Advanced Energy Raises 2026 Growth Outlook After Record Q3

Advanced Energy Industries reported record third-quarter 2026 revenue and non-GAAP earnings above the high end of its guidance, supported by broad-based growth led by semiconductor equipment and data center computing. The company raised its full-year revenue growth outlook to around 40% as demand increased across all four of its target markets.

Revenue rose 50.3% year over year and 21.3% sequentially to $696.4 million. Non-GAAP earnings per share increased 109.8% from a year earlier to $3.65, while GAAP EPS from continuing operations more than doubled to $2.80.

Profitability also expanded as higher volume and manufacturing efficiency supported margins. Non-GAAP gross margin reached 42.1%, up 300 basis points year over year, while non-GAAP operating margin increased 760 basis points to 24.4%. Non-GAAP operating income was a record $169.8 million. On a GAAP basis, gross margin was 41.5% and operating margin from continuing operations was 20.6%.

The company said strong factory execution helped it meet increased demand and capture additional revenue during the quarter. It remains on track to surpass its gross-margin target of more than 43%, citing new products, manufacturing efficiency and higher production volumes.

Semiconductor and data center demand lead growth

Semiconductor equipment was Advanced Energy’s largest market, generating $322.2 million of revenue, up 63.9% year over year and 15.8% from the second quarter. The company attributed the performance to investment in leading-edge wafer capacity and said it won several plasma-power designs for advanced-node processes, along with two new semiconductor test programs. Management expects semiconductor revenue in the second half of 2026 to increase by more than 60% from the prior-year period.

Data center computing revenue climbed 49.3% year over year and 33.8% sequentially to $256.2 million. Multiple hyperscale programs contributed revenue, with further growth expected into 2027 and 2028. Advanced Energy also secured several additional customer wins that it expects to begin generating revenue in 2027. The company continues to expect high-50% data center revenue growth for full-year 2026 after revenue in that market more than doubled in 2025.

Industrial and medical revenue increased 27.1% year over year to $90.5 million, marking a fourth consecutive quarter of year-over-year growth. Advanced Energy reported design wins across medical imaging, life sciences, test and measurement, and military and aerospace applications. It also said distribution resales continued to outpace its sales into the channel.

Telecom and networking revenue rose 15.1% to $27.5 million, with AI-related applications contributing to higher customer demand. Results in the market were in line with the company’s expectations.

Capacity investment supports expansion plans

Advanced Energy is expanding production across Thailand, the Philippines, Malaysia and Mexico to support demand. Its Thailand facility began generating revenue after qualifying with multiple data center customers during the third quarter, with semiconductor customer qualifications expected to follow. The company is targeting more than $5 billion of annual revenue capacity by the end of 2028.

The expansion is being accompanied by investment in inventory and working capital. Inventory increased to $645.7 million from $538.1 million in the second quarter, while inventory turns remained at 2.5 times. Management expects turns to stay around that level over the next several quarters.

Operating cash flow from continuing operations was $66 million, and capital expenditures totaled $31 million. Cash increased sequentially to $1.42 billion, while total debt was $1.27 billion, resulting in net cash of $159 million.

For the fourth quarter, Advanced Energy forecast revenue of $735 million, plus or minus $25 million. It expects non-GAAP EPS of $3.90, plus or minus $0.30, and GAAP EPS from continuing operations of $3.30, plus or minus $0.30.

The outlook depends in part on continued demand across the company’s target markets, execution of its global manufacturing expansion and the timing of customer qualifications and new-program revenue. Advanced Energy is also maintaining elevated inventory as it invests to support growth and customer service.