AMSC (AMSC) Q2 2026 earnings review
AMSC sales jump 43%, but its third-quarter plan steps down
AMSC, a maker of grid and wind power control systems, held sales near record levels as customers took deliveries early, while thinner margins kept profit flat. Second-quarter revenue rose 43% from a year ago to $94 million, helped by the acquired Comtrafo transformer business, and customer prepayments lifted free cash flow to $29 million by our math. However, chief executive Daniel P. McGahn's plan for revenue to average $90 million across the first three quarters leaves about $82 million for the third quarter by our math.
| Revenue | $94.0M +42.8% from a year ago (includes Comtrafo) |
|---|---|
| Gross margin | 28.2% -2.8 percentage points from a year ago |
| Free cash flow (by our math) | $28.8M $5.1M a year ago |
| Third-quarter revenue outlook | >$80.0M ~$82M implied by 3-quarter average |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because strong order intake and cash generation offset a softer third-quarter outlook and lingering margin pressure. Booking over $95 million in new orders eased the risk of a second-quarter air pocket after early first-half shipments. The caution is that gross margin stayed 2.8 percentage points below last year at 28.2%, so the 43% revenue jump barely moved profit excluding one-offs, and the third-quarter outlook floor dropped to $80 million.
The question now is whether the lower third-quarter plan reflects normal caution after early shipments or a real slowdown once the Comtrafo acquisition laps in December. If demand is holding up, third-quarter sales will beat the floor by the usual 10% and gross margin will climb back toward 30%; if the acquisition masked slower core growth, revenue will land near $82 million. Next quarter's results and the conference call's backlog disclosure will tell.
🐂 Bull Case
Early Shipments Kept Revenue Above $94 Million
AMSC makes power control systems for electric grids, naval ships, and wind turbines. After shipping orders early in the first quarter, management set a second-quarter sales floor of $85.0 million, which raised concern about a post-rush drop. Instead, sales held steady at $94.0 million, up 42.8% from a year ago, because of "continued customer-requested accelerations in project deliveries through the first half of our fiscal year," chief executive Daniel P. McGahn said.
Grid systems brought in $76.7 million, up 41.1% from last year, partly from the December acquisition of Brazilian transformer maker Comtrafo. Beating the $85.0 million floor by 10.6% matches the power-systems group's 9.8% average beat over the last three quarters, by our math. That shows the floor was cautious, not that the delivery timing risk is gone.
What to watch: underlying revenue growth excluding Comtrafo in the quarterly filing or conference call. A disclosure showing how much of the 42.8% jump came from businesses owned a year ago will show the true pace of demand.
Energy and Materials Orders Topped $95 Million
Orders measure the value of new customer contracts signed during the quarter and typically turn into revenue over the next nine months. AMSC booked over $95 million in new orders this quarter, McGahn said, "driven primarily by traditional and renewable energy as well as demand from materials and utility customers."
That intake stepped down from last quarter's record $130 million, which included a single $25 million mining systems contract. Even so, booking more than $95 million kept new orders ahead of the $94.0 million shipped during the quarter and well above the roughly $70 million quarterly average from two years ago. Customers are replacing the revenue that AMSC ships early.
What to watch: the 12-month order backlog figure on the conference call. A number above last quarter's $300 million mark would confirm that contract wins are still outpacing early factory shipments.
Wind Sales Jumped 51% Despite Single-Customer Reliance
The Wind division designs turbine electronic controls and licenses turbine designs to manufacturers. Its revenue rose 50.8% from a year ago to $17.4 million, following a 44.6% increase in the first quarter. The standing risk is that most of this business relies on a single wind customer in India, and shipments depend on timely payments.
First-half Wind sales reached $35.1 million, up 47.6% from the $23.8 million recorded in the first half of last year. Two straight quarters above $17 million show that the customer is paying for and taking delivery of control systems at a higher quarterly run rate.
What to watch: Wind customer payment commentary and segment backlog on the conference call. A dip in pre-shipment payments would signal a slowdown in future turbine control deliveries.
Positives this quarter didn't test
Two standing growth drivers from prior quarters received no standalone numbers in the earnings release.
- Bundled power systems: selling combined equipment packages that bring in five times the revenue of a single product; the conference call order breakdown will test whether multi-product deals drove the $95 million order intake.
- Brazil factory expansion: adding capacity at Comtrafo after buying a third facility last quarter; company-wide capital spending was $3.9 million in the second quarter by our math, and the filing will show how much went to Brazil.
🐻 Bear Case
Third-Quarter Plan Points to a Revenue Drop
"Looking forward, we expect revenue to average approximately $90 million for each of our first three quarters," McGahn said, adding that AMSC anticipates strong demand through the second half. Because first-half revenue already reached $188.1 million across the first two quarters, a $90 million three-quarter average ($270 million in total) leaves $81.9 million for the third quarter by our math.
The formal outlook sets the third-quarter revenue floor at $80.0 million. At $81.9 million, revenue would drop 12.9% from the second quarter, and growth from a year ago would slow from 42.8% to 9.9% by our math. That slowdown happens because the third quarter laps the December 2025 purchase of Comtrafo and pays back the early first-half shipments.
What to watch: third-quarter revenue against the $87.8 million level implied if AMSC matches its 9.8% average beat. A result near $82 million would show that underlying growth has slowed below 10%.
Lower Gross Margin Held Profit Flat
AMSC highlighted its quarter-on-quarter gross margin improvement as a source of financial flexibility. While gross margin — the share of sales left after the cost of making the products — rose 1.9 percentage points from the first quarter to 28.2%, it remained 2.8 percentage points below the 31.0% recorded a year ago.
