Knowles (KN) Q3 2026 Earnings Call: Umsatz steigt um 20 %, Precision Devices führt Wachstum an

Die Knowles Corporation (NYSE: KN) verzeichnete im 3. Quartal 2026 einen Umsatz von 184 Millionen US-Dollar. Dies entspricht einem Anstieg von 20 % gegenüber dem Vorjahreszeitraum und liegt über dem oberen Ende der eigenen Prognosespanne. Das Segment Precision Devices war der Hauptwachstumstreiber, während ein starker Auftragseingang und begrenzte Kapazitäten den vorläufigen Ausblick der Unternehmensführung für 2027 prägten.

Wichtigste Erkenntnisse

• Der Umsatz im 3. Quartal stieg im Jahresvergleich um 20 % auf 184 Millionen US-Dollar. Das Ergebnis je Aktie (EPS) legte um 15 % auf 0,38 US-Dollar zu, während der operative Cashflow 45 Millionen US-Dollar erreichte.
• Der Umsatz des Segments Precision Devices wuchs um 33 % auf 117 Millionen US-Dollar, getrieben von der Nachfrage in den Märkten Medizintechnik, Verteidigung, Industrie und Elektromobilität.
• Precision Devices verzeichnete ein Book-to-Bill-Verhältnis von 1,5 und einen Auftragseingang von fast 180 Millionen US-Dollar. Laut Unternehmensführung werden aktuelle Aufträge bereits für das erste Halbjahr 2027 eingeplant.
• Für das 4. Quartal erwartet Knowles einen Umsatz von 180 bis 190 Millionen US-Dollar und ein EPS von 0,39 bis 0,43 US-Dollar. Gemessen an den Mittelwerten entspricht dies bei beiden Kennzahlen einem Anstieg von 14 % gegenüber dem Vorjahr.
• Zusätzliche Kapazitäten in den meisten Produktlinien von Precision Devices sollen Ende des 1. Quartals 2027 in Betrieb genommen werden und im zweiten Halbjahr 2027 vollständig zur Verfügung stehen.
• Das Management sieht innerhalb von zwei bis drei Jahren einen Weg zu einer bereinigten EBITDA-Marge von 30 %, getragen von einer jährlichen Steigerung der Bruttomarge und operativem Skaleneffekt.

Wichtige Finanzdaten

Alle Finanzangaben beziehen sich auf Nicht-GAAP-Basis der fortgeführten Geschäftsbereiche, ausgenommen der operative Cashflow, sofern vom Unternehmen nicht anders angegeben.

Geschäftliche und operative Entwicklung

Precision Devices

Precision Devices war der Hauptwachstumstreiber. Der Umsatz stieg um 33 %, da die Nachfrage in allen vier Hauptendmärkten zulegte: Medizintechnik, Verteidigung, Industrie und Elektromobilität.

Im Bereich Medizintechnik gewannen Impuls-Folienkondensatoren weiter Marktanteile bei Anwendungen für Defibrillatoren und Strahlentherapie. Keramikkondensatoren sicherten sich Design-Wins bei medizinischen Bildgebungssystemen der nächsten Generation und implantierbaren Geräten.

Die Nachfrage im Verteidigungssektor blieb bei Hochfrequenzfiltern (RF-Filter), Folienkondensatoren und Keramikkondensatoren für Munition und Kommunikationstechnik weiterhin stark. In den Industriemärkten verzeichneten Keramikkondensatoren und Kondensatorbaugruppen eine steigende Nutzung in Plasmageneratoren für Halbleiterausrüstungen.

Der Auftragseingang belief sich auf fast 180 Millionen US-Dollar, was zu einem Book-to-Bill-Verhältnis von 1,5 führte. Dies beinhaltete einen zuvor bekannt gegebenen RF-Filter-Auftrag über 15 Millionen US-Dollar für einen Kunden aus dem Verteidigungsbereich mit einer vorgesehenen Lieferzeit von 36 Monaten.

Knowles erweitert die Kapazitäten in den meisten Produktlinien von Precision Devices. Das Management rechnet damit, dass die ersten Erweiterungen Ende des 1. Quartals 2027 ans Netz gehen und im zweiten Halbjahr 2027 voll verfügbar sind. Bis dahin arbeitet das Segment nahe an der Kapazitätsgrenze.

