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EnerSys (ENS)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 FY26 delivered net sales of $951.3M (+7.7% YoY) and adjusted diluted EPS of $2.56 (+21% YoY), both above the company’s Q2 guidance ranges; gross margin was 29.1% and gross margin ex‑45X was 24.9% .
  • Strength came from Energy Systems (data centers, communications) and Specialty (A&D, Bren‑Tronics), while Motive Power volumes were lower YoY; management fully offset tariffs in the quarter via pricing and supply chain actions .
  • Q3 FY26 guidance: net sales $920–$960M, adjusted EPS $2.71–$2.81, adjusted EPS ex‑45X $1.64–$1.74, and 45X cost of sales benefit $35–$40M; FY26 capex expected ~$80M; full‑year quantitative guidance remains paused (macro uncertainty) .
  • Capital returns remain a catalyst: $77.5M returned in Q2 via buybacks/dividends, plus $37M repurchased in October; net leverage 1.3x remains below the low end of the target range, leaving ~$958–960M buyback authorization outstanding as of Nov 4, 2025 .

What Went Well and What Went Wrong

What Went Well

  • Energy Systems acceleration: revenue +14% YoY to $435M, adjusted operating earnings +38% YoY; margin expanded 130 bps to 7.7% on volume and price/mix, aided by COE execution and data center demand .
  • Specialty outperformance: revenue +16% YoY to $157M and adjusted operating margin +380 bps to 9.2% on A&D demand and Bren‑Tronics contributions, with near‑term further margin expansion expected .
  • Cost/operational initiatives taking hold: EnerGize framework and COEs shortened component validation “from weeks to days,” introduced AI inspection for lead‑acid plates to cut scrap, and reduced capex 30% QoQ to $21M .
  • Management quote: “We delivered net sales up 8% and adjusted diluted EPS ex 45X up 15%... we are right‑sizing the organization to generate meaningful reductions in operating expenses” — CEO Shawn O’Connell .

What Went Wrong

  • GAAP profitability pressure: diluted EPS fell to $1.80 (‑10% YoY) due to $28.6M net‑of‑tax highlighted items (restructuring, amortization, other), despite strong adjusted results .
  • Motive Power softness and margin headwinds: revenue ‑2% YoY to $360M; adjusted operating margin down 240 bps to 13.3% on lower volumes; rising lithium mix will temporarily pressure margins due to tariffs and elevated costs until volumes scale .
  • Order lumpiness: a large communications customer front‑loaded spend, and order dynamics remain variable; backlog down in Motive Power on tariff uncertainty and a shift back to book‑and‑ship patterns .

Financial Results

MetricQ4 FY25Q1 FY26Q2 FY26
Net Sales ($USD Millions)$974.8 $893.0 $951.3
Diluted EPS (GAAP) ($)$2.41 $1.46 $1.80
Adjusted Diluted EPS ($)$2.97 $2.08 $2.56
Gross Margin (%)31.2% 28.4% 29.1%
Gross Margin ex 45X (%)26.6% 24.1% 24.9%
Adjusted Operating Earnings ($USD Millions)$152.5 $114.3 $129.5
Adjusted EBITDA ($USD Millions)$166.9 $123.3 $146.0

Q2 FY26 vs S&P Global consensus:

  • Adjusted EPS: $2.56 vs $2.3525* — bold beat.
  • Revenue: $951.286M vs $890.273M* — bold beat.
    Values retrieved from S&P Global.
MetricQ2 FY25Q1 FY26Q2 FY26
Primary EPS Consensus Mean ($)$2.07*$2.0525*$2.3525*
Revenue Consensus Mean ($USD Millions)$887.752*$848.015*$890.273*
Values retrieved from S&P Global.

Segment breakdown

SegmentQ2 FY25Q2 FY26
Energy Systems Net Sales ($USD Millions)$382.1 $434.7
Energy Systems Operating Earnings ($USD Millions)$17.5 $14.4
Energy Systems Adjusted Operating Earnings ($USD Millions)$24.2 $33.6
Energy Systems Operating Margin (%)4.6% 3.3%
Energy Systems Adjusted Operating Margin (%)6.4% 7.7%
Motive Power Net Sales ($USD Millions)$366.7 $359.7
Motive Power Operating Earnings ($USD Millions)$56.3 $36.3
Motive Power Adjusted Operating Earnings ($USD Millions)$57.6 $47.9
Motive Power Operating Margin (%)15.4% 10.1%
Motive Power Adjusted Operating Margin (%)15.7% 13.3%
Specialty Net Sales ($USD Millions)$134.9 $156.9
Specialty Operating Earnings ($USD Millions)$0.3 $8.0
Specialty Adjusted Operating Earnings ($USD Millions)$7.5 $14.6
Specialty Operating Margin (%)0.2% 5.1%
Specialty Adjusted Operating Margin (%)5.4% 9.2%

KPIs and cash/returns

KPIQ4 FY25Q1 FY26Q2 FY26
Cash from Operations ($USD Millions)$135.2 $1.0 $218.0
Free Cash Flow ($USD Millions)$105.0 ($32.1) $197.1
Capital Expenditures ($USD Millions)$30.2 $33.0 $20.9
Net Leverage Ratio (x)1.3x 1.6x 1.3x
IRC 45X Benefit (Quarter, $USD Millions)$44.1 $38.1 $39.6
Share Repurchases ($USD Millions)$40.0 $150.0 $67.7
Dividend per Share ($)$0.24 $0.240 $0.2625

