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AE

ADVANCED ENERGY INDUSTRIES INC (AEIS)·Q3 2025 Earnings Summary

Executive Summary

  • AEIS delivered Q3 2025 revenue of $463.3M and non-GAAP EPS of $1.74, both above the high end of guidance, driven by record AI data center demand and better gross margin execution .
  • Data Center Computing revenue grew 113% YoY and 21% QoQ; GAAP diluted EPS from continuing operations was $1.21 versus $0.67 in Q2 and a $(0.38) loss a year ago .
  • Q4 2025 guidance: revenue $470M ±$20M; non-GAAP EPS $1.75 ±$0.25; GAAP EPS $1.12 ±$0.25; gross margin 39–40% with tariffs ~100 bps headwind; OpEx ~$107M; tax ~17%; other income $1.5–$2.0M .
  • Strong operating cash flow ($79M) and improving margins (non-GAAP GM 39.1%, OM 16.8%) support the raised 2025 outlook (total revenue growth ~20%; data center “more than double” YoY) and provide catalysts around AI infrastructure ramps and margin trajectory .

What Went Well and What Went Wrong

What Went Well

  • Record AI data center performance: Data Center Computing revenue reached $171.6M, +113% YoY, +21% QoQ; management expects robust AI-driven demand to continue, citing new program ramps and next-gen power platforms unveiled at OCP .
  • Margin execution ahead of plan: Non-GAAP gross margin rose to 39.1% (+100 bps QoQ, +280 bps YoY), aided by China factory closure benefits and lower tariff timing; non-GAAP operating margin reached 16.8%, highest since 2022 .
  • Cash generation and balance sheet strength: Cash flow from continuing operations was $79M (+123% YoY) and free cash flow $51M; cash & equivalents reached $758.6M; net cash $192M .

Quotes

  • “Third quarter results surpassed the high end of our guidance due to increased demand for our AI data center solutions.” — Steve Kelley, CEO .
  • “Gross margin… exceeded our target, driven by faster-than-expected benefits from our China factory closure and lower tariff costs.” — Paul Oldham, CFO .
  • “We now expect overall 2025 revenue to grow approximately 20%.” — Steve Kelley, CEO .

What Went Wrong

  • Semiconductor down sequentially: Semi revenue fell to $196.6M (−6% QoQ), roughly flat YoY, reflecting near-term choppiness; semi expected down slightly in Q4 per customer forecasts .
  • Industrial & Medical softness YoY: I&M revenue was $71.2M (−7% YoY) though up 4% QoQ; management noted cautious customer purchasing amid tariffs and gradual recovery via distribution channels .
  • Tariff headwinds: Tariffs expected ~100 bps GM headwind in Q4; mitigation actions continue, but mix (higher data center) and ramp costs are ongoing headwinds to reaching ≥40% GM including tariffs .

Financial Results

Summary vs Prior Periods and Estimates

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$404.6 $441.5 $463.3
GAAP Diluted EPS – Continuing Ops ($)$0.65 $0.67 $1.21
Non-GAAP EPS ($)$1.23 $1.50 $1.74
GAAP Gross Margin (%)37.2% 37.0% 37.6%
Non-GAAP Gross Margin (%)37.9% 38.1% 39.1%
GAAP Operating Margin (%)7.6% 7.2% 10.6%
Non-GAAP Operating Margin (%)13.5% 14.6% 16.8%
Adjusted EBITDA ($USD Millions)$65 $74 $87

Consensus Comparison

MetricQ3 2025 ConsensusQ3 2025 ActualDelta
Revenue ($USD Millions)$441.5*$463.3 +$21.8 (+4.9% vs cons)*
Primary EPS ($)$1.47*$1.74 +$0.27 (+18.6% vs cons)*

Values with * retrieved from S&P Global.

