Electronic components manufacturer Knowles (NYSE: KN) announced better-than-expected revenue in Q2 CY2026, with sales up 14.3% year on year to $166.8 million. On top of that, next quarter’s revenue guidance ($172 million at the midpoint) was surprisingly good and 5.2% above what analysts were expecting. Its non-GAAP profit of $0.33 per share was 8.2% above analysts’ consensus estimates.

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“We delivered second quarter revenues exceeding the high end of our guided range. Non-GAAP diluted EPS was above the high end of our guided range and cash from operations was within the guided range,” commented Jeffrey Niew, President and CEO of Knowles.

Company Overview

With roots dating back to 1946 and a focus on components that must perform flawlessly in critical situations, Knowles (NYSE: KN) designs and manufactures specialized electronic components like high-performance capacitors, microphones, and speakers for medical technology, defense, and industrial applications.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $635 million in revenue over the past 12 months, Knowles is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels.

As you can see below, Knowles’s demand was weak over the last five years. Its sales fell by 5.7% annually, a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Knowles’s annualized revenue growth of 3.6% over the last two years is above its five-year trend, which is encouraging.

This quarter, Knowles reported year-on-year revenue growth of 14.3%, and its $166.8 million of revenue exceeded Wall Street’s estimates by 6.3%. Company management is currently guiding for a 12.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 5.2% over the next 12 months, an improvement versus the last two years. This projection is above the sector average and indicates its newer products and services will spur better top-line performance.

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Adjusted Operating Margin

Adjusted operating margin is a key measure of profitability. Think of it as net income (the bottom line) excluding the impact of non-recurring expenses, taxes, and interest on debt - metrics less connected to business fundamentals.

Knowles’s adjusted operating margin has risen over the last 12 months and averaged 16.1% over the last five years. On top of that, its profitability was top-notch for a business services business, showing it’s a well-run company with an efficient cost structure.

Looking at the trend in its profitability, Knowles’s adjusted operating margin might have fluctuated slightly but has generally stayed the same over the last five years, highlighting the consistency of its expense base.

This quarter, Knowles generated an adjusted operating margin profit margin of 18.5%, up 1.9 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth — for example, a company could inflate its sales through excessive spending on advertising and promotions.

Knowles’s flat EPS over the last five years was weak but better than its 5.7% annualized revenue declines. This tells us management adapted its cost structure.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Knowles, its two-year annual EPS growth of 11.9% was higher than its five-year trend. Accelerating earnings growth is almost always an encouraging data point.

In Q2, Knowles reported adjusted EPS of $0.33, up from $0.24 in the same quarter last year. This print beat analysts’ estimates by 8.2%. Over the next 12 months, Wall Street expects Knowles’s full-year EPS to grow 12% from $1.29 to $1.44.

Key Takeaways from Knowles’s Q2 Results

We were impressed by how significantly Knowles blew past analysts’ EPS guidance for next quarter expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. The stock remained flat at $39.03 immediately after reporting.

Indeed, Knowles had a rock-solid quarterly earnings result, but is this stock a good investment here? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).