Qnity Q2 2026 earnings: Revenue rises 22% as GAAP profit falls

Qnity (NYSE: Q) reported Q2 2026 net sales of $1.429 billion, up 22% from $1.170 billion a year earlier, while diluted GAAP EPS fell 34% to $0.59 from $0.90. For the quarter ended June 30, adjusted EPS increased 53% to $1.19 and adjusted operating EBITDA rose 24% to $431 million, supported by growth in both operating segments. The main contrast was between higher adjusted earnings and lower GAAP profit, as interest expense, transformation charges and other costs absorbed the increase in gross profit.

Core financial results

Revenue growth was entirely organic at 22%. A 23% increase in volume was partly offset by a 1% decline from local pricing and product mix, while currency had no net effect on total reported growth.

Gross profit increased 23%, slightly faster than sales, lifting the calculated GAAP gross margin by approximately 0.5 percentage points. However, higher expenses below gross profit caused GAAP net income and EPS to decline even as adjusted earnings increased.

For non-GAAP comparisons, the Q2 2025 pro forma measures reflect interest expense, standalone costs and agreements related to the DuPont spin-off as if the separation had occurred on January 1, 2025.

Business and segment performance

Interconnect Solutions was the larger growth contributor, adding $159 million of revenue and expanding 30%. Semiconductor Technologies added $100 million and grew 16%, resulting in growth across both segments but at notably different rates.

Interconnect’s organic growth came from a 28% increase in volume, with no contribution from pricing or product mix. Semiconductor Technologies recorded 18% volume growth, partly offset by a 1% decline in pricing and mix and a 1% currency headwind.

Asia Pacific remained the largest geographic market, with sales rising 24% to $1.139 billion. Americas sales increased 16% to $185 million, while EMEA sales grew 11% to $105 million.

Higher standalone costs outweighed gross-profit growth under GAAP

Qnity generated $126 million more gross profit than a year earlier, but income before taxes declined by $56 million to $199 million. Several expense increases more than absorbed the additional gross profit: selling, general and administrative expenses rose to $200 million from $154 million, transformation and integration charges increased to $42 million from $2 million, and other expense increased to $27 million from $4 million.

Interest expense was another major difference, reaching $61 million compared with none in the prior-year statement. These items contributed to a decline in GAAP net margin to 9.5% from 16.9%, even as the adjusted operating EBITDA margin improved to 30.2%.

The adjusted measures use different definitions. Adjusted earnings excludes significant items, intangible amortization, certain pension or post-employment items and indirect legacy costs, while adjusted operating EBITDA also excludes interest, depreciation and amortization. Investors therefore need to track both the underlying operating trend and the costs that continue to affect reported earnings.

Working capital and capital spending reduced first-half cash generation

Cash-flow figures were provided for the six months ended June 30 rather than Q2 alone. First-half operating cash flow declined to $376 million from $480 million, while capital expenditures increased to $212 million from $153 million. On a simple operating-cash-flow-minus-capex basis, cash generation was approximately $164 million, compared with approximately $327 million a year earlier.

Working capital was an important factor. Accounts receivable used $152 million of cash versus $28 million in the prior-year period, while inventory used $77 million versus $41 million. A $134 million contribution from accounts payable partly offset those outflows.

Qnity ended June with $961 million in cash and cash equivalents, up from $915 million at the end of 2025. Long-term debt was nearly unchanged at $3.997 billion, compared with $4.003 billion at year-end.

Full-year 2026 guidance

Qnity raised its full-year guidance following the second-quarter performance and what management described as continued customer engagement and demand across end markets. The release did not provide the previous ranges, so the size of the increase cannot be quantified from the supplied information.

Adjusted free cash flow excludes specified legacy, IT independence, transformation and unusual cash items. It is therefore not directly comparable with the simple first-half operating cash flow less capital expenditures calculation above.

Management’s view

CEO Jon Kemp attributed the quarter’s growth to execution across both segments and Qnity’s involvement in customers’ next-generation technology platforms. Management expects the semiconductor industry’s shift toward smaller and more vertically stacked chip designs to require more process steps, layers and materials, supporting demand for Qnity’s portfolio. It also identified AI, high-performance computing and advanced connectivity as important end-market drivers.

Recent insider transactions

The supplied six-month insider summary shows 68,064 shares acquired across 20 transactions and 918 shares sold across three transactions, for net purchases of 67,146 shares. The latest reported records include two sales and several stock awards; awards should not be interpreted as open-market purchases.

Risks investors need to watch

• GAAP cost pressure: Interest expense, transformation charges, indirect legacy costs and other expenses could continue to create a substantial gap between GAAP and adjusted results.
• Cash conversion: First-half operating cash flow declined as receivables and inventory consumed more cash, while capital spending increased. This makes progress toward the adjusted free-cash-flow guidance an important operating measure.
• Demand dependence: The higher guidance relies on continued customer engagement and demand across semiconductor, AI, high-performance computing and connectivity markets.
• Geographic exposure: Asia Pacific generated approximately 80% of quarterly sales. Trade restrictions, sanctions or geopolitical disruptions could therefore have a material effect on revenue and operations.
• Post-spin execution: Qnity continues to incur transformation, standalone and legacy-related costs, and the timing and ultimate benefits of those activities remain important to reported profitability.

Summary

Qnity’s second-quarter sales and adjusted earnings increased as both segments delivered volume-led growth, with Interconnect Solutions expanding fastest. GAAP profit moved in the opposite direction because higher interest, transformation and other expenses outweighed the increase in gross profit. The raised full-year outlook points to continued near-term demand, while cash conversion, standalone costs and the gap between GAAP and adjusted performance remain the main areas to monitor.