Novanta Q2 2026 earnings: Organic growth reaches 9.3% as margins expand

Novanta (Nasdaq: NOVT) reported Q2 2026 revenue of $265.8 million, up 10.3% year over year, while GAAP diluted EPS rose to $0.30 from $0.12. Organic revenue increased 9.3%, and adjusted EBITDA grew 16.4% to $60.7 million. Operating cash flow also improved sharply, while margin performance diverged between the Automation Enabling Technologies and Medical Solutions segments.

Core earnings data

For the quarter ended July 3, 2026, foreign exchange added $2.4 million, or 1.0 percentage point, to reported revenue growth. Excluding that benefit, Novanta’s 9.3% organic growth was its highest since the first quarter of 2023.

GAAP gross margin expanded by 120 basis points, supporting faster operating-income growth. Net income increased more rapidly than operating income, aided by lower net interest expense and a narrower foreign-exchange loss.

Adjusted gross profit was $125.1 million, representing an adjusted gross margin of 47.1%, compared with 46.1% a year earlier.

Automation margin gains offset Medical Solutions compression

Both reportable segments increased revenue, but their margin trends moved in opposite directions. Automation Enabling Technologies recorded the faster revenue growth and substantial gross-margin expansion, while Medical Solutions’ gross margin declined despite higher sales.

The difference remained visible on an adjusted basis. Automation’s adjusted gross margin increased to 53.4% from 48.9%, whereas Medical Solutions’ adjusted gross margin fell to 41.1% from 44.0%. Automation’s improvement was sufficient to help lift Novanta’s companywide gross margin despite the pressure in Medical Solutions.

Profitability, cash flow, and the balance sheet

Total operating expenses increased to $102.9 million from $91.8 million. Selling, general, and administrative expense rose to $60.0 million from $47.1 million, while research and development and engineering expense declined to $24.0 million from $25.3 million. Restructuring, acquisition, and related costs were nearly unchanged at $12.5 million.

Below the operating line, net interest expense decreased to $1.1 million from $5.8 million, and the foreign-exchange transaction loss narrowed to $0.8 million from $2.7 million. These changes helped GAAP net income grow faster than operating income. Diluted weighted-average shares rose to 41.2 million from 36.1 million, which limited EPS growth relative to the increase in net income.

Operating cash flow benefited from $34.3 million provided by changes in other operating assets and liabilities, compared with a $7.4 million use of cash a year earlier. Inventory used only $0.6 million of cash, versus $14.2 million in the prior-year quarter, although accounts receivable shifted to a $5.5 million use of cash from a $9.9 million source.

Cash and cash equivalents reached $718.7 million at quarter-end, up from $380.9 million at December 31, 2025. Financing cash flow included $288.5 million of net proceeds from a private placement. Total debt declined to approximately $229.7 million from $250.8 million at year-end.

Guidance now includes Riverpoint Medical

Novanta’s Q3 and full-year guidance incorporates the expected contribution from its recently completed acquisition of Riverpoint Medical and assumes no significant change in foreign-exchange rates. The source does not provide the company’s previous guidance ranges, so the size of any revision cannot be quantified.

Management said Riverpoint roughly doubles Novanta’s recurring medical consumables business to approximately 25% of annualized sales and increases medical end-market exposure to about 60% of revenue. The company expects the acquisition to be immediately accretive to revenue growth, gross margin, EBITDA margin, and EPS.

Risks investors need to watch

• Riverpoint integration: The outlook already includes Riverpoint’s expected contribution. Delays in integration or weaker-than-expected performance could affect the revenue, margin, and EPS ranges.
• Medical Solutions margins: The segment’s GAAP and adjusted gross margins both contracted despite revenue growth. Continued pressure could offset gains in Automation Enabling Technologies.
• Foreign-exchange sensitivity: Currency movements contributed one percentage point to Q2 revenue growth, while guidance assumes no significant exchange-rate changes.
• Cash conversion variability: Q2 operating cash flow benefited materially from working-capital movements, particularly other operating assets and liabilities. The durability of that improvement will depend on future working-capital patterns.
• Order and backlog conversion: Management’s confidence is based partly on bookings, backlog, and new-product revenue. Changes in customer order timing could affect reported growth.

Summary

Novanta’s Q2 2026 results combined 9.3% organic revenue growth with wider companywide gross and adjusted EBITDA margins. Automation Enabling Technologies drove the margin improvement, while Medical Solutions remained the principal area of profitability pressure. The next points to monitor are the sustainability of cash conversion, Medical Solutions margins, and whether Riverpoint delivers the contributions already reflected in Q3 and full-year guidance.