MedTech & Specialty Audio

Der Umsatz im Bereich MedTech & Specialty Audio stieg um 4 % auf 67 Millionen US-Dollar. Das Management führte einen Teil der Nachfrage im Quartal darauf zurück, dass Kunden aus dem Bereich Hörgesundheit KI-gestützte Produkte etwas früher als üblich auf den Markt brachten.

Für 2027 erwartet die Unternehmensführung, dass das Geschäft mit Hörgesundheit im gewohnten historischen Rahmen wachsen wird. Allerdings dürfte der Wegfall margenschwacher Stanzteilumsätze zu einer Belastung des Segmentumsatzes von 2 % bis 3 % führen, die sich vor allem auf das erste Halbjahr konzentriert. Trotz dieses Drucks erwartet das Management für das Gesamtjahr ein Segmentwachstum von etwa 2 % bis 4 % und deutete an, dass sich die Bruttomarge gegenüber 2026 um rund einen Prozentpunkt verbessern könnte.

Das Geschäft mit Micro Solutions erzielte im Jahr 2025 einen Umsatz von rund 1 Million US-Dollar und soll 2026 nahezu 3 Millionen US-Dollar erreichen. Das Management sieht Potenzial für mehr als 5 Millionen US-Dollar im Jahr 2027 und über 10 Millionen US-Dollar im Jahr 2028.

Kapitalallokation und Margenausweitung

Im 3. Quartal kaufte Knowles eigene Aktien im Wert von 25 Millionen US-Dollar zurück und reduzierte die Bankverbindlichkeiten um 15 Millionen US-Dollar, während das organische Wachstum weiterhin finanziert wurde.

Laut Management führen Automatisierung und operative Verbesserungen zu einer Margensteigerung im ehemaligen Spezialfoliengeschäft von Cornell. Die Bruttomarge lag bei der Übernahme bei etwa 27 % bis 28 % und soll Ende 2026 im mittleren 30-%-Bereich liegen, mit Perspektive auf über 40 %.

Das Unternehmen verfolgt zudem potenzielle Übernahmen, die nach Ansicht der Unternehmensführung das organische Wachstum ergänzen könnten; es wurde jedoch keine konkrete Transaktion angekündigt.

Prognose des Managements

Gemessen am Mittelwert sollen Umsatz und EPS im 4. Quartal im Jahresvergleich jeweils um 14 % steigen. Das Management erklärte, der EPS-Ausblick spiegele einen geschätzten Anstieg des bereinigten EBITDA um 20 % wider, der teilweise durch das Fehlen eines im 4. Quartal 2025 verbuchten einmaligen Steuervorteils von 0,03 US-Dollar ausgeglichen wird.

Für das Gesamtjahr 2026 erwartet Knowles am Mittelwert der Prognosespanne ein Umsatzwachstum von 16 % und ein Wachstum des bereinigten EBITDA von 24 % gegenüber 2025. Die Investitionen für das Gesamtjahr dürften schätzungsweise etwa 5 % des Umsatzes entsprechen.

Im Jahr 2027 dürften die Investitionen auf 5 % bis 7 % des Umsatzes steigen, da Knowles die Kapazitäten im Bereich Precision Devices ausbaut. Das Management geht davon aus, dass das organische Wachstum weiterhin über den auf dem Investorentag im Mai 2025 vorgestellten Umsatzzielen liegen wird.

Das Management erwartet außerdem eine jährliche Verbesserung der Bruttomarge um rund 100 Basispunkte, gestützt durch Preisgestaltung, Kapazitätsauslastung und Fabrikproduktivität. Ein zusätzlicher operativer Skaleneffekt von 50 bis 100 Basispunkten könnte dazu beitragen, dass die bereinigte EBITDA-Marge von über 25 % Ende 2026 innerhalb von zwei bis drei Jahren auf 30 % steigt.