- Cost of making products: 71.8% of revenue, up 2.8 percentage points from a year ago by our math
- Selling and administrative overhead: 19.4% of revenue, down 0.9 percentage points from a year ago (though spending rose 36.2% to $18.3 million)
- Research and development: 4.0% of revenue, down 1.7 percentage points from a year ago
- Stock-based pay: $6.5 million, up 73.0% from $3.8 million a year ago
Because factory costs took a bigger slice of sales and stock-based pay rose, the 42.8% revenue jump barely lifted bottom-line earnings. Net income excluding one-offs edged up 3.3% from a year ago to $9.1 million, and diluted profit per share excluding one-offs slipped from $0.20 to $0.19.
What to watch: third-quarter gross margin in the next earnings release. A reading still below 30% would show that Comtrafo's transformer business and multi-part projects carry permanently lower margins.
Earn-out Revaluation and Taxes Skewed Net Income
When AMSC bought Comtrafo, it agreed to pay the sellers extra money if the Brazilian business hits performance targets. For a second straight quarter, the company reduced the estimated value of that payout liability, recording a $1.3 million non-cash gain on its income statement after an $8.1 million gain in the first quarter. Total earn-out liabilities fell from $39.5 million in March to $30.5 million in September.
Without the $1.3 million revaluation gain, operating profit was $4.0 million, or 4.3% of sales, down 0.2 percentage points from a year ago by our math. At the same time, income tax expense rose to $3.4 million from $0.1 million a year ago, eating up 53.1% of pre-tax profit and pushing reported net income down 36.9% to $3.0 million.
What to watch: the footnote on contingent consideration in the quarterly filing. A cut caused by lower Brazilian sales projections rather than currency moves would undercut the growth story for Comtrafo.
Risks this quarter didn't answer
Three standing concerns from prior quarters could not be tested from the earnings release alone.
- Turnkey project execution: AMSC won a $25 million mining project last quarter that includes installation and commissioning for delivery next fiscal year; the conference call will show whether procurement is on budget.
- Mining and energy spending cycle: orders stayed above $95 million this quarter, so a downturn in industrial capital spending has not appeared, but one quarter does not settle a cyclical risk.
- 12-month backlog and Latin America cross-selling: neither the 12-month backlog figure nor any Comtrafo order outside Brazil was disclosed in the release; both are normally discussed on the call.
👓 Other Themes
Middle East Conflict Added to Supply Risks
AMSC updated the risk disclosures in its earnings release to add a new geopolitical warning. "The ongoing conflict between the United States, Israel, and Iran has disrupted global energy markets and supply chains," the company wrote, noting that the disruption could hurt its operations and financial results. Management did not cite any delayed shipments or higher component costs from the conflict in the second quarter.
💲 Other KPIs
By our math, cash left after capital spending jumped More than fivefold from $5.1 million a year ago and rose from $5.6 million in the first quarter. Operating cash flow reached $32.7 million on customer prepayments and lower inventory, lifting total cash to $181.9 million even after $3.9 million of second-quarter factory spending.
Deferred revenue — cash customers have paid upfront for equipment not yet delivered — rose 6.8% from last quarter's $102.6 million and is up 17.4% since March, by our math. The short-term portion due within a year climbed from $77.9 million in March to $96.3 million, backing up the order intake with cash in hand.
Weighted average diluted shares rose 6.4% from 44.2 million a year ago after last year's stock offering and the Comtrafo acquisition, though dilution slowed from the 18.6% year-on-year jump in the first quarter. The higher share count turned a 3.3% rise in profit excluding one-offs into a 1-cent drop in diluted earnings per share.
🔮 Guidance
New. The plan sets a third-quarter sales floor of $80.0 million, down up to 14.9% from the second quarter. By our math, the chief executive's target of a $90 million average across the first three quarters leaves $81.9 million for Q3, or 9.9% growth from a year ago as the Comtrafo acquisition laps. If the 9.8% three-quarter beat pattern holds, revenue would reach $87.8 million by our math.
New. The power-systems maker expects reported profit to exceed breakeven, down from $3.0 million ($0.06 per share) in the second quarter. The forecast assumes $0.5 million of income tax expense and no gain or loss from revaluing the Comtrafo earn-out, alongside $6.3 million of stock-based pay and $0.7 million of intangible amortization.
New. The floor steps down from the $8.0 million ($0.17 per share) floor set for the first two quarters and sits 23.5% below the second quarter's $9.1 million result by our math. Lower planned third-quarter revenue after first-half shipment pull-forwards drives the sequential dip.
❓ Key Questions
What was revenue growth excluding Comtrafo?
Total revenue rose 42.8% in the second quarter, but the release combines existing business growth with the acquired Brazilian transformer maker. Without a separate figure for businesses owned a year ago, investors cannot tell how fast the core grid business is growing before the acquisition laps in December.
Why did the Comtrafo earn-out liability drop again?
AMSC cut the fair value of its acquisition earn-out liability by $1.3 million in Q2 after an $8.1 million reduction in Q1. Management has not said whether the cuts reflect slower expected profit in Brazil, interest rate changes, or currency moves.
Where does the 12-month order backlog stand?
The company reported over $95 million in new orders against $94.0 million in revenue, but the release omitted the 12-month and total backlog figures that stood above $300 million and $400 million last quarter.
Why did income tax expense jump to $3.4 million?
Second-quarter tax expense took 53.1% of pre-tax income ($3.4 million on $6.4 million), up from $1.3 million in the first quarter, while the third-quarter outlook assumes just $0.5 million. The driver of that tax swing was not explained in the release.