Segment Revenue Breakdown

Segment ($USD Millions)Q3 2024Q1 2025Q2 2025Q3 2025
Semiconductor Equipment$197.5 $222.2 $209.5 $196.6
Industrial & Medical$76.9 $64.3 $68.6 $71.2
Data Center Computing$80.6 $96.2 $141.6 $171.6
Telecom & Networking$19.2 $21.9 $21.8 $23.9
Total$374.2 $404.6 $441.5 $463.3

KPIs

KPIQ1 2025Q2 2025Q3 2025
Cash Flow from Continuing Ops ($USD Millions)$29.2 $46.5 $79.0
Free Cash Flow ($USD Millions)——$51.0
Cash & Equivalents ($USD Millions)$723.0 $713.5 $758.6
Net Cash ($USD Millions)$158 $147 $192
Inventory Turns (x)2.7x 2.7x 2.8x
DSO (days)62 62 58
DPO (days)56 63 62
Dividend Declared ($/share)$0.10 (Jun pay) $0.10 (Aug pay) $0.10 (Dec 5 pay)

Guidance Changes

MetricPeriodPrevious Guidance/OutlookCurrent Guidance/OutlookChange
Revenue ($USD Millions)Q4 2025N/A~$470 ± $20 New issuance
GAAP EPS ($)Q4 2025N/A$1.12 ± $0.25 New issuance
Non-GAAP EPS ($)Q4 2025N/A$1.75 ± $0.25 New issuance
Gross Margin (%)Q4 202539–40% incl. tariffs 39–40% incl. ~100 bps tariffs Maintained; clarified tariff headwind
Operating Expenses ($USD Millions)Q4 2025“Up slightly” vs Q3 ~$107 Raised vs Q3 $103
Other Income ($USD Millions)Q4 2025~$1 $1.5–$2.0 Raised
Tax Rate (%)Q4 2025~17–18% ~17% Slightly lower
Data Center Revenue (2025)FY 2025“>80% YoY” “More than double YoY” Raised
Total Company Revenue GrowthFY 2025~17% ~20% Raised
DividendQ4 2025$0.10/quarter maintained $0.10/quarter declared Oct 31 (pay Dec 5) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
AI/Data Center DemandRamping hyperscale programs; increased CapEx to support high-power supplies; 2025 DC growth “>80%” Record DC revenue; 25–30% DC growth targeted in 2026; next-gen platforms at OCP; second-wave customers in late 2026–2027 Strengthening; visibility extends into 2026
Tariffs/MacroMitigation actions; GM impact manageable; GM exiting 39–40% incl. tariffs Q4 tariffs ~100 bps GM headwind; continued mitigation with customers Headwind persists but managed
Semiconductor Product PerformanceeVoS/eVerest/NavX: 350 qual units; early production in H2’25; 2025 semi growth mid-single digits Conductor/etch/deposition wins ramp in 2026; semi down slightly near term; stronger outlook H2’26 Qualification progressing; ramps 2026
Manufacturing FootprintChina factory closure completion expected; Thailand facility ready 2026 Thailand 500k sq ft ready to start on short notice; potential >$1B incremental capacity; consolidation largely done Capacity poised for rapid scale
I&M Channel/RecoveryDistribution inventory down; gradual recovery; design win pipeline strong; website/microsites driving leads Sequential growth; cautious customers; backlog improving; aerospace/defense, medical wins Gradual recovery; improving indicators
Margin Targets/MixTargeting ≥40% exiting 2025; long-term 43% at scale Non-GAAP GM 39.1%; aiming ≥40% near-term despite DC mix; long-term 43% still target On track; DC mix headwinds mitigated
M&A PrioritiesFocus on I&M roll-up opportunities; valuation gaps Priorities unchanged; still focused on I&M Continued focus

Management Commentary

Prepared remarks highlights

  • CEO: “By selling our industry-leading power technologies into a variety of high-end markets, we are able to generate more consistent profits and cash flow.” .
  • CEO: “We unveiled several new high-power platforms geared to meet the next-generation needs of our customers…we are seeing strong interest from emerging cloud and enterprise customers.” .
  • CFO: “Gross margin was 39.1%, up 280 basis points over last year and 100 basis points sequentially…Operating margins at 16.8%, the highest level since 2022.” .
  • CFO: “We expect Q4 non-GAAP earnings per share to be $1.75 ± $0.25…gross margin…between 39%–40%, with benefits of cost optimization partially offset by increased tariff costs.” .
  • CEO: “We now expect overall 2025 revenue to grow approximately 20%…data center computing revenue growth…more than double 2024 levels.” .