Risiken und wichtige Beobachtungspunkte

• Precision Devices arbeitet nahe an der Kapazitätsgrenze, was das sequenzielle Wachstum begrenzen könnte, bis im Laufe des Jahres 2027 neue Kapazitäten zur Verfügung stehen.
• Das Management rechnet damit, dass der Umsatz von Precision Devices Anfang 2027 im Vergleich zum Vorquartal annähernd unverändert bleiben wird, ungeachtet des starken Wachstums im Jahresvergleich.
• Der Wegfall der Stanzteilumsätze wird den Umsatz von MedTech & Specialty Audio insbesondere im ersten Halbjahr 2027 belasten; das Management rechnet jedoch mit geringen Auswirkungen auf das EBIT, da dieses Geschäft auf Cost-Plus-Basis betrieben wurde.
• Frühere Produkteinführungen im Bereich Hörgesundheit verschoben einen Teil der Nachfrage in das 3. Quartal 2026, was die übliche Saisonalität veränderte.
• Das Management nannte Halbleiterausrüstungen als industriellen Endmarkt, bei dem die Nachhaltigkeit der aktuellen Nachfrage weniger gewiss ist.
• Ein Nachfolgeauftrag im Energiebereich ist möglich, das Management warnte jedoch davor, dass nach Abschluss des aktuellen Auftrags eine Lücke entstehen könnte.

Highlights der Analysten-Fragerunde

Laut Management könnte der Gesamtumsatz des Unternehmens im 1. Quartal 2027 im Vergleich zum Vorquartal leicht sinken, wobei die Schätzung eines Analysten von etwa 1 % bis 2 % als angemessene Annahme bezeichnet wurde. Das Unternehmen rechnet weiterhin mit einem starken Wachstum im Jahresvergleich, da Precision Devices kapazitätsmäßig begrenzt ist und MedTech & Specialty Audio vom Ausstieg aus den Stanzteilumsätzen betroffen ist.

Der Energieauftrag ist vollständig hochgefahren und entwickelt sich in Bezug auf Produktion und Margen wie erwartet. Knowles rechnet mit weiteren sechs bis sieben Quartalen an Lieferungen. Das Management bestätigte Gespräche über Nachfolgechancen, die 2028, 2029 und darüber hinaus Aufwärtspotenzial bieten könnten, nannte jedoch keinen verbindlichen Auftragsausblick.

Zur Nachhaltigkeit der Nachfrage erklärte das Management, man sehe keine Anzeichen für einen wesentlichen Aufbau von Sicherheitsbeständen in den medizinischen Märkten. Zudem führten Vertriebspartner keine überschüssigen Lagerbestände, die mit dem Niveau von 2022 vergleichbar wären. Die Nachfrage im Verteidigungsbereich könnte sich in den nächsten 12 bis 18 Monaten beschleunigen, so das Management, während Medizin und Verteidigung – einschließlich Hörgesundheit – etwa 60 % des Unternehmensumsatzes ausmachen.

Neben den Kernprodukten hob Knowles Micro Solutions, Impulskondensatoren, Dämpfungsglieder und Induktivitäten als potenzielle Treiber für die Erweiterung des adressierbaren Gesamtmarktes hervor. Das Management rechnet damit, im Laufe des Jahres 2027 detailliertere Ziele vorzulegen.

Vollständiges Transkript der Telefonkonferenz zu den Quartalszahlen

Vollständiges Transkript der Telefonkonferenz

Ausführungen des Managements

Operator

Hello, everyone. Thank you for joining us, and welcome to the Third Quarter Knowles Corporation Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Sarah Cook, Vice President of Investor Relations. Sarah, please go ahead.

Sarah Cook

Thank you, and welcome to our third quarter 2026 earnings call. I'm Sarah Cook, Vice President of Investor Relations, and presenting with me today are Jeffrey Niew, our President and CEO; and John Anderson, our Senior Vice President and CFO. Our call today will include remarks about future expectations, plans and prospects for Knowles, which constitute forward-looking statements for purposes of the safe harbor provisions under applicable federal securities laws.

Forward-looking statements in this call will include comments about demand for company products, anticipated trends in company sales, expenses and profits and involve a number of risks and uncertainties that could cause results to differ materially from current expectations. The company urges investors to review the risks and uncertainties in the company's SEC filings, including, but not limited to, the annual report on Form 10-K for the fiscal year ended December 31, 2025, periodic reports filed from time to time with the SEC and the risks and uncertainties identified in today's earnings release.

