You can find today's earnings press release and presentation on our website at ir.advancedenergy.com. Any targets beyond the current quarter presented today should not be interpreted as guidance. Excluded from our non-GAAP results are stock compensation, amortization, acquisition-related costs, facility infrastructure and other transition costs, restructuring and asset impairment charges, and unrealized foreign exchange gain or loss. Second quarter revenue exceeded the high end of our guidance range, driven by strong demand for Advanced Energy Industries' data center power solutions.
We also benefited from increased demand in industrial and medical, posting our first sequential growth in that market since 2023. On a year-over-year basis, second quarter revenue grew 21%, our third consecutive quarter of year-over-year growth. Earnings per share also came in at the higher end of guidance. Our business diversification strategy, which is focused on three distinct target markets, is driving more consistent profitability and cash flow.
We have been mitigating cycle risk by participating in multiple growth markets, each with its own characteristics. Semiconductor has performed well for AE, with mid-single-digit growth expected this year after a growth year in 2024. Our improved profitability and cash flow are allowing us to make the technology and capacity investments necessary to fuel long-term profitable growth. This year, we have won a number of next-generation programs, which are expected to support further growth in 2026.
| Metric | Period | Current guidance |
|---|---|---|
| Total revenue | Q3 2025 | ~$440 million ±$20 million (Similar to Q2) |
| Non-GAAP EPS | Q3 2025 | $1.45 ±$0.25 |
| Gross margin | Q3 2025 | ~38.5% (Up from 38.1% in Q2) |
| Gross margin | Exiting 2025 | 39%-40% (Refined, includes tariffs) |
| Full-year revenue growth | FY 2025 | ~17% |
| Data center revenue growth | FY 2025 | Over 80% (Raised) |
| Semiconductor revenue growth | FY 2025 | Mid-single digits (Lowered) |
| Tax rate | Q3 2025 | 17%-18% |
| Telecom and networking revenue | Q3 2025 | Low $20 million level |
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +21% | Driven by upside in data center computing demand, plus year-over-year growth in semiconductor |
| Data center computing revenue | +94% | Hyperscale design wins ramping and captured upside demand for new data center power solutions |
| Semiconductor revenue | +11% | Year-over-year growth despite sequential decline; partially offset by higher service revenue |
| Industrial and medical revenue | -13% | Still recovering from an extended correction period, though market has passed the bottom |
| EPS | +76% | Higher revenue, operating leverage, and a lower-than-expected 15.3% tax rate |
| Operating expenses (% of revenue) | -260 bps | Revenue grew faster than operating expenses, demonstrating model leverage |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Data center / AI demand | 50% FY growth expected, viewed as lumpy historically | Over 80% FY growth, demand sustainable into 2026 on continued hyperscaler investment and high win rate | Up |
| Tariffs | — | Dynamic environment, ~100 bps gross margin headwind in Q2, mitigation via USMCA Mexicali qualification, geographic footprint, and supply chain optimization | Headwind |
| Gross margin improvement program | Approach 40% exiting 2025 | On track, last China factory closed in June, 39%-40% exiting 2025 including tariffs | Up |
| Semiconductor new products (EVOS, eVerest, NAVEX) | Early design wins | Revenue expected to more than double in 2025 to double-digit millions, catalyzing growth in 2026 as leading-edge processes ramp | Up |
| Industrial and medical recovery | Extended correction, declining | Passed the bottom; backlog growing, channel inventory down five quarters, modest sequential growth in H2 | Improving |
| Acquisition strategy | — | Actively pursuing with a solid pipeline of potential opportunities | — |