Advanced Energy(AEIS) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This part presents the unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for Advanced Energy Industries, Inc ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS This section presents Advanced Energy Industries, Inc.'s unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed explanatory notes Consolidated Balance Sheets The consolidated balance sheets show a slight decrease in cash and cash equivalents but an overall increase in total assets and stockholders' equity from December 31, 2024, to June 30, 2025, indicating growth in the company's asset base and financial strength | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | Change (in millions) | % Change | | :--------------------------------- | :-------------------------- | :---------------------------- | :------------------- | :------- | | Cash and cash equivalents | $713.5 | $722.1 | $(8.6) | -1.19% | | Accounts receivable, net | $304.0 | $265.3 | $38.7 | 14.59% | | Inventories | $397.9 | $360.4 | $37.5 | 10.40% | | Total current assets | $1,459.5 | $1,389.3 | $70.2 | 5.05% | | Total assets | $2,379.6 | $2,261.9 | $117.7 | 5.20% | | Total current liabilities | $356.9 | $314.3 | $42.6 | 13.55% | | Total liabilities | $1,117.0 | $1,055.3 | $61.7 | 5.85% | | Total stockholders' equity | $1,257.3 | $1,203.1 | $54.2 | 4.51% | Consolidated Statements of Operations The company reported significant year-over-year growth in revenue, gross profit, and operating income for both the three and six months ended June 30, 2025, demonstrating improved operational efficiency and profitability, despite a decrease in interest income | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change (YoY) | | :------------------- | :------------------------------- | :------------------------------- | :------------- | :----------------------------- | :----------------------------- | :------------- | | Revenue, net | $441.5 | $364.9 | 21.0% | $846.1 | $692.4 | 22.2% | | Gross profit | $163.4 | $127.7 | 28.0% | $313.9 | $240.5 | 30.5% | | Operating income | $31.6 | $12.9 | 145.0% | $62.2 | $13.6 | 357.4% | | Interest income | $6.6 | $12.1 | -45.5% | $13.5 | $24.8 | -45.6% | | Net income | $25.2 | $14.8 | 70.3% | $49.9 | $20.2 | 147.0% | | Diluted EPS | $0.67 | $0.39 | 71.8% | $1.31 | $0.54 | 142.6% | Consolidated Statements of Comprehensive Income Comprehensive income significantly increased for both the three and six months ended June 30, 2025, primarily driven by higher net income and a positive impact from foreign currency translation, which shifted from a loss in the prior year to a gain in the current period | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change (YoY) | | :------------------- | :------------------------------- | :------------------------------- | :------------- | :----------------------------- | :----------------------------- | :------------- | | Net income | $25.2 | $14.8 | 70.3% | $49.9 | $20.2 | 147.0% | | Foreign currency translation | $16.2 | $(2.6) | N/A | $20.8 | $(9.2) | N/A | | Comprehensive income | $41.3 | $9.8 | 321.4% | $70.5 | $7.2 | 879.2% | Consolidated Statements of Stockholders' Equity Total stockholders' equity increased from $1,203.1 million at December 31, 2024, to $1,257.3 million at June 30, 2025, primarily due to net income and stock-based compensation, partially offset by share repurchases and dividend payments | Metric (in millions) | December 31, 2024 | June 30, 2025 | | :------------------- | :---------------- | :------------ | | Total Stockholders' Equity | $1,203.1 | $1,257.3 | | Net income | N/A | $25.2 | | Stock-based compensation | N/A | $12.2 | | Share repurchases | N/A | $(22.8) | | Dividends declared | N/A | $(3.9) | Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $74.1 million for the six months ended June 30, 2025, compared to $14.0 million in the prior year, driven by higher net income. Investing activities saw a slight decrease in cash used, while financing activities used more cash due to share repurchases and debt-related payments | Metric (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change (YoY) | | :------------------- | :----------------------------- | :----------------------------- | :------------- | | Net cash from operating activities | $74.1 | $14.0 | 429.3% | | Net cash used in investing activities | $(43.6) | $(47.6) | -8.4% | | Net cash used in financing activities | $(42.8) | $(23.2) | 84.5% | | Net change in cash and cash equivalents | $(8.6) | $(58.5) | -85.3% | | Cash and cash equivalents, end of period | $713.5 | $986.1 | -27.7% | Notes to Consolidated Financial Statements These notes detail the company's