Benchmark Electronics (BHE) Q4 2025 earnings review
A Strong Finish Overshadowed by CEO Exit
Benchmark delivered a robust Q4, beating EPS estimates ($0.71 vs $0.61 YoY) and returning to solid top-line growth (+7% YoY) after a year of contraction. The story is a tale of sector rotation: the previous growth engine, Semi-Cap, has stalled (-14%), while laggards Medical (+23%) and AC&C (+27%) have roared back to life. However, the surprise announcement of CEO Jeff Benck's departure creates leadership uncertainty just as the growth thesis is reigniting.
🐂 Bull Case
Medical and AC&C, which dragged performance for most of FY25, have aggressively reversed course. Medical surged 23% YoY and AC&C jumped 27% YoY, validating the 'recovery' narrative management touted in Q3.
Despite Semi-Cap (a high-margin sector) declining, Benchmark achieved a 10.6% Non-GAAP Gross Margin—its highest recent mark. This proves operational efficiency and mix management are durable.
🐻 Bear Case
Semi-Cap revenue fell 14% YoY to $171M. This sector was the safety net during the 2024 downturn; its reversal into contraction poses a significant headwind for FY26 profitability mix.
CEO Jeff Benck is leaving at the end of the quarter. While President David Moezidis is the successor, Benck was the architect of the current high-margin strategy. Transitions always carry execution risk.
⚖️ Verdict: 🟢
Bullish. The operational turnaround is undeniable with revenue growth accelerating and margins expanding. While the CEO departure and Semi-Cap weakness are valid concerns, the resurgence of Medical and AC&C provides ample cover.
Key Themes
Medical & AC&C: V-Shaped Recovery
The rotation is dramatic. Medical revenue grew 23% YoY to $144M, and AC&C grew 27% YoY to $108M. Just two quarters ago (25Q2), AC&C was down significantly. This confirms that inventory destocking in Medical has ended and AI/HPC demand in AC&C is finally materializing.
Semi-Cap Reversal
Reversing. Semi-Cap equipment revenue dropped to $171M, down 14% YoY and down 8% sequentially from Q3 ($185M). In previous quarters, this segment was growing double-digits. Management flagged 'China demand headwinds' in Q3, and the data now confirms a sharp contraction is underway.
Aerospace & Defense Consistency
Stable/Accelerating. A&D grew 17% YoY to $137M. This segment has been a consistent performer throughout FY25, unaffected by the cyclical swings seen in Medical and Semi-Cap. It remains a foundational pillar of the growth story.
Working Capital Execution
The cash conversion cycle improved significantly to 67 days, down from 77 days in Q3 and 89 days a year ago. Inventory days dropped to 69 from 85 YoY. This operational discipline generated $48M in Free Cash Flow in Q4 alone.
Tax Accounting Error
Management disclosed an 'immaterial error' in income tax calculations for 2024, resulting in restated 2024 financials (overstated equity by $8.7M). While deemed immaterial, accounting errors can sometimes signal lax internal controls and bear monitoring.
Other KPIs
Stable/Accelerating. Up from 10.4% a year ago and 10.1% in Q3. This is a critical metric demonstrating that despite the drop in high-margin Semi-Cap revenue, the company is finding efficiency gains and pricing power elsewhere.
Strong generation compared to Net Income of $6M (GAAP). Driven by efficient working capital management, particularly the 16-day YoY reduction in inventory days.
Decelerating significantly from $16.2M YoY. While Non-GAAP EPS grew, GAAP results were heavily impacted by $14M in restructuring charges and other costs in Q4, significantly higher than the $0.7M charge in the prior year period.
Guidance
Accelerating. The midpoint ($675M) implies +6.8% YoY growth compared to the $632M reported in 25Q1. This confirms the Q4 growth return was not a fluke.
Accelerating. Midpoint of $0.56 represents a +7.7% increase vs 25Q1 ($0.52). The company expects to maintain operating leverage despite the revenue mix shift away from Semi-Cap.
Text implies margin stability, but explicit range was not provided in the prompt's extracted guidance section, only Revenue and EPS ranges.
Key Questions
Semi-Cap Floor
Semi-Cap revenue deteriorated 8% sequentially and 14% YoY. Is Q4 the bottom, or should we model further contraction in H1 2026 given the China headwinds?
CEO Transition Strategy
With Jeff Benck leaving, does David Moezidis plan to maintain the current sector strategy, or will there be a shift in capital allocation or M&A focus?
AC&C Sustainability
The AC&C segment saw a massive 27% YoY jump. How much of this is lumpiness from specific AI/HPC project builds versus sustainable recurring demand?