All forward-looking statements are made as of the date of this call, and Knowles disclaims any duty to update such statements, except as required by law. In addition, pursuant to Reg G, any non-GAAP financial measures referenced during today's conference call can be found in our press release posted on our website at knowles.com and in our current report on Form 8-K filed today with the SEC. This will include a reconciliation to the most directly comparable GAAP measure.

All financial references on this call will be on a non-GAAP continuing operations basis with the exception of cash from operations or unless otherwise indicated. We've made selected financial information available on webcast slides, which can be found in the Investor Relations section of our website. With that, let me turn the call over to Jeff, who will provide details on our results. Jeff?

Jeffrey Niew

Thanks, Sarah, and thanks to all of you for joining us today. To start out, I would like to take a moment to thank the Knowles team for delivering an outstanding third quarter. We had strong performance across our business as demonstrated by our key financial metrics. Revenue was $184 million, up 20% year-over-year and above the high end of our guided range. EPS was $0.38 and cash generated from operations was $45 million, both at the high end of our guided range. These results reflect the strength of our execution and the positive momentum across our business. I believe our results continue to demonstrate that our focus on markets and products where we have significant competitive advantages is paying dividends and positions us well for future growth.

In Q3, MedTech & Specialty Audio revenue was $67 million, up 4% year-over-year. Hearing health OEM customers typically launch new products annually in Q4. This year, however, we believe our customers' new products, which are implementing AI features, drove demand slightly earlier than usual. While this change in seasonality accelerated sales to earlier in the year, we continue to expect the hearing health market to grow at historical rates in 2026.

Precision Devices delivered Q3 revenue of $117 million, up 33% year-over-year with strong demand across every major product line and end market we serve: MedTech, defense, industrial and electrification. Our close collaboration with customers continues to drive a robust pipeline of design wins as customers continue to choose our innovative and differentiated solutions. I believe our year-over-year growth demonstrates the strength of our strategy and the momentum across the business.

On a base of strong revenue growth, orders remained robust. Precision Devices had a book-to-bill of 1.5 in Q3 with broad-based order strength across our key end markets, both among OEMs and with our distribution partners. Q3 orders in the PD segment were nearly $180 million, well above Q2 orders, reinforcing my confidence in continued growth. As noted on the Q2 earnings call, there was a $15 million order early in Q3 for RF filters for a defense customer that will be delivered over the next 36 months.

I will now provide a little more color on the revenue and order strength across our PD end markets. In MedTech, our pulse power film capacitors continue to win in defibrillator and radiotherapy applications, while our ceramic capacitors are securing strong design wins in next-generation medical imaging and implantables. In defense, demand remains strong across all our product categories. Our RF filters, film and ceramic capacitors are in high demand in munitions and communications applications. We also serve a broad range of applications in industrial markets. As an example, our ceramic capacitors and capacitor assemblies are growing in use for plasma generators in semiconductor equipment.

With strong orders, a healthy backlog and continued design wins, we are in the process of adding capacity across most of our Precision Devices product lines to support the demand. I expect this additional capacity to begin to come online in late Q1 with it being fully available in the second half of 2027. Our ability to continue to expand and meet increasing demand for our products is supported by our strong cash generation from operations. We have the ability to invest in growth while returning capital to shareholders and reducing debt.

In the third quarter, we repurchased $25 million in shares and reduced outstanding bank borrowings by $15 million in addition to funding organic growth initiatives. Our strong balance sheet positions us well to support organic growth through disciplined capital investment and still pursue strategic accretive acquisitions.

Before turning the call over to John to cover our financial results and provide our Q4 guidance, I would like to share my initial perspectives on 2027. Our strategy of combining unique technologies to create custom engineered solutions and then quickly ramping them at scale with a world-class operational capability is driving revenue growth in our core products and markets, margin expansion and strong cash flow.

