Manufacturing equipment and systems provider Advanced Energy (NASDAQ:AEIS) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 17.8% year on year to $489.4 million. On top of that, next quarter’s revenue guidance ($500 million at the midpoint) was surprisingly good and 5.3% above what analysts were expecting. Its non-GAAP profit of $1.94 per share was 8.8% above analysts’ consensus estimates.
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Advanced Energy (AEIS) Q4 CY2025 Highlights:
- Revenue: $489.4 million vs analyst estimates of $473.7 million (17.8% year-on-year growth, 3.3% beat)
- Adjusted EPS: $1.94 vs analyst estimates of $1.78 (8.8% beat)
- Adjusted EBITDA: $96.7 million vs analyst estimates of $92.36 million (19.8% margin, 4.7% beat)
- Revenue Guidance for Q1 CY2026 is $500 million at the midpoint, above analyst estimates of $474.8 million
- Adjusted EPS guidance for Q1 CY2026 is $1.94 at the midpoint, above analyst estimates of $1.68
- Operating Margin: 11.6%, up from 8.2% in the same quarter last year
- Market Capitalization: $10.53 billion
StockStory’s Take
Advanced Energy’s fourth quarter saw a positive market response, reflecting outperformance in key segments and operational execution. Management identified rising demand in the semiconductor, industrial, and medical markets as the primary contributors to the strong results, with particular emphasis on the company’s success in data center computing. CEO Steve Kelley highlighted that data center revenue more than doubled year over year, attributing it to the adoption of Advanced Energy’s customized power solutions by hyperscalers for AI rack applications. Kelley also pointed to the benefits of the company’s diversification strategy and recent operational capacity expansions in the Philippines, Mexico, and Thailand.
Looking ahead, management expects continued growth driven by an expanding pipeline of design wins, especially in semiconductor and data center markets. Kelley noted, “We project that our 2026 revenue will grow in the high teens after 21% growth in 2025,” emphasizing the expectation that new product launches and ramping production from recent wins will fuel this momentum. CFO Paul Oldham added that the company is targeting further gross margin improvement, aiming to surpass 40% as efficiency gains and a favorable product mix take effect. Management believes that investments in research and manufacturing, combined with ongoing customer demand, will support these targets.
Key Insights from Management’s Remarks
Management attributed the quarter’s outperformance to robust data center demand, new product introductions, and sustained improvements in operational efficiency, while also noting the impact of ongoing factory investments and inventory adjustments.
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Data center demand surge: Advanced Energy’s data center revenue achieved sequential and year-over-year growth, with hyperscalers adopting its power solutions for AI applications. Kelley cited ongoing product development for next-generation data centers as a key growth factor.
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Semiconductor market recovery: Semiconductor revenue grew as new products moved into early production and customer forecasts strengthened significantly in the latter part of the quarter. Kelley credited technology adoption in sub-two-nanometer processes for driving share gains and longer-term visibility.
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Industrial and medical normalization: The industrial and medical segment returned to year-over-year growth after an extended downturn, supported by customers and distributors working through excess inventories and the successful launch of factory automation and medical imaging products.
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Operational capacity expansion: The company completed capacity expansions in the Philippines and Mexico and brought its new Thailand facility online, positioning the business for future growth and supply chain resilience across all major product lines.
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Gross margin improvement: Despite tariff headwinds, gross margin reached its highest level in five years, reflecting manufacturing scale, efficiency initiatives, and a shifting product mix. Oldham indicated that margins could rise further as new products scale and manufacturing matures.
Drivers of Future Performance
Management expects high-teens revenue growth next year, led by data center and semiconductor strength, ongoing product launches, and continued operational efficiencies.
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Data center growth outlook: Management projects data center revenue to increase by more than 30% in the coming year, driven by current hyperscaler demand and ramping production for new and existing customers. Kelley noted that while supply constraints in processors and memory could limit upside, the company’s expanded manufacturing footprint is set to support robust demand.
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Semiconductor momentum and new products: The semiconductor segment is expected to benefit from design wins moving into production, increased demand for advanced logic and memory applications, and ongoing service business growth. Management believes that new products like Everest, EVOS, and NavX will contribute more meaningfully as next-generation nodes are adopted.
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Industrial and medical recovery: The industrial and medical markets should see continued improvement as inventory corrections subside and new product introductions gain traction. Oldham acknowledged macroeconomic uncertainty as a potential headwind but expects Advanced Energy to outpace market growth due to its investments in R&D and channel development.
Catalysts in Upcoming Quarters
Looking forward, our analysts will be closely monitoring (1) the pace at which new data center and semiconductor design wins convert into production revenue, (2) further gross margin improvements as the Thailand facility ramps and product mix evolves, and (3) continued recovery in industrial and medical segments as customer inventories normalize. Additionally, we will watch for updates on supply chain dynamics and the impact of potential acquisitions.
Advanced Energy currently trades at $285.44, up from $279.04 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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