Manufacturing equipment and systems provider Advanced Energy (NASDAQ:AEIS) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 23.6% year on year to $404.6 million. On top of that, next quarter’s revenue guidance ($420 million at the midpoint) was surprisingly good and 5.4% above what analysts were expecting. Its non-GAAP profit of $1.23 per share was 16.1% above analysts’ consensus estimates.
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Advanced Energy (AEIS) Q1 CY2025 Highlights:
- Revenue: $404.6 million vs analyst estimates of $390.1 million (23.6% year-on-year growth, 3.7% beat)
- Adjusted EPS: $1.23 vs analyst estimates of $1.06 (16.1% beat)
- Adjusted EBITDA: $59.7 million vs analyst estimates of $59.31 million (14.8% margin, 0.7% beat)
- Revenue Guidance for Q2 CY2025 is $420 million at the midpoint, above analyst estimates of $398.4 million
- Adjusted EPS guidance for Q2 CY2025 is $1.30 at the midpoint, above analyst estimates of $1.11
- Operating Margin: 7.6%, up from 0.2% in the same quarter last year
- Free Cash Flow was $15 million, up from -$9.35 million in the same quarter last year
- Market Capitalization: $3.67 billion
“First quarter results were at the higher end of our guidance, highlighting growth in our new data center programs and continued strength in semiconductor,” said Steve Kelley, president and CEO of Advanced Energy.
Company Overview
Pioneering technologies for radio frequency power delivery, Advanced Energy (NASDAQ:AEIS) provides power supplies, thermal management systems, and measurement and control instruments for various manufacturing processes.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Advanced Energy’s sales grew at a solid 10.1% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, 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 recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 8.8% over the last two years. Advanced Energy isn’t alone in its struggles as the Electronic Components industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time. 
Advanced Energy also breaks out the revenue for its most important segments, Semiconductor Equipment and Industrial and Medical Equipment, which are 54.9% and 15.9% of revenue. Over the last two years, Advanced Energy’s Semiconductor Equipment revenue (i.e., plasma power) averaged 2.8% year-on-year declines while its Industrial and Medical Equipment revenue (i.e., robotics) averaged 18.3% declines.
This quarter, Advanced Energy reported robust year-on-year revenue growth of 23.6%, and its $404.6 million of revenue topped Wall Street estimates by 3.7%. Company management is currently guiding for a 15.1% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 5.6% over the next 12 months. While this projection indicates its newer products and services will catalyze better top-line performance, it is still below average for the sector.
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Operating Margin
Advanced Energy has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 9%, higher than the broader industrials sector.
Looking at the trend in its profitability, Advanced Energy’s operating margin decreased by 9.1 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.
In Q1, Advanced Energy generated an operating profit margin of 7.6%, up 7.4 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.
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.
Advanced Energy’s decent 9.5% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
Advanced Energy’s two-year annual EPS declines of 18.2% were bad and lower than its two-year revenue performance.
In Q1, Advanced Energy reported EPS at $1.23, up from $0.58 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Advanced Energy’s full-year EPS of $4.35 to grow 15.1%.
Key Takeaways from Advanced Energy’s Q1 Results
We were impressed by Advanced Energy’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also excited its adjusted operating income outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid quarter. The stock traded up 4.5% to $101.96 immediately after reporting.
Sure, Advanced Energy had a solid quarter, but if we look at the bigger picture, is this stock a buy? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.