In 2027, as we add capacity, new design wins ramp and we fulfill our healthy backlog within our PD segment and our MSA segment continues to perform at historical growth levels, we expect organic growth to continue to exceed the revenue targets presented at our May 2025 Investor Day. I also believe we will be entering the next phase of revenue growth beyond our core, where we expect to have meaningful expansion of our SAM through the growth initiatives we outlined at our Investor Day.

By following the same playbook we used in our core of investing in innovative technologies, using these technologies to develop customized solutions to solve our customers' problems and then scaling into high-volume production, we expect 3 fundamental paths to supplementing our core growth. First, we are developing new products such as attenuators and inductors for our existing markets. This is a great opportunity to provide a wider array of solutions to the markets and customers we already serve.

Second, we are utilizing existing technologies and capabilities for new customers and markets as we are doing with our [ Micro Solutions ] group and with pulse power capacitors. The breadth of opportunities we are pursuing that leverage our core competencies continues to expand with limited expansion of OPEX to support this new business. Lastly, we are seeing the opportunity to meaningfully grow content with existing products and technology at current customers as we have discussed in hearing health and with integrated capacitor solutions.

All these initiatives are expected to meaningfully expand our SAM, will complement our strong core, and I look forward to providing a more detailed outlook and updates on these initiatives and others in 2027. Now let me turn the call over to John for our financial results and our Q4 guidance.

John Anderson

Thanks, Jeff. We reported third quarter revenues of $184 million, up 20% from the year-ago period and above the high end of our guidance range. EPS was $0.38 in the quarter, up $0.05 or 15% from the year-ago period and at the high end of our guidance range. Cash provided by operating activities was $45 million, also at the high end of our guidance range.

In the MedTech & Specialty Audio segment, Q3 revenue was $67 million, up 4% compared with the year-ago period. Gross margins were 51.9%. The Precision Devices segment delivered third quarter revenues of $117 million, up 33% from the year-ago period. Increased demand from both OEM customers and our distribution channel partners resulted in strong growth in the 4 major markets we serve: MedTech, defense, industrial and electrification. Segment gross margins were 41.6%, up 10 basis points from the third quarter of 2025 on higher volume, partially offset by unfavorable inventory adjustments.

On a total company basis, R&D expense in the quarter was $10 million, up $1 million compared to Q3 2025 on higher project spending in both MSA and PD segments. SG&A expenses were $30 million, up $4 million from prior year levels, driven primarily by higher sales commissions, higher incentive compensation expense and increased headcount as we pulled forward hiring primarily to support increased customer demand and new product initiatives. Interest expense for the quarter was $1.6 million, down $700,000 from the third quarter of 2025 due to lower average debt balances.

Now I'll turn to our balance sheet and cash flow. In the third quarter, we generated $45 million in cash from operating activities and capital spending was $7 million. During the third quarter, we repurchased 695,000 shares at a total cost of $25 million. We exited the quarter with cash of $47 million and $116 million of borrowings under our revolving credit facility. Lastly, our net leverage ratio based on trailing 12 months adjusted EBITDA was 0.4x, and we have liquidity of more than $330 million as measured by cash plus unused capacity under our revolving credit facility.

Moving to our Q4 guidance. For the fourth quarter of 2026, revenues are expected to be between $180 million and $190 million, up 14% year-over-year at the midpoint. R&D expenses are expected to be between $10 million and $12 million. Selling and administrative expenses are expected to be within the range of $29 million to $31 million. We're projecting adjusted EBIT margin for the quarter to be within the range of 23% to 25%. Interest expense in Q4 is estimated at $1.5 million, and we expect an effective tax rate of 15% to 19%.

We're projecting EPS to be within the range of $0.39 to $0.43 per share, up $0.05 or 14% year-over-year at the midpoint, driven by a 20% increase in adjusted EBITDA, partially offset by the absence of a $0.03 discrete tax benefit, which was included in Q4 2025. This assumes weighted average shares outstanding during the quarter of 87 million on a fully diluted basis.

We're projecting cash from operating activities to be within the range of $60 million to $70 million. Capital spending is expected to be $8 million. We expect full year capital spending to be approximately 5% of revenues. Looking ahead, we expect capital spending to be above our historic range of 3% to 5%, increasing to 5% to 7% of revenues in 2027 as we continue to make investments in capacity to support increased customer demand in the Precision Devices segment.