accounting policies, revenue disaggregation, income tax, equity, fair value, derivatives, receivables, inventories, intangibles, restructuring, warranties, leases, stock compensation, commitments, debt, and cash flow information NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Advanced Energy Industries, Inc. provides precision power solutions globally, with financial statements prepared under U.S. GAAP, and recent accounting standard updates are not expected to have a material impact - Advanced Energy Industries, Inc. specializes in precision power conversion, measurement, and control solutions for global customers, focusing on transforming raw electrical power into highly controllable, usable power for complex equipment[18] - The company adopted a change in financial statement presentation from thousands to millions during 2025, which did not materially impact previously reported financial information[21] - New accounting standards, ASU 2023-09 (Income Tax Disclosures, effective Dec 31, 2025) and ASU 2024-03 (Expense Disaggregation Disclosures, effective Jan 1, 2027), are not expected to materially impact the consolidated financial statements upon adoption[25][26] NOTE 2. REVENUE Total revenue increased significantly for both the three and six months ended June 30, 2025, driven primarily by strong growth in the Data Center Computing and Semiconductor Equipment markets. Geographically, Japan showed the most substantial growth, while Taiwan experienced a decline Revenue by Market (in millions) | Market | Q2 2025 | Q2 2024 | % Change (YoY) | YTD 2025 | YTD 2024 | % Change (YoY) | | :-------------------- | :------ | :------ | :------------- | :------- | :------- | :------------- | | Semiconductor Equipment | $209.5 | $188.3 | 11.3% | $431.7 | $368.2 | 17.2% | | Industrial and Medical | $68.6 | $79.1 | -13.3% | $132.9 | $162.5 | -18.2% | | Data Center Computing | $141.6 | $73.0 | 94.0% | $237.8 | $114.9 | 107.0% | | Telecom and Networking | $21.8 | $24.5 | -11.0% | $43.7 | $46.8 | -6.6% | | Total Revenue | $441.5| $364.9| 21.0% | $846.1 | $692.4 | 22.2% | Revenue by Significant Countries (in millions) | Country | Q2 2025 | Q2 2024 | % Change (YoY) | YTD 2025 | YTD 2024 | % Change (YoY) | | :------ | :------ | :------ | :------------- | :------- | :------- | :------------- | | United States | $141.7 | $129.5 | 9.4% | $285.9 | $237.3 | 20.5% | | Mexico | $41.1 | $42.9 | -4.2% | $82.8 | $68.8 | 20.3% | | Taiwan | $28.6 | $39.1 | -26.9% | $57.5 | $78.6 | -26.9% | | Japan | $64.6 | $12.7 | 408.7% | $95.9 | $25.0 | 283.6% | Revenue by Category (in millions) | Category | Q2 2025 | Q2 2024 | % Change (YoY) | YTD 2025 | YTD 2024 | % Change (YoY) | | :------- | :------ | :------ | :------------- | :------- | :------- | :------------- | | Product | $396.1 | $325.4 | 21.7% | $756.3 | $611.6 | 23.7% | | Services and other | $45.4 | $39.5 | 14.9% | $89.8 | $80.8 | 11.1% | NOTE 3. INCOME TAX The effective tax rate for the three and six months ended June 30, 2025, decreased compared to the prior year, primarily due to a more favorable mix of earnings in foreign jurisdictions with lower tax rates. The company is assessing the potential impact of the Pillar II minimum global effective tax rate regime and the recently signed OBBB Act, but currently does not expect a material impact on its 2025 effective tax rate | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Income from continuing operations, before income tax (in millions) | $29.3 | $18.6 | $59.2 | $26.3 | | Income tax provision (in millions) | $3.8 | $3.2 | $8.8 | $5.0 | | Effective tax rate | 13.0% | 17.2% | 14.9% | 19.0% | - The effective tax rate for 2025 was lower than 2024 primarily due to a more favorable mix of earnings in foreign jurisdictions subject to lower tax rates, as well as tax credits, partially offset by net U.S. tax on foreign operations and Pillar II top-up taxes[31] - The company is assessing the potential impact of the Pillar II minimum global effective tax rate regime and the One Big Beautiful Bill (OBBB) Act, but currently does not expect a material impact on its estimated annual effective tax rate in 2025[32][33] NOTE 4. STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE Accumulated other comprehensive income (loss) shifted from a loss of $(11.8) million at December 31, 2024, to a gain of $8.8 million at June 30, 2025, primarily due to foreign currency translation. Diluted EPS from continuing operations increased significantly to $0.67 for Q2 2025 and $1.33 for YTD 2025. The company repurchased 0.3 million shares for $23.7 million during the six months ended June 30, 2025, with $173.4 million remaining authorized for future repurchases Accumulated