ATI Q2 2026 earnings: AA&S margin gains support a higher outlook

ATI Inc. (NYSE: ATI) reported Q2 2026 revenue of $1.26 billion, up 11% from $1.14 billion a year earlier, while GAAP diluted EPS increased 56% to $1.09 from $0.70. Earnings grew faster than sales as pricing and product mix lifted the Advanced Alloys & Solutions segment, although quarterly operating and adjusted free cash flow declined year over year. The quarter ended June 28, 2026, and ATI released the results on August 6.

Core earnings data

Aerospace and defense remained the main revenue driver, with sales to the market increasing 13% to $862.0 million and representing 68% of total revenue. Profitability improved faster than revenue, led by higher pricing and a more favorable mix in AA&S.

ATI’s adjusted figures exclude $23.6 million of pre-tax special charges, but both GAAP and non-GAAP results include a $9.9 million gain from the sale of a previously closed AA&S manufacturing facility.

Business and segment performance

AA&S generated approximately three-quarters of ATI’s year-over-year increase in revenue and produced the larger margin improvement. HPMC continued to grow, but higher manufacturing and qualification-related costs limited its sequential margin performance.

HPMC’s growth primarily reflected strong demand and pricing for commercial jet engine products. Aerospace and defense represented 93% of segment revenue. Its margin improved modestly year over year, but declined from 24.9% in Q1 because of higher manufacturing and period costs, including costs tied to revised qualification requirements for ATI’s new Mexico facility and titanium electron-beam furnace.

AA&S benefited from higher aerospace and defense and conventional energy sales. Aerospace and defense revenue in the segment rose 34%, including a 90% increase in defense sales, reflecting higher demand and pricing. The segment’s EBITDA included the $9.9 million facility-sale gain; excluding that gain, ATI attributed the margin improvement primarily to pricing and favorable mix.

AA&S margin gains outpaced cash conversion

ATI’s adjusted earnings exclude $23.6 million of pre-tax start-up, transaction, transformation, restructuring and receivables-sale costs, compared with $7.4 million of special items a year earlier. The after-tax Q2 2026 adjustment was $18.7 million, or $0.14 per share. Meanwhile, the $9.9 million facility-sale gain contributed $0.06 per share and remained in both reported and adjusted results, making it important to separate recurring operating improvement from one-time effects.

Cash conversion did not keep pace with earnings. Managed working capital increased by $128.9 million during Q2, while inventory rose to $1.67 billion from $1.58 billion at the end of Q1. Managed working capital nevertheless declined to 34.3% of annualized sales from 34.8%, indicating that sales growth partly offset the larger dollar investment.

ATI ended the quarter with $783.0 million in cash, up from $416.7 million at the end of fiscal 2025. That increase should be viewed alongside $450.0 million of senior note issuance: current and long-term debt totaled $2.19 billion, compared with $1.75 billion at fiscal year-end. ATI also repurchased $50 million of common stock during Q2, leaving $495 million under its authorization.

Earnings guidance

ATI raised every full-year non-GAAP guidance range it provided. Management said the revised outlook is supported by contracted pricing improvements, a richer product mix and rising production volumes as investments expand available capacity. Backlog reached a record $4.4 billion, up 18% year over year.

ATI did not provide GAAP reconciliations for these forward-looking non-GAAP measures, citing the complexity and unpredictability of excluded items.

Recent insider transactions

Reported insider activity over the past six months included purchases of 9,496 shares across 11 transactions and sales of 258,808 shares across seven transactions, resulting in net sales of 249,312 shares. The following are the latest transactions for which the supplied data included a transaction amount; the records do not state the insiders’ reasons.

Risks investors need to monitor

• Capacity and qualification execution: ATI said aerospace and defense demand continues to exceed available supply. Higher costs related to revised qualification requirements already affected HPMC, and delays could limit planned volume growth or pressure margins.
• Working-capital demands: Quarterly operating and adjusted free cash flow declined despite higher earnings, while inventory and managed working capital increased in dollar terms. Continued growth may require further cash investment before production translates into collections.
• Aerospace and defense concentration: The market accounted for 68% of ATI revenue and 93% of HPMC sales. This concentration increases the effect that changes in aerospace production, defense demand or customer schedules could have on results.
• Nonrecurring items and comparability: Adjusted results excluded substantially higher special charges, while retaining the $9.9 million asset-sale gain. Future restructuring, start-up or transaction costs could create further differences between GAAP results and adjusted performance.
• Raised guidance depends on operational delivery: The higher outlook assumes contracted pricing, favorable mix and increased production from capacity investments. Qualification or manufacturing setbacks would make those targets more difficult to achieve.

Summary

ATI’s Q2 2026 results showed earnings growing considerably faster than revenue, with AA&S pricing, mix and aerospace and defense demand driving most of the improvement. The raised full-year outlook and record backlog point to continued operating momentum, but investors should monitor capacity qualification, working-capital needs and the gap between reported cash generation and profit growth.