The strong growth and financial results we've achieved through the first 3 quarters of '26, combined with a robust backlog and increased order activity, give me confidence in our ability to deliver 2026 revenue growth of 16% at the midpoint of our guidance range and adjusted EBITDA growth of 24% over 2025 levels, with both metrics well above the high end of the target ranges that we provided at our May 2025 Investor Day.

I'll now turn the call back over to the operator for the Q&A portion of our call.

Operator?

Operator

[Operator Instructions] Your first question is from the line of Anthony Stoss with Craig-Hallum.

Fragen und Antworten

Anthony Stoss

Congrats again on just solid and continued execution. Jeff, I'd love to hear your thoughts. You gave a little bit of a preamble on 2027. Maybe you can expand on that a little bit in terms of order visibility kind of entering into the first half of 2027. Then I have a couple of follow-ups.

Jeffrey Niew

Yes. So let me just say at a top level, if you look sector by sector or market by market that we're in, what we're seeing is just extremely high design activity. And whether it be for faster, more precision, getting more output, new innovative features, all the applications we're involved in, people are asking for more customized stuff. It's a trend that we're just clearly seeing now. And our product portfolio is well positioned to take advantage of this. I mean it's very well positioned.

Now to take it to '27, let me break it down by the segments, right? First, MSA. MSA, we expect next year, the hearing health business is going to perform at historical levels again. We will have a little bit of a headwind, I'd say, primarily in the first half. I think we mentioned this before on stamping that we had this -- when we sold the consumer business, we have a supplier. We're at the last time buy at the end of this year. There'll be no revenue, and that's about a headwind of about 2% to 3% next year, especially more in the first half, I would say, than the back half. But the Micro Solutions business, as we talked about, should start accelerating in the back half. So overall, we'll still probably be in that 2% to 4% for the full year, although it might be down a little bit in the first half.

Now PD, let's say, the book-to-bill, again, in the second quarter was very strong. But the orders we're taking now, it was 1.5 in Q3. The orders we're taking in Q3 are already being scheduled into the first half of next year. But we are at a point where we are pretty close to capacity constraint. So while we're going to have very strong year-over-year growth in the first half with PD, I think sequentially, it's going to be relatively flat because of capacity constraints.

And so I think that's probably the one thing. And one thing I think on -- just to be clear on the MSA thing, yes, it may be a little bit of a headwind to stamping. But remember that stamping was on a cost-plus basis. It doesn't generate a lot of EBIT. So it won't affect the EBIT and the margin should be better.

John Anderson

Yes. I think gross margins, Tony, this year, we've talked about kind of for MSA in that low 50% range, and expect that maybe a little 1% or so higher in '27 over '26.

Jeffrey Niew

So bottom line is on this, we expect strong year-over-year growth in the first half. But sequentially, it's probably going to be -- especially in the first quarter, might be slightly down, like PD being flat sequentially because of capacity constraints with MSA being slightly down.

Anthony Stoss

Just to be clear, and maybe this is a better question for John. Last year, it seems like seasonal, your March quarter was typically down 5% sequentially. Are you saying it's only going to be down a little bit, like 1%, 2% sequentially?

Jeffrey Niew

I think that's a fair guess, somewhere in that -- it's slightly down sequentially based on the guide that we have...

John Anderson

Tony, were you talking about the MSA segment or total Knowles?

Anthony Stoss

Total Knowles.

Jeffrey Niew

Yes. It will be down slightly sequentially, but still, if you look at the year-over-year number, it's way up. And again, MSA being slightly down, right, because of the stamping business going away, PD being flat capacity constrained because we're pretty much running all out.

Anthony Stoss

Got it. No, it's a good problem to have. And then my last question, Jeff, I'd love to hear kind of an update on the energy order, the trajectory and what you're seeing from that customer.

Jeffrey Niew

Yes. I mean the business is fully ramped. We're outputting like as expected. And so now we've got about 6, 7 more quarters of delivery of this order. I think if I look at the numbers, it's performing in terms of the margins and the output as expected. I really put -- I really call out to the team. I mean this was like a Herculean effort to ramp with this speed and this amount of volume, but it's going very well.