Other Comprehensive Income (Loss) (in millions) | Component | December 31, 2024 | June 30, 2025 | | :-------------------------------- | :---------------- | :------------ | | Foreign Currency Translation | $(22.3) | $(1.5) | | Defined Employee Benefit Plan | $10.5 | $10.3 | | Total Accumulated Other Comprehensive Income (Loss) | $(11.8) | $8.8 | Earnings Per Share (EPS) from Continuing Operations | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------- | :------ | :------ | :------- | :------- | | Basic EPS | $0.68 | $0.41 | $1.34 | $0.57 | | Diluted EPS | $0.67 | $0.41 | $1.33 | $0.56 | Share Repurchases (in millions, except per share amounts) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | | Amount paid to repurchase shares | $23.7 | $0 | | Number of shares repurchased | 0.3 | 0 | | Average repurchase price per share | $84.19 | $0 | | Remaining authorized for future repurchases | $173.4 | N/A | NOTE 5. FAIR VALUE MEASUREMENTS The company's non-pension assets and liabilities measured at fair value on a recurring basis, primarily certificates of deposit, investments, and deferred compensation liabilities, are classified within Level 2 of the fair value hierarchy. Foreign currency forward contracts decreased from $0.3 million to $0 | Description | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------- | :-------------------------- | :---------------------------- | | Certificates of deposit | $0.2 | $0.2 | | Foreign currency forward contracts | $0 | $0.3 | | Investments | $12.1 | $9.9 | | Deferred compensation liabilities | $10.9 | $10.1 | NOTE 6. DERIVATIVE FINANCIAL INSTRUMENTS The company uses derivative financial instruments, primarily one-month foreign currency forward contracts, to manage exchange rate risk associated with nonfunctional currency assets and liabilities. These are not designated as accounting hedges but economically offset foreign exchange fluctuations. The total outstanding foreign currency forward contracts decreased from $70.6 million at December 31, 2024, to $59.7 million at June 30, 2025 - Advanced Energy uses one-month foreign currency forward contracts to manage exchange rate risk on assets and liabilities denominated in nonfunctional currencies, with gains and losses included in other income (expense), net[41] | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :------------------------------------ | :-------------------------- | :---------------------------- | | Foreign currency forward contracts outstanding | $59.7 | $70.6 | NOTE 7. ACCOUNTS RECEIVABLE, NET Accounts receivable, net, increased to $304.0 million as of June 30, 2025. The expected credit losses related to receivables decreased slightly from $0.9 million at December 31, 2024, to $0.7 million at June 30, 2025, due to write-offs | Metric | December 31, 2024 (in millions) | June 30, 2025 (in millions) | | :------------------------------------ | :---------------------------- | :-------------------------- | | Accounts receivable, net | N/A | $304.0 | | Expected credit losses related to receivables | $0.9 | $0.7 | NOTE 8. INVENTORIES Total inventories increased to $397.9 million as of June 30, 2025, from $360.4 million at December 31, 2024, primarily driven by an increase in parts and raw materials | Component | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :---------------- | :-------------------------- | :---------------------------- | | Parts and raw materials | $296.1 | $255.1 | | Work in process | $23.3 | $20.6 | | Finished goods | $78.5 | $84.7 | | Total Inventories | $397.9 | $360.4 | NOTE 9. INTANGIBLE ASSETS AND GOODWILL Net intangible assets decreased to $128.7 million as of June 30, 2025, from $139.4 million at December 31, 2024, due to amortization, partially offset by new acquisitions. Goodwill increased slightly to $300.9 million due to foreign currency translation and other factors Intangible Assets (Net Carrying Amount in millions) | Component | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Technology | $26.8 | $29.9 | | Customer relationships | $91.7 | $98.0 | | Trademarks and other | $10.2 | $11.5 | | Total | $128.7 | $139.4 | Amortization Expense (in millions) | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three Months Ended June 30, | $6.8 | $5.6 | | Six Months Ended June 30, | $11.1| $13.7| Goodwill (in millions) | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------- | :---------------- | :------------ | | Goodwill | $296.0 | $300.9 | NOTE 10. RESTRUCTURING, ASSET IMPAIRMENTS, AND OTHER CHARGES Total restructuring, asset impairments, and other charges significantly increased to $7.0 million for Q2 2025 and $8.2 million for YTD 2025, primarily due to new restructuring