XPEL Q2 2026 Earnings: Record Revenue and a Wider Gross Margin

XPEL (NASDAQ: XPEL) reported Q2 2026 revenue of $143.1 million, up 14.7% year over year from $124.7 million, while diluted EPS increased to $0.65 from $0.59. Gross margin expanded by 1.2 percentage points and adjusted EBITDA rose 20.7%, although manufacturing investments in San Antonio and China drove a sharp increase in investing cash outflows. Asia Pacific led the geographic growth, primarily because China revenue more than doubled.

Core Financial Results

Revenue increased by $18.3 million year over year, while gross profit grew faster than sales as gross margin reached 44.1%. Operating income also outpaced revenue growth, but growth in net income attributable to stockholders was more moderate because of less favorable foreign-exchange results, higher interest expense and other below-the-line effects.

Adjusted net income was $18.8 million, or $0.68 per diluted share. The adjustments reflect acquisition-related expenses and manufacturing start-up costs identified in XPEL’s non-GAAP reconciliation.

The Q2 2026 figures were preliminary and unaudited when released.

Business and Regional Performance

Asia Pacific was the fastest-growing region, with revenue increasing 68.3% to $22.1 million. China revenue rose 106.7% to $15.9 million and contributed roughly $8.2 million, or about 45%, of XPEL’s total year-over-year revenue increase.

North America remained the largest market and grew 11.5%, while revenue declined in Europe, the UK and Africa and in India and the Middle East.

On a reported basis, product revenue increased to $111.7 million from $94.8 million, or approximately 17.8%, while service revenue rose to $31.4 million from $29.9 million, or approximately 4.9%. Using management’s alternative operating measures, adjusted product revenue grew 14.4% and normalized service revenue increased 16.0%. Window-film revenue rose 16.1% and represented 22.7% of total revenue, while installation revenue increased 10.8%.

Gross-Margin Gains Offset Spending Growth, but Net Margin Narrowed

Gross margin increased to 44.1% from 42.9%, allowing gross profit to grow faster than revenue. Operating expenses rose 16.7% and increased to 27.9% of revenue from 27.4%, but their growth remained below the 18.0% increase in gross profit. As a result, operating income grew approximately 20.3% and operating margin expanded.

Sales and marketing expense was the main source of spending growth, rising 29.7% to $15.4 million and reaching 10.8% of revenue. General and administrative expense increased 9.8% to $24.5 million, equivalent to 17.2% of revenue.

Despite the stronger operating margin, net income attributable to stockholders grew 10.7%, and its margin declined to 12.6% from 13.1%. XPEL recorded a $403,000 foreign-exchange gain, down from $1.0 million a year earlier, while interest expense rose to $262,000 from $7,000 and income tax expense increased to $5.1 million from $4.1 million. Net income attributable to non-controlling interests was also $264,000, compared with a negative $82,000 in the prior-year quarter.

Manufacturing Expansion Pushed Investing Outflows Above Operating Cash Generation

Operating cash flow improved to $30.8 million, but investing cash outflow climbed to $72.9 million from $1.3 million. The increase primarily reflected $65.1 million of property and equipment purchases related to XPEL’s San Antonio and China manufacturing investments, along with $7.1 million used for business acquisitions.

XPEL borrowed $44.8 million during the quarter, helping fund the investment program. At June 30, cash and equivalents stood at $40.7 million, down from $50.9 million at the end of 2025, while long-term debt increased to $43.5 million from zero. Property and equipment rose to $104.5 million from $15.8 million over the same period.

Other short-term liabilities increased to $20.8 million from $10.6 million, primarily because of the remaining purchase price payable for the China manufacturing facility. CEO Ryan Pape said the company had completed the first key objectives of its manufacturing expansion, though no further quantitative milestones were provided.

Revenue Guidance

XPEL expects Q3 2026 revenue of approximately $137 million to $139 million. The $138 million midpoint is approximately 3.5% below Q2 revenue, indicating sequential moderation from the record second-quarter level.

Risks Investors Should Watch

• Dependence on China-led growth: China contributed about 45% of the company-wide year-over-year revenue increase. Slower growth in that market would reduce one of Q2’s largest drivers.
• Regional weakness outside North America and Asia Pacific: Revenue declined 2.3% in the EU, UK and Africa and 5.0% in India and the Middle East, showing that growth was not broad-based across all markets.
• Operating expense growth: Sales and marketing expense rose substantially faster than revenue. Continued spending at that pace could offset further gross-margin improvement.
• Manufacturing investment and leverage: Investing outflows exceeded operating cash generation, while debt and short-term liabilities increased. The future cash impact will depend on the timing and operating progress of the new manufacturing assets.
• Sequential revenue moderation: The midpoint of the Q3 outlook is below Q2 revenue, making the pace of demand following the record quarter an important operating indicator.

Summary

XPEL’s Q2 2026 results combined record revenue, a wider gross margin and faster adjusted EBITDA growth, with China and the broader Asia Pacific region providing a significant share of the expansion. Higher sales and marketing costs and less favorable below-the-line items limited net-income growth, while manufacturing investments required new borrowing and produced substantial investing outflows. The next points to monitor are the return from those manufacturing assets, the durability of China-led growth and performance against the $137 million to $139 million Q3 revenue outlook.