What Management Said
Read the full Q4 2025 transcript ↗You can find today's press release and earnings presentation on our website at ir.advancedenergy.com. Any targets beyond the current quarter presented today should not be interpreted as guidance. Revenue of nearly $490 million was at the high end of our guidance. Strengthening demand in the semiconductor, industrial, and medical markets drove the outperformance.
Gross margin came in just shy of 40%, our best performance in five years. For 2025, we grew total revenue over 20%, increased earnings per share by over 70%, and significantly improved our gross and operating margins. We deploy our best-in-class technologies across multiple high-value markets, allowing us to deliver healthy revenue, profitability, and cash flow through market cycles. In 2025, we grew revenue in two of our three target markets.
Data center computing revenue more than doubled year-on-year and increased sequentially in every quarter of 2025. Semiconductor revenue grew 6% year-on-year to the second-highest level in company history. New products began contributing incremental revenue in 2025 as some of our design wins moved into early production. Although industrial medical revenue declined year-on-year, we were encouraged by three-quarters of sequential revenue growth after reaching a bottom in the first quarter.
What went well
- Advanced Energy finished 2025 with a strong fourth quarter, posting revenue of nearly $490 million ($489 million, up 6% sequentially and 18% year-over-year) at the high end of guidance, driven by strengthening demand in semiconductor, industrial, and medical markets plus another record quarter in data center.
- Fourth-quarter gross margin reached 39.7%, the best performance in five years, up 60 basis points sequentially despite tariff and factory ramp costs.
- Earnings of $1.94 per share beat guidance and rose from $1.74 the prior quarter and $1.30 a year ago, while operating margin expanded to 17.8%, up 430 basis points year-over-year, highlighting model leverage.
- Data center computing revenue hit a record $178 million, up 101% year-over-year, and industrial medical revenue grew 10% sequentially to $78 million, returning to year-over-year growth for the first time in two years.
- For full-year 2025, the company grew total revenue over 20% to $1.8 billion, increased EPS over 70% to $6.41, expanded gross margin 240 basis points to 38.7%, and delivered record operating cash flow of $235 million.
- Management cited 26 new product launches, broad customer acceptance of Everest, eVoS, and NavX technologies, and completed capacity expansions in the Philippines, Mexico, and a new Thailand factory.
What went wrong
- Industrial medical revenue declined year-over-year for the full year, down 11%, following a prolonged inventory correction that bottomed in the first quarter of 2025.
- Telecom and networking revenue was $22 million, down slightly for both the quarter and the year, mainly due to program timing.
- Management acknowledged ongoing tariff headwinds (managed to less than 100 basis points of gross margin impact for the year) and continued ramp costs in the data center business.
- Supply chain constraints on processors (GPUs/ASICs) and now memory are expected to limit data center growth in 2026, with memory makers reportedly sold out and allocation situations developing.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Revenue | Q1 2026 | ~$500 million ±$20 million (new) |
| Gross margin | Q1 2026 | 39.5%–40% range (new) |
| Non-GAAP EPS | Q1 2026 | ~$1.94 ±$0.25 (new) |
| Tax rate | Q1 2026 / forward | 16%–17% (new) |
| Other income | Q1 2026 | ~$1 million (new) |
| Data center revenue growth | FY 2026 | more than 30% (raised) |
| Total revenue growth | FY 2026 | high teens (new) |
| Gross margin (40% target) | FY 2026 | expect to achieve above 40% within 2026 (new) |
| EPS share count | Q1 2026 | 39.7 million shares (new) |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +18% | Strengthening demand in semiconductor, industrial, and medical markets plus record data center revenue. |
| Semiconductor revenue | +8% sequentially (Q4); +6% full year to $840 million | Customer demand strengthened in Q4 ahead of guidance; full-year was second-strongest after 2022 peak as new products began contributing. |
| Data center computing revenue | +101% (Q4 to $178M); +107% full year to $587 million | AI data center investment and hyperscaler adoption of customized power solutions in AI rack applications. |
| Industrial medical revenue | +2% (Q4 to $78M); -11% full year | Recovery after inventory correction bottomed in Q1; customers and distributors worked through excess inventories; backlog and distribution metrics improving. |
| Telecom and networking revenue | down slightly to $22 million | Mainly program timing. |
| Gross margin | +240 bps full year to 38.7% | Leverage on higher revenue and footprint optimization including closure of last China factory, despite tariffs. |