plans in 2025 and ongoing activities from 2024 and 2023 plans, including manufacturing footprint optimization and functional support consolidation. A $1.6 million asset impairment charge was recorded in Q2 2025 related to vacating facilities Restructuring, Asset Impairments, and Other Charges (in millions) | Charge Type | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Restructuring | $4.0 | $0.1 | $4.6 | $0.1 | | Asset impairments | $1.6 | $0 | $1.6 | $0 | | Other charges | $1.4 | $0.5 | $2.0 | $0.8 | | Total | $7.0| $0.6| $8.2 | $0.9 | Restructuring Liabilities (in millions) | Plan | December 31, 2024 | June 30, 2025 | | :---------- | :---------------- | :------------ | | 2025 Plan | $0 | $2.9 |\n| 2024 Plan | $25.0 | $13.0 |\n| 2023 Plan | $5.0 | $4.4 |\n| Total | $30.0 | $20.3 | - During Q2 2025, the company approved a new restructuring plan (2025 Plan) to consolidate R&D, sales, and administrative functions, expected to be substantially complete by end of 2026[50] - A $1.6 million impairment charge was recorded during Q2 2025 related to remeasuring operating lease right-of-use assets and leasehold improvements due to vacating facilities[54] NOTE 11. WARRANTIES The estimated product warranty obligation increased to $6.3 million as of June 30, 2025, from $5.7 million at December 31, 2024, reflecting net increases to accruals partially offset by warranty expenditures | Metric | December 31, 2024 (in millions) | June 30, 2025 (in millions) | | :-------------------------- | :---------------------------- | :-------------------------- | | Estimated warranty obligation | $5.7 | $6.3 | NOTE 12. LEASES Total operating lease cost increased for both the three and six months ended June 30, 2025. The present value of lease liabilities is $121.4 million, with estimated future payments extending through 2029 and thereafter. The weighted average remaining lease term is 8.3 years with a weighted average discount rate of 6.3% Total Operating Lease Cost (in millions) | Period | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------- | :------ | :------ | :------- | :------- | | Operating lease cost | $6.5 | $5.9 | $13.0 | $11.7 | | Short-term and variable lease cost | $1.7 | $0.9 | $3.1 | $1.6 | | Total | $8.2| $6.8| $16.1| $13.3| Estimated Future Payments on Operating Lease Liabilities (in millions) | Year Ending December 31, | Amount | | :----------------------- | :----- | | 2025 (remaining) | $13.6 | | 2026 | $22.7 | | 2027 | $19.4 | | 2028 | $19.1 | | 2029 | $16.0 | | Thereafter | $68.7 | | Total lease payments | $159.5 | | Less: Interest | $(38.1)| | Present value of lease liabilities | $121.4 | Lease Agreement Information | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Weighted average remaining lease term (in years) | 8.3 | 8.4 | | Weighted average discount rate | 6.3% | 6.1% | NOTE 13. STOCK-BASED COMPENSATION Stock-based compensation expense increased to $13.6 million for Q2 2025 and $26.6 million for YTD 2025, partly due to the Airity Technologies acquisition. The company has 1.4 million shares available for future issuance under the 2023 Incentive Plan and 0.5 million under the ESPP. Restricted Stock Units (RSUs) outstanding at June 30, 2025, totaled 1.0 million with a weighted average grant date fair value of $110.88 Stock-Based Compensation Expense (in millions) | Period | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------- | :------ | :------ | :------- | :------- | | Stock-based compensation expense | $13.6 | $11.4 | $26.6 | $22.4 | Shares Available for Future Issuance (in millions) | Plan | June 30, 2025 | | :-------------------------- | :------------ | | 2023 Incentive Plan | 1.4 | | ESPP | 0.5 | Restricted Stock Units (RSUs) (in millions, except fair value) | Metric | Six Months Ended June 30, 2025 | | :-------------------------- | :----------------------------- | | RSUs outstanding at end of period | 1.0 | | Weighted Average Grant Date Fair Value | $110.88 | NOTE 14. COMMITMENTS AND CONTINGENCIES The company is involved in various legal disputes and actions in the normal course of business. While the outcome is difficult to predict, management believes any ultimate loss would not be material to its financial position. Loss contingencies are accrued when probable and estimable - The company is involved in legal actions arising in the normal course of business, but management believes the results will not have a material adverse effect on its financial position, results of operations, or cash flows[64] NOTE 15. LONG-TERM DEBT Long-term debt consists primarily of $575.0 million in 2.5% Convertible Notes due 2028, with a net balance of $566.1 million as of June 30, 2025. The company