Sotera Health Q2 2026 Earnings: Segment Growth Supports a Higher Outlook

Sotera Health (Nasdaq: SHC) reported Q2 2026 net revenue of $321.4 million, up 9.2% from $294.3 million, while diluted GAAP EPS increased to $0.19 from $0.03. Adjusted EBITDA rose 10.0% to $165.7 million, all three segments generated revenue growth, and the company raised its full-year outlook.

Core financial results

Revenue increased 8.0% on a constant-currency basis, indicating that foreign exchange provided a benefit to the reported growth rate. Pricing and improved volume and mix supported each segment, although inflation and higher costs offset part of those gains.

GAAP gross profit grew more slowly than revenue as total cost of revenue increased 12.3%. That reduced gross margin by approximately 120 basis points, even as adjusted EBITDA margin expanded by 40 basis points to 51.6%.

Adjusted EBITDA, adjusted EPS, adjusted net income and constant-currency growth are non-GAAP measures.

Business and segment performance

Nordion recorded the fastest growth and the largest margin expansion, but some of its increase reflected the timing of Cobalt-60 harvests. Sterigenics remained the largest contributor, while Nelson Labs’ higher costs limited its segment income growth.

Sterigenics benefited from favorable pricing, improved volume and mix, and foreign exchange, with inflation providing a partial offset. Its segment income grew faster than revenue, producing modest margin expansion.

Nordion’s growth was driven mainly by improved volume and mix associated with the timing of Cobalt-60 harvests, as well as favorable pricing. Foreign exchange and inflation partly offset those benefits.

Nelson Labs also generated pricing and volume improvements, but higher costs kept segment income growth at only 0.6%. Its margin improved by 438 basis points sequentially, though it remained below the prior-year quarter on an approximate basis.

Prior-year EO settlement amplified the GAAP earnings increase

The increase in GAAP net income was much larger than the underlying revenue and adjusted earnings growth. Q2 2025 included a $34 million Illinois ethylene oxide litigation settlement charge, while Q2 2026 had no comparable settlement expense.

Other favorable comparisons included an approximately $6.3 million reduction in intangible asset amortization and a similar decline in net interest expense. As a result, pretax income rose to $78.1 million from $18.9 million. Adjusted net income still increased 31.9%, showing underlying improvement, but the adjusted result was less dramatic than the increase in GAAP net income.

EO-related costs have not disappeared entirely. Professional services associated with EO sterilization facilities were $13.3 million in the quarter, compared with $14.0 million a year earlier.

Cash flow and balance sheet

Sotera Health generated $88 million of operating cash flow during Q2. For the first six months of 2026, operating cash flow increased to $117.9 million from $112.9 million, but purchases of property, plant and equipment rose to $92.6 million from $51.1 million. On a simple operating cash flow less capital expenditures basis, first-half cash generation declined to approximately $25.3 million from $61.8 million.

At June 30, total debt was approximately $2.23 billion, cash and cash equivalents were $356.7 million, and net debt was $1.88 billion. Net leverage improved to 3.0x from 3.2x at the end of 2025, reaching the upper end of the company’s long-term target range of 2.0x to 3.0x.

Available liquidity was approximately $950 million, with no borrowings outstanding under the $600 million revolving credit facility. The term-loan repricing is expected to save approximately $3.5 million in annual interest expense.

Full-year 2026 guidance

Management raised the revenue and adjusted EBITDA outlook following the first-half performance. It also improved the ranges for interest expense, the tax rate applicable to adjusted net income, and adjusted EPS, although the prior numerical ranges were not included in the release.

The outlook assumes continuity in the supply of ethylene oxide and Cobalt-60 and reflects management’s current expectations for inflation, energy prices and labor availability.

Risks investors should monitor

• EO and Cobalt-60 supply: The full-year outlook depends on continued access to these critical inputs. Disruptions or price increases could affect revenue, capacity and margins.
• Nordion timing effects: Part of Nordion’s growth came from the timing of Cobalt-60 harvests, which can make quarterly comparisons uneven.
• Nelson Labs’ cost pressure: Revenue increased, but higher costs limited segment income growth and reduced its year-over-year margin.
• EO litigation and regulation: The absence of a settlement charge helped this quarter’s GAAP comparison, but the company continues to incur EO-related professional expenses and remains exposed to legal and regulatory proceedings.
• Capital intensity and leverage: First-half capital expenditures increased substantially, while total debt remained above $2.2 billion despite the improvement in net leverage.

Conclusion

Sotera Health’s Q2 2026 results combined broad-based segment revenue growth with higher adjusted earnings and improved leverage. Nordion and Sterigenics delivered the clearest operating gains, while Nelson Labs’ costs and the decline in GAAP gross margin remain areas to watch. The raised outlook signals management’s confidence in the second half, but execution will depend on supply continuity, cost control and converting earnings into cash while maintaining elevated capital investment.