| Operating margin | +430 bps (Q4 to 17.8%); +560 bps full year to 15.8% | Leverage in the financial model on higher revenue and disciplined spending. |
| EPS | +73% full year to $6.41 | Revenue growth and margin expansion. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Data center / AI power | guided 25%-30% FY26 growth | raised to more than 30%; record Q4; engaging second wave of cloud/enterprise customers and 800-volt projects | Improving |
| Semiconductor recovery | Q4 expected down 2%-3% | Q4 grew 8%; stronger customer forecasts increasing confidence in strong second half 2026 and 2027 | Improving |
| Industrial medical normalization | multiple quarters of decline, bottomed Q1 2025 | three quarters of sequential growth, returned to YoY growth, market largely normalized | Improving |
| Gross margin expansion | initial 40% target | 39.7% in Q4, expect above 40% within 2026, long-term goal 43% | Improving |
| Capacity expansion (Thailand) | — | new $1B+ Thailand factory fit-up complete; total network capacity $3.5B+; can ramp data center as soon as Q4 2026 | Expanding |
| New products (Everest, eVoS, NavX) | — | delivered double-digit millions of revenue in 2025, expected higher in 2026 as sub-2nm nodes ramp | Improving |
| M&A pipeline | — | active pipeline; Airity acquisition successful; opportunities in industrial medical as valuations normalize | Active |
Q&A Summary
How are you thinking about semi-cap growth this year relative to industry WFE growth, and do you anticipate acceleration in the back half?
The company feels better positioned than ever due to broad acceptance of eVoS, Everest, and NavX, setting up structural share gain over five years in conduction, dielectric, and deposition as customers face throughput and yield challenges below 2nm. A surge in demand for advanced logic and DRAM capacity, a larger installed base, growing service business, and new system power wins ramping in 2026 are all growth factors; they expect to be happy with the growth though they did not quantify it.
What is embedded in the revised greater-than-30% data center growth outlook regarding new customers, and are you optimistic existing-customer volumes strengthen given hyperscaler CapEx increases?
The over-30% forecast comprehends only the existing customer base and does not include any second-wave customer pull-ins. The market looks bullish given hyperscaler capital spending plans; capacity was expanded in the Philippines and Mexico, with Thailand ready to start up this year if needed to absorb additional demand.
What is your visibility into data center projects, and is the greater-than-30% growth conservatism or lack of visibility?
There is definitely upside to the number. The main issue is supply-side constraints; in 2025 processor (GPU/ASIC) constraints dictated box deliveries, and in 2026 memory is also constrained with makers sold out, creating allocation situations that limit growth. Supply chain has not limited their own ability to build, so they are building strategic inventory.
On semi, is the second-half-better commentary just revenue or an inflection?
A material change in customer outlooks occurred in Q4, driving the Q4 outperformance; initially feared a pull-in from Q1, but Q1 and Q2 demand also went up, and customers signaled further increases for the second half, suggesting second half stronger than first and a healthy 2027.
As Thailand ramps to $3.5 billion total capacity, how should we think about revenue mix across semi, data center, and the rest?
Existing network provides more than $2.5 billion of revenue-generating capacity and Thailand adds $1 billion or more, reaching $3.5 billion by end of next year if fully built out. Exact mix was not detailed, but Thailand will initially focus on high-volume, low-mix data center products, then plasma power products, then industrial medical.
Would there be an ASP uplift as you support 800-volt AI data center racks given the redesign and increased content?
Based on market analysis, the total dollar opportunity goes up with 800-volt solutions relative to today; the company has technology enabling 800 volts in a small space and is engaged with multiple marquee customers, viewing the mix shift to newer technologies as very good for the business.
Do you have capacity to support upwards of 50% data center growth if the supply chain delivers?
That is why Thailand was built; first products will likely qualify there this year and could ramp as soon as Q4 2026, likely data center. Factory floor space and equipment are not the constraints; the focus is on bill of materials, parts, ICs, and discretes, which is why inventory is moving up as insurance.
More on Advanced Energy Industries Inc
Reported 2026-02-10 · figures from the Advanced Energy Industries Inc Q4 2025 earnings call.
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