Advanced Energy’s third quarter saw a positive market reaction, reflecting the company’s outperformance against Wall Street expectations. Management attributed the robust quarterly results to a significant surge in data center revenue, which more than doubled year over year, as well as operational execution and cost savings from the closure of its China manufacturing facility. CEO Stephen Kelley emphasized that “strong revenue, solid execution and cost savings from our China factory closure pushed gross margin higher,” while also highlighting the benefits of Advanced Energy’s diversified end-market strategy in stabilizing profits and cash flow.
Is now the time to buy AEIS? Find out in our full research report (it’s free for active Edge members).
Advanced Energy (AEIS) Q3 CY2025 Highlights:
- Revenue: $463.3 million vs analyst estimates of $441 million (23.8% year-on-year growth, 5% beat)
- Adjusted EPS: $1.74 vs analyst estimates of $1.47 (18.5% beat)
- Adjusted EBITDA: $87.3 million vs analyst estimates of $77.7 million (18.8% margin, 12.4% beat)
- Revenue Guidance for Q4 CY2025 is $470 million at the midpoint, above analyst estimates of $445.6 million
- Adjusted EPS guidance for Q4 CY2025 is $1 at the midpoint, below analyst estimates of $1.53
- Operating Margin: 10.6%, up from -3% in the same quarter last year
- Market Capitalization: $8.28 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Advanced Energy’s Q3 Earnings Call
- Brian Chin (Stifel) asked how Advanced Energy removed capacity constraints to double data center revenue and whether new Thailand factory ramps would impact margins. CEO Stephen Kelley explained capacity investments enabled the growth, and the Thailand facility is expected to support high-volume data center products without incremental margin pressure.
- Joseph Quatrochi (Wells Fargo) inquired if Q3 data center growth was driven by backlog catch-up and how this baseline affects future quarters. CFO Paul Oldham clarified that operational flexibility allowed backlog fulfillment, establishing a higher baseline for ongoing growth.
- Steve Barger (KeyBanc Capital Markets) questioned the adoption trajectory for eVoS and eVerest platforms and related market share potential. Kelley reported multiple early adopters and expects conductor etch wins to drive revenue growth next year, with dielectric etch ramping later.
- Sreekrishnan Sankarnarayanan (TD Cowen) probed the impact of rising data center revenue on gross margins and the outlook for 800-volt DC products. Oldham acknowledged possible margin pressure but expects mitigation via cost controls, while Kelley noted that high-voltage solutions will ramp in 2027 and 2028.
- James Ricchiuti (Needham & Company) asked about share gains in data center and M&A priorities given recent growth. Kelley stated the focus remains on margin health and select customer engagement, and that M&A attention continues to center on the industrial and medical segment.
Catalysts in Upcoming Quarters
Looking ahead, our team will closely watch (1) the ramp in production and customer adoption of the Thailand facility, (2) the pace of new product wins in both data center and semiconductor markets, and (3) Advanced Energy’s ability to manage gross margins as the data center mix grows and tariffs fluctuate. Execution on operational efficiencies and the success of new technology platforms will be critical signposts for sustained performance.
Advanced Energy currently trades at $220.50, up from $195.25 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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