Operator

Your next question is from the line of Christopher Rolland with Susquehanna.

Christopher Rolland

Mine is around looking at Knowles kind of through the cycle here. I think everybody is benefiting from the cycle, longer lead times, longer bookings, people worrying about short capacity and perhaps even safety stock building. How much do you think this is a part of your business? Or conversely, do you think what we're seeing here is really more representative of something through cycle? Maybe if you could put the larger picture in focus for us.

Jeffrey Niew

So let me just first say based on the markets. If I think about the markets that we participate in, and I think I said this, in medical, I do not see that there's safety stock or that this is going to grow through a cycle. We've got a lot of great new design wins. I think it's sustainable. We're not seeing in medical that there's a concern here.

Then I go to defense, I would argue that there's probably an opportunity for an acceleration from even where we are in terms of defense in the next 12 to 18 months as budgets around the world are increasing for both the U.S. as well as allies, the replacement of munitions, there's a lot of things going on here that says that this is going to continue to maybe even accelerate. And so that's about 60% of our business or so right there as a company.

Electrification is what it is, and is -- I would say, we still expect growth next year. We have some EV business. We expect that to be up again next year. We've got a lot of great design wins as well as the energy order. I don't see a lot of concerns there. So it really comes back down to industrial. And if you look at it, there are some pockets here where I would sit there and say, okay, maybe this isn't sustainable, like semiconductor equipment, how long will that last?

But we are not really overly reliant on one market. And I can tell you, when I look at our distribution partners, they do not have a lot of inventory. They're not holding excess inventory like we saw happen in '22. And I think this goes back to kind of the discussion of what's different between back then and '22. In '22, we had lead times of 15 weeks and some of the competitors, like say, ceramic capacitor guys had 60-week lead times. Our lead times are now long, not driven by AI. They're driven by our demand in our core markets. And so I think, generally speaking, we're going to be pretty good going forward through the cycle.

John Anderson

Chris, just to clarify, too, that Jeff mentioned roughly 60% of our business is Med and defense and Med includes the hearing health business.

Christopher Rolland

Yes. Yes. Okay. Perfect. And then as I look at some of the implied fourth quarter stuff around gross margin, it looks like that's up nicely. Maybe any puts and takes into next year as well, that would be appreciated.

John Anderson

Chris, you're right. I mean in terms of gross margin, if you kind of take the guidance, the components of the guidance that I gave, you can back into gross margin, and it's just above 46% at the midpoint of the guidance that I gave. I think there's room to continue to expand gross margins. Our target is 100 basis points a year. But kind of exiting this year, again, the guidance I provided is just a touch above 46%, but there is room to increase that next year.

Jeffrey Niew

Yes. I would just add one more thing, Chris, on that, as I'm kind of looking at the numbers here. I think we're going to exit above -- well above 25% on EBITDA margins this year. And I think John said this before, but I mean, we clearly see the path over the midterm now to get to 30% EBITDA margins.

John Anderson

Yes. If you take what I said, the gross margin alone, we think there's 100 basis points of improvement annually. And then we're going to get operating leverage of 50 to 100 basis points with the growth that we have. So yes, you can see a path there within 2 to 3 years going from where we are just a little north of 25% this year to 30%.

Operator

Your next question is from the line of Tristan Gerra with Baird.

Tyler Bomba

This is Tyler Bomba on for Tristan. Looking into 2027, could you give us a sense of which of the newer growth platforms that you outlined in the prepared remarks are closest to contributing meaningful revenue? Are you starting to get production orders that give you better visibility on the timing across those different platforms?

Jeffrey Niew

Yes. So here's what I'd say is I'll give you a little bit of color on this, but I think this is going to be a great topic for an Investor Day sometime next year, right, as we kind of move forward. But let me kind of talk about it a little bit.

First, I'd say if you look at our Micro Solutions group from MSA, we really have now a list as long as my arm of opportunities. We're really starting to actually have to kind of push back on customers. We talked about this. We had about $1 million worth of revenue in 2025. We'll have $2 million to $3 million, probably going to closer to $3 million this year. I see a clear path north of $5 million next year. And then if you look in '28, it should be north of $10 million and maybe even more. And so I'd say that one is really coming along well.