terminated its prior credit agreement and entered into a new one on May 8, 2025, consisting of a Term Loan Facility and a $600.0 million Revolving Facility, both maturing on May 8, 2030. No borrowings were outstanding under the new Credit Agreement as of June 30, 2025. The fair value of the Convertible Notes was estimated at $693.2 million as of June 30, 2025 Long-Term Debt (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Convertible Notes due 2028, 2.5% interest | $575.0 | $575.0 |\n| Less: debt discount | $(8.9) | $(10.3) |\n| Net long-term debt | $566.1 | $564.7 | Interest Expense Related to Debt (in millions) | Period | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------- | :------ | :------ | :------- | :------- | | Interest expense | $3.4 | $6.1 | $6.9 | $12.4 | | Amortization of debt issuance costs | $0.8 | $0.9 | $1.5 | $1.7 | | Total | $4.2| $7.0| $8.4 | $14.1| Credit Agreement Details | Metric | June 30, 2025 | | :-------------------------- | :------------ | | Available on Revolving Facility | $600.0 | | Estimated fair value of Convertible Notes | $693.2 | - On May 8, 2025, the company entered into a new credit agreement, including a senior unsecured term loan facility and a senior unsecured revolving facility, both maturing on May 8, 2030. No borrowings were outstanding under the new Credit Agreement as of June 30, 2025[67][70] - Concurrent with the Convertible Notes issuance, the company entered into Note Hedges and sold Warrants, synthetically increasing the initial conversion price from $137.46 to $179.76 to reduce potential dilutive effects[75] NOTE 16. SUPPLEMENTAL CASH FLOW INFORMATION AND OTHER DISCLOSURES Supplemental cash flow information for the six months ended June 30, 2025, includes $22.0 million in capital expenditures in accounts payable and other accrued expenses. Cash paid for interest was $7.2 million, and for income taxes was $14.7 million, with $2.9 million received from income taxes Supplemental Cash Flow Information (in millions) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Capital expenditures in accounts payable and other accrued expenses | $22.0 | $8.1 | | Cash paid for interest | $7.2 | $12.4 | | Cash paid for income taxes | $14.7 | $23.6 | | Cash received from income taxes | $2.9 | $0.7 | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial performance, condition, and future outlook, highlighting significant revenue growth driven by Data Center Computing and Semiconductor Equipment markets, improved gross margins, and increased operating expenses due to compensation and restructuring. It also discusses liquidity, debt, dividends, share repurchases, and cash flow dynamics, along with forward-looking statements and critical accounting policies Special Note on Forward-Looking Statements This section cautions readers that the report contains forward-looking statements based on management's current estimates and assumptions, which involve risks and uncertainties that could cause actual results to differ materially. Key risks include market volatility, customer demand, global economic conditions, currency fluctuations, cybersecurity, supply chain disruptions, and the ability to integrate acquisitions - The report contains forward-looking statements based on management's current estimates, forecasts, and assumptions, which are subject to risks and uncertainties that could cause actual results to differ materially[79][80] - Key risks include volatility in competing industries, ability to meet customer demand, global economic conditions (tariffs, conflicts, inflation), customer price sensitivity, U.S. Dollar value changes, customer base concentration, information security breaches, ERP implementation difficulties, loss of key personnel, manufacturing footprint optimization risks, supply chain disruptions, acquisition integration challenges, quality issues, international operation risks, intellectual property enforcement, regulatory risks, debt obligations, pension obligations, intangible asset valuation, and potential dilution from convertible debt[81][83] BUSINESS AND MARKET OVERVIEW Advanced Energy provides precision power conversion, measurement, and control solutions across Semiconductor Equipment, Industrial and Medical, Data Center Computing, and Telecom and Networking markets. The company is executing a manufacturing consolidation plan, including closing its Zhongshan, China facility, and is monitoring tariff impacts. Growth is driven by AI, energy efficiency, and automation trends, with strong demand in Data Center Computing and Semiconductor Equipment, a recovery in Industrial and Medical, and stable conditions in Telecom and Networking - Advanced Energy provides