Q&A Highlights

  • Capacity & Thailand ramp: AEIS increased CapEx to alleviate data center capacity constraints; Thailand factory can deliver >$1B incremental annual revenue and is ready to ramp on short notice; ramp costs expected but managed within the model .
  • 2026 data center growth: Management targets 25–30% DC growth in 2026, acknowledging dynamic mix shifts; preparing capacity for upside and second-wave customers leveraging existing technology blocks .
  • Semiconductor trajectory & new platforms: Multiple early adopters for eVoS/eVerest; conductor/etch/deposition wins ramp first in 2026; dielectric etch ramps begin 2027; market share gains expected in plasma power .
  • OpEx run-rate: Q4 OpEx ~$107M; cadence of ~$2–$2.5M QoQ increases expected into 2026, with goal to grow OpEx ≤50% of revenue growth .
  • Tariffs: Q4 tariffs ~100 bps GM headwind; ongoing mitigation; despite heavier DC mix, margins still improved; long-term GM goal of 43% reiterated .

Estimates Context

  • Q3 2025: AEIS beat consensus revenue ($463.3M vs $441.5M*) and EPS ($1.74 vs $1.47*). EBITDA consensus was $77.7M*; S&P Global shows actual $70.4M*, while company-reported adjusted EBITDA was $87M, reflecting definitional differences .
  • Q4 2025: Revenue consensus $473.5M* vs company guidance ~$470M ± $20M; EPS consensus $1.79* vs non-GAAP EPS guidance $1.75 ± $0.25 — broadly aligned; margin headwinds from tariffs embedded .

Values with * retrieved from S&P Global.

Where estimates may need to adjust

  • Data center trajectory and margin mix suggest potential upward revisions in DC revenue and modest caution on GM due to tariff mix; semi down slightly near term but improving outlook into H2’26 could support multi-quarter upward estimate revisions in 2026 .

Key Takeaways for Investors

  • AI data center remains the core growth engine: record Q3, raised 2025 outlook to “more than double” DC revenue; 2026 DC growth targeted at 25–30%, with next-gen platforms and second-wave customers extending runway .
  • Margin story intact despite mix: non-GAAP GM 39.1% and OM 16.8% in Q3; Q4 GM 39–40% with tariff headwinds (~100 bps) — actions support near-term ≥40% GM and long-term 43% target .
  • Cash generation and balance sheet enable capacity scaling: $79M operating cash flow, $51M FCF; cash $758.6M; net cash $192M; Thailand facility unlocked for >$1B incremental capacity when demand justifies .
  • Semiconductor positioned for 2026: eVoS/eVerest/NavX platforms gaining traction; conductor/etch/deposition wins to volume first; dielectric etch follows in 2027; H2’26 upturn expected .
  • I&M gradual recovery: sequential growth and improving channel metrics; design wins and digital initiatives (distributor microsites) should translate into share gains as customers normalize inventories .
  • Near-term trading: Beat on Q3 and solid Q4 guide provide support; watch tariff policy developments and DC mix impacts on GM; catalysts include OCP/AI rack power platforms and visible program ramps .
  • Medium-term thesis: Diversified end-markets provide resilience, with AI infrastructure and leading-edge semi cycles driving multi-year growth; manufacturing consolidation and scale underpin margin expansion .

Additional Q3 2025 Press Releases

  • Dividend: Quarterly cash dividend of $0.10 per share, payable December 5, 2025, to shareholders of record November 24, 2025 .
  • Product activity: Multiple product launches in October (pyrometer, fiber optic thermometry, ultra-efficient DC-DC converters), supporting technology leadership positioning in targeted markets (titles listed in catalog).