets and record data center results. He noted gross margin was “just shy of 40%,” the best performance in five years, and earnings per share were “nearly $2,” also ahead of guidance.

CFO Paul Oldham reported fourth-quarter revenue of $489 million, up 6% sequentially and 18% year-over-year. By segment, results were:

• Semiconductor: $212 million, up 8% sequentially, ahead of guidance as customer demand strengthened.
• Data center computing: record $178 million, up 4% sequentially and 101% year-over-year.
• Industrial and medical: $78 million, up 10% sequentially and up 2% year-over-year, the first year-over-year increase in two years.
• Telecom and networking: $22 million, down slightly due to program timing.

Gross margin in the quarter was 39.7%, up 60 basis points sequentially, which Oldham attributed primarily to higher volume and favorable mix, partially offset by tariffs and factory ramp costs. Operating expenses were $107 million, up 4% sequentially due to higher sales and incentive-related expenses, while operating margin improved to 17.8%.

Non-GAAP EPS was $1.94, up from $1.74 in Q3 and $1.30 a year earlier. Oldham said the non-GAAP tax rate was 14.7%, below the company’s roughly 17% guidance due to earnings mix and discrete items.

Full-year 2025: revenue up 21%, cash flow and margins improved

For the full year, Advanced Energy posted $1.8 billion of revenue, up 21% year-over-year. Oldham said growth was primarily driven by data center computing, which rose 107% to $587 million. Semiconductor revenue increased 6% to $840 million, which management described as the company’s second-strongest year following the 2022 peak.

Industrial and medical revenue declined 11% for 2025, though management emphasized sequential improvement after a first-quarter trough. Kelley said the company saw “three-quarters of sequential revenue growth” in the segment after bottoming in Q1 and expects continued recovery as customers and distributors work through excess inventories.

Advanced Energy’s full-year gross margin improved 240 basis points to 38.7%, the highest since 2020, while operating margin improved 560 basis points to 15.8%, the highest in five years. Oldham said the company managed tariff impacts to less than 100 basis points on gross margin during 2025. Non-GAAP EPS increased 73% to $6.41, and adjusted EBITDA rose 68% to $324 million.

The company generated record cash flow from operations of $235 million for 2025. In the fourth quarter, cash flow from continuing operations was $80 million. Cash increased to $791 million, with net cash of $224 million. During the quarter, the company invested $38 million in capex, paid $4 million in dividends, and repurchased 33,000 shares for $6.7 million at an average price of $205.38 per share.

Operations and capacity: factory network expanded; Thailand planned as major growth lever

Management highlighted manufacturing footprint changes and capacity investments made during 2025. Kelley said the company expanded capacity in the Philippines and Mexico to support data center growth and completed the fit-up of a new factory in Thailand. He said Thailand is expected to provide “more than $1 billion in annual revenue-generating capacity once it’s fully built out.”

Oldham added that Advanced Energy exited its last manufacturing facility in China while adding new capacity in the Philippines and Mexico. Looking forward, he said 2026 capex is expected to continue “at or around Q4 levels,” enabling “over $2.5 billion of revenue-generating capacity within our existing footprint,” with a full Thailand build-out adding another $1 billion. Longer term, the company expects capex to revert to around 4% of sales after completing these investments.

In Q&A, Kelley said Thailand initially will likely focus on data center products because they are “high-volume, low-mix,” but the site was built to accommodate the company’s full product range, including semiconductor plasma power and industrial/medical products. He also noted that Thailand was originally conceived as a business continuity factory for semiconductor, with customers supporting it as a backup to the company’s Malaysia operation.

2026 outlook: high-teens revenue growth model; data center seen up more than 30%

Entering 2026, Kelley said the company sees positive demand trends across its target markets and expects multiple new wins to ramp to production during the year. He said Advanced Energy projects 2026 revenue growth in the high teens after 21% growth in 2025.

In data center, management raised its outlook and now projects full-year revenue growth of more than 30%. Oldham said this is up from a prior 25%–30% view. In response to analyst questions, Kelley clarified that the company’s “over 30%” forecast is based on its existing customer base and does not assume pull-ins from “second-wave” cloud and enterprise customers. He also said Advanced Energy is engaged with customers on “a number of 800-volt projects,” and stated the company’s total dollar opportunity is expected to increase with 800-volt solutions versus current architectures.

At the same time, Kelley cited potential industry constraints—such as processors and memory allocations—as a reason for conservatism, even as demand remains “pretty bullish.” He said Advanced Energy has not been supply-limited in its ability to build data center products in the first quarter, but the company is building strategic inventory to reduce risk.

For semiconductor, Kelley said stronger customer forecasts increased management’s confidence in a strong second half of 2026, supported by downstream investments in advanced logic and memory capacity. In Q&A, he pointed to broad adoption of eVoS, eVerest, and NavX technologies and argued they position the company for structural share gains, particularly as customers face yield and throughput challenges at sub-2-nanometer nodes. Oldham said the company met its goals for these new products in 2025, with “double-digit millions” of revenue contribution, and expects higher revenue in 2026 as qualifications progress and production ramps.

In industrial and medical, management said demand has been improving as inventories normalize. Oldham said Q1 is expected to be seasonally softer, implying a “flattish” quarter, but the company expects growth over the course of 2026, with macroeconomic conditions as a key variable. Kelley said the company’s investments during the downturn have strengthened its design-win pipeline and should support share gains.

Q1 guidance: revenue around $500 million; EPS about flat amid higher tax rate

For the first quarter of 2026, Advanced Energy guided to revenue of approximately $500 million ± $20 million, with sequential growth expected primarily from semiconductor. Gross margin is expected to remain around Q4 levels in the 39.5%–40% range on similar volume. Operating expenses are expected to be roughly flat quarter-over-quarter, with higher R&D investments and lower SG&A.

Oldham said the company is now modeling a non-GAAP tax rate of 16%–17% going forward. As a result, Q1 non-GAAP EPS is expected to be about flat at $1.94 ± $0.25, reflecting higher operating income but a more normalized tax rate. The EPS guidance assumes 39.7 million shares due to the company’s stock performance and the dilutive effect of a convertible note.

Management reiterated its expectation to move gross margin above 40% in 2026, with timing dependent on volume and mix, and said it continues to see a path to a long-term gross margin goal of 43% despite tariffs and a higher data center mix.

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.