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance / ActualChange
Net SalesQ2 FY26$870M–$910M $951.3M actual Raised/Beat
Adjusted Diluted EPSQ2 FY26$2.33–$2.43 $2.56 actual Raised/Beat
Adjusted Diluted EPS ex‑45XQ2 FY26$1.34–$1.44 $1.51 actual Raised/Beat
Net SalesQ3 FY26n/a$920M–$960M Initiated
Adjusted Diluted EPSQ3 FY26n/a$2.71–$2.81 Initiated
Adjusted Diluted EPS ex‑45XQ3 FY26n/a$1.64–$1.74 Initiated
45X Cost of Sales BenefitQ3 FY26n/a$35M–$40M Initiated
Capital ExpendituresFY26n/a~$80M Initiated

Consensus for Q3 FY26 sits near the midpoints (EPS $2.73*, revenue $932.1M*) — aligned with guidance; values retrieved from S&P Global.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY25, Q1 FY26)Current Period (Q2 FY26)Trend
AI/data center demandData center revenue +22% YoY; robust market momentum Data center +29% YoY; key growth vector tied to AI and resilience Accelerating
Supply chain/tariffsTariff “stranded costs” and order pauses; mitigation ongoing; guidance paused Direct tariff exposure ~$70M annualized; fully offset in P&L via pricing and sourcing Mitigation progressing
Product mix (TPPL, lithium)Maintenance‑free share record 29% in Q4; margins up Motive maintenance‑free 29.9%; lithium ramp to drive growth but near‑term margin pressure Mix improving; lithium near‑term drag
Regional trendsEMEA softness; Americas strength; communications recovering Communications network refresh; backlog stable in Energy Systems Gradual recovery
Regulatory/DOE/45X45X intact; DOE lithium plant support; IRS refund pending Q3 45X benefit guided; lithium plant update expected next quarter Continuing support
R&D/COEs/AI opsWorkforce reduction and $80M savings; COEs launched COEs cut validation “weeks→days”; AI inspections reduce scrap Execution gains
Capital returns$49.5M returned in Q4; buyback optionality $77.5M returned in Q2; +$37M post‑Q2; ~1.3x leverage Aggressive buybacks maintained

Management Commentary

  • Strategic: “We are beginning to realize the impact of our EnerGize strategic framework… increasing our rigor around R&D and CapEx… reallocating resources to higher‑return opportunities” — CEO Shawn O’Connell .
  • Operations: “Early benefits are materializing from the $80M annual cost‑saving initiative… we launched our three centers of excellence… deliver products faster and lower costs” — CEO .
  • Outlook and discipline: “We remain confident… prudent to keep full‑year quantitative guidance paused… reaffirm expectation that full‑year adjusted operating earnings growth, excluding 45X, will outpace revenue growth” — CFO Andrea Funk .
  • Tariffs: “We fully offset the tariffs realized in our P&L through proactive supply chain actions and pricing strategies; direct tariff exposure now ~$70M annualized” — CEO/CFO .

Q&A Highlights

  • Communications front‑loading and order lumpiness: a major customer shifted spending earlier due to an acquisition; order variability manageable with COEs .
  • Lithium margin dynamics: near‑term margin pressure from China‑sourced cell tariffs and early ramp inefficiencies; improves with scale .
  • Gross margin trajectory: sequential improvement with and without 45X; continuous improvement expected, with lithium/tariffs a near‑term headwind .
  • Data centers: revenue up 29% YoY; primarily lead‑acid UPS and TPPL today, with lithium NPIs under development .
  • A&D demand: robust with thermal battery programs; limited impact from government shutdown; Bren‑Tronics integration strong .
  • Capital allocation: buybacks opportunistic amid perceived dislocation versus intrinsic value; bolt‑on M&A pipeline remains active .

Estimates Context

  • Q2 FY26 beat: adjusted EPS $2.56 vs $2.3525* and revenue $951.286M vs $890.273M* — significant beats; estimates likely to move up for Energy Systems and Specialty, while Motive Power margin assumptions may incorporate lithium ramp pressure. Values retrieved from S&P Global.
  • Prior quarters: Q1 FY26 adjusted EPS $2.08 vs $2.0525* and revenue $893.024M vs $848.015M* (beats); Q2 FY25 adjusted EPS $2.12 vs $2.07* and revenue $883.669M vs $887.752M* (minor revenue miss). Values retrieved from S&P Global.

Key Takeaways for Investors

  • Q2 FY26 was a clean beat on both revenue and adjusted EPS, driven by Energy Systems and Specialty; GAAP EPS was depressed by highlighted items — a non‑recurring headwind .
  • Data center demand tied to AI and energy resilience is increasing, supporting margin expansion in Energy Systems; communications is in network refresh mode rather than broad expansion .
  • Motive Power volumes should regain YoY growth in Q3, but lithium mix will temporarily pressure margins until scale is reached; maintenance‑free penetration continues to rise .
  • Tariff impacts were fully offset in Q2; management’s task force and COEs provide ongoing mitigation capacity — reducing earnings risk from policy volatility .
  • Cash generation surged on IRS tax refund, with FCF of $197.1M in Q2; leverage at 1.3x provides ample dry powder for buybacks and bolt‑on M&A .
  • Q3 guidance aligns with consensus, with an explicit 45X benefit; FY26 capex ~$80M, and adjusted operating earnings growth (ex‑45X) is expected to outpace revenue — an attractive margin trajectory .
  • Narrative catalyst: continued execution of EnerGize (cost saves, COEs, AI), segment mix shift toward higher‑margin areas, and buyback activity should support the stock.

Appendix: Additional Q2 FY26 Press Releases

  • Dividend: Board declared quarterly dividend of $0.2625 per share payable Dec 26, 2025; record date Dec 12, 2025 .