Manufacturing equipment and systems provider Advanced Energy (NASDAQ: AEIS) reported Q3 2026 results exceeding the market’s revenue expectations, with revenue rising 50.3% year on year to $696.4 million. Revenue guidance for next quarter ($735 million at the midpoint) was also surprisingly strong, coming in 5.6% above analysts’ consensus estimates. Its non-GAAP profit of $3.65 per share was 19.2% above analysts’ consensus estimates.

For more on Advanced Energy, read our free full research report.

“We delivered record financial results again in the third quarter, with revenue in each of our markets growing sequentially and year-over-year,” said Steve Kelley, president and CEO of Advanced Energy. “Our strategic investments and solid execution are enabling us to meet strengthening customer demand and deliver higher gross margin. With our Thailand factory ramp on track and growing revenue contribution from new products expected in 2027, we are confident in our ability to gain share and outgrow our markets.”

Revenue growth

A company’s long-term revenue performance can indicate its overall quality. Even a bad business can perform well for one or two quarters, but a top-tier one grows for years. Advanced Energy’s 9.7% annualized revenue growth over the last five years was solid. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth matters most, but within industrials, a half-decade historical view may miss cycles, industry trends or a company capitalizing on catalysts such as a new contract win or a successful product line. Advanced Energy’s annualized revenue growth of 24.2% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

We can better understand the company’s revenue dynamics by analyzing its most important segments, Semiconductor Equipment and Industrial and Medical Equipment, which are 46.3% and 13% of revenue. Over the last two years, Advanced Energy’s Semiconductor Equipment revenue (i.e., plasma power) averaged 17.6% year-on-year growth while its Industrial and Medical Equipment revenue (i.e., robotics) averaged 2% growth.

This quarter, Advanced Energy reported strong year-on-year revenue growth of 50.3%, and its $696.4 million of revenue beat Wall Street’s consensus estimates by 7.8%. Management is guiding for a 50.2% year-on-year increase in revenue next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 28.7% over the next 12 months, according to S&P, an improvement versus the last two years. This strong projection indicates its newer products and services will spur better revenue performance.

Operating margin

Advanced Energy has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 10%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Advanced Energy’s operating margin rose by 3.6 percentage points over the last five years, as its revenue growth gave it operating leverage.

In Q3, Advanced Energy generated an operating margin of 20.6%, up 9.9 percentage points year on year. The increase was solid, and operating margin rose more than gross margin, suggesting greater efficiency in expenses such as marketing, R&D and administrative overhead.

Earnings per share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Advanced Energy’s EPS grew at a 16.2% compounded annual growth rate over the last five years, higher than its 9.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

A closer look at Advanced Energy’s earnings helps explain its performance. As mentioned earlier, Advanced Energy’s operating margin expanded by 3.6 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Advanced Energy, its two-year annual EPS growth of 69% was higher than its five-year trend. That acceleration is a positive, particularly given the already high base.

In Q3, Advanced Energy reported adjusted EPS of $3.65, up from $1.74 in the same quarter last year. This result comfortably beat analysts’ consensus estimates, a positive for shareholders. Over the next 12 months, Wall Street expects Advanced Energy’s full-year EPS to grow 39.8% from $10.42 to $14.56, according to S&P.

Key takeaways from Advanced Energy’s Q3 results

Advanced Energy’s EPS outlook for next quarter came in well above analysts’ consensus estimates, adding to a solid quarter in which adjusted operating income also beat Wall Street’s consensus by a wide margin. Shares surged 9.7% to $237.37 immediately after the results.

Advanced Energy reported solid earnings, but one quarter doesn’t necessarily make the stock a buy. That decision also depends on its valuation and business quality, alongside the latest quarterly results. For more on Advanced Energy, read the full research report here (it’s free).