I would sit there and say the pulse power opportunity, it's a matter now of really of our execution. There are so many new applications, whether it be downhole applications, there's all different types of things in terms of even beyond the energy that we've discussed kind of a lot. So I think -- and that's ready to go. And I mean, it's a question of when the customers will start ordering in some of these new applications.

I'm really encouraged. I mean, like we have not talked about this at all. We introduced a line of attenuators, now this is primarily for defense, takes some time, but super encouraged by the initial reaction we're getting from attenuators. I'm super encouraged by inductors. So a lot of good stuff coming here.

I think I would just say this, what we're seeing is a meaningful expansion of our SAM with all these things we're doing beyond the core that will supplement that growth. And that's why we're feeling more and more compelled to kind of call that out. I think we'll raise some numbers around that probably sometime in the new year.

Tyler Bomba

Great. Well, looking forward to that. With -- for my follow-up, with the energy order now fully ramped, are you seeing discussions around follow-on orders or similar applications with different customers that could sustain growth beyond this initial $75 million order?

Jeffrey Niew

Let me give you the short answer. Yes. Let me give you a little more color, a little bit longer answer. I think we're still 6 to 7 quarters out from completing this order. I think there's a possibility that we get another order like that follows right on, but there may be a small gap. I think from my perspective, we have so many growth opportunities that are even beyond this energy order. I think not that I don't want to focus on this because this could be a big upside to our numbers in '28, '29 and beyond. But I mean, it's a great opportunity for us. And hopefully, we'll -- as we get further along in delivering this order, we'll be able to talk more about what the next -- what comes beyond.

Operator

Your next question is from the line of Bob Labick with CJS.

Bob Labick

Congratulations on really strong results. Also exciting news that you're adding capacity here due to all the demand and that you're kind of bumping up. And obviously, we've talked about the energy order on the call already. You've stood up a fully automated production facility recently kind of state-of-the-art for this energy order. What have you learned from that process? And how can you apply that to the incremental capacity you want to add and also just other Knowles facilities already in the footprint of manufacturing?

Jeffrey Niew

I mean that's a great question, Bob. I think what we've learned from the whole ramp-up of this automation is that we have a lot of margin expansion opportunity within that factory. I think that's what we've learned. I think part of that, John has kind of alluded to that within the Cornell, former Cornell business, that we acquired, the specialty film business, we think there are great opportunities for margin expansion.

I don't know if it applies as much because we really are applying these kind of learnings to every one of our facilities as we go along. But for sure, in this area, we're going to be adding more automation in order to improve yields, lower our overhead and make the Cornell business more profitable.

I think we've alluded to this when we bought that business. It was in the 27%, 28% gross margin. It's exiting the year in the mid-30s now with a clear path above 40%. And so we're seeing all the things that we expected from that. I think what we're hoping is we can find another acquisition that is a 1 plus 1 equals 3 and be a real home run that is like another Cornell over the next year or two that really makes sense for us.

Bob Labick

And then obviously, you gave a nice initial look to 2027. And in general, in the economy and kind of the macro, there's obviously a lot of inflationary pressures right now. How is Knowles positioned based on the kind of current inflationary market? And how would this project into 2027 for you, if at all?

Jeffrey Niew

I think we're positioned very well. I think just to state, first off, we have an excellent operations team globally that focus on value creation every year. So they're looking for ways to reduce costs, reduce -- improve yields. We have that going on. That's an ongoing thing.

I think we've alluded to this. I think the pricing environment is positive and the direction we're heading with the customers with. Generally speaking, we are a critical piece of the bill of materials, but we're not an overly large portion of our bill of materials to our customers. And so moderate pricing every year increases are pretty much what we do.

I wouldn't say we do it with every customer across every single segment, but we are looking at this on a continual basis. And I think, generally speaking, we're in a very good position to be able to handle inflationary pressures. I don't know...

John Anderson

Yes. Bob, just to add to that. I mean, I talked about the potential to increase gross margins 100 basis points. The levers are really price, capacity utilization and productivity on the factory floor. Those are the 3 components. And there's a piece of both of those that will benefit us in 2027.

Operator

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.