highly engineered, critical, precision power conversion, measurement, and control solutions, operating as a single segment of power electronics conversion products across four key markets: Semiconductor Equipment, Industrial and Medical, Data Center Computing, and Telecom and Networking[84][85] - The company is continuing its manufacturing consolidation plan, including the shutdown of its Zhongshan, China facility, with final closure activities expected by early 2026[86] - The Semiconductor Equipment market is driven by AI, energy efficiency, and automobile electrification, with strong demand for leading-edge devices offset by lower trailing-edge demand and U.S. export restrictions to China[91][94] - The Data Center Computing market is experiencing meaningful growth due to rapid AI investments, accelerated adoption of next-generation AI processors, and the transition to high-power 48-volt power shelf infrastructure[98][99] - The Industrial and Medical market resumed sequential growth in Q2 2025 as customer inventories normalized after a major downturn, with this trend expected to continue, potentially limited by tariff impacts[97] Results of Continuing Operations The company achieved substantial growth in revenue, gross profit, and operating income for both the three and six months ended June 30, 2025, primarily driven by strong performance in Data Center Computing and Semiconductor Equipment. Gross margin improved due to increased revenue and manufacturing cost reductions. Operating expenses rose due to higher compensation and restructuring charges, while the effective tax rate decreased due to a favorable mix of foreign earnings. Non-GAAP results also showed significant improvements | Metric (in millions) | Q2 2025 | Q2 2024 | % Change (YoY) | YTD 2025 | YTD 2024 | % Change (YoY) | | :------------------------------------ | :------ | :------ | :------------- | :------- | :------- | :------------- | | Revenue | $441.5 | $364.9 | 21.0% | $846.1 | $692.4 | 22.2% | | Gross profit | $163.4 | $127.7 | 28.0% | $313.9 | $240.5 | 30.5% | | Operating income from continuing operations | $31.6 | $12.9 | 145.0% | $62.2 | $13.6 | 357.4% | | Income from continuing operations, before income tax | $29.3 | $18.6 | 57.5% | $59.2 | $26.3 | 125.1% | | Income tax provision | $3.8 | $3.2 | 18.8% | $8.8 | $5.0 | 76.0% | | Income from continuing operations | $25.5 | $15.4 | 65.6% | $50.4 | $21.3 | 136.6% | Revenue Total revenue increased by 21.0% for Q2 2025 and 22.2% for YTD 2025, primarily driven by significant growth in Data Center Computing (94.0% for Q2, 107.0% for YTD) and Semiconductor Equipment (11.3% for Q2, 17.2% for YTD). Industrial and Medical, and Telecom and Networking markets experienced declines | Market | Q2 2025 (in millions) | Q2 2024 (in millions) | % Change (YoY) | YTD 2025 (in millions) | YTD 2024 (in millions) | % Change (YoY) | | :-------------------- | :-------------------- | :-------------------- | :------------- | :--------------------- | :--------------------- | :------------- | | Semiconductor Equipment | $209.5 | $188.3 | 11.3% | $431.7 | $368.2 | 17.2% | | Industrial and Medical | $68.6 | $79.1 | -13.3% | $132.9 | $162.5 | -18.2% | | Data Center Computing | $141.6 | $73.0 | 94.0% | $237.8 | $114.9 | 107.0% | | Telecom and Networking | $21.8 | $24.5 | -11.0% | $43.7 | $46.8 | -6.6% | | Total | $441.5 | $364.9 | 21.0% | $846.1 | $692.4 | 22.2% | - The increase in Semiconductor Equipment revenue was due to continued cyclical recovery and strong demand for leading-edge process tools, while Data Center Computing revenue surged from hyperscale investments in AI-driven platforms and design wins[106] - Industrial and Medical revenue decreased due to customer inventory rebalancing, and Telecom and Networking revenue saw a modest decrease due to slowing mobile data traffic, partially offset by increased networking infrastructure spending[106][107] Gross Profit and Gross Margin Gross profit increased by 28.0% for Q2 2025 and 30.5% for YTD 2025, with gross margin improving to 37.0% and 37.1% respectively. This improvement was largely driven by increased revenue and manufacturing cost reduction programs, which positively impacted gross margin by 110 and 190 basis points for the three and six months ended June 30, 2025 | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | % Change (YoY) | YTD 2025 (in millions) | YTD 2024 (in millions) | % Change (YoY) | | :---------- | :-------------------- | :-------------------- | :------------- | :--------------------- | :--------------------- | :------------- | | Gross profit | $163.4 | $127.7 | 28.0% | $313.9 | $240.5 | 30.5% | | Gross margin | 37.0% | 35.0% | 2.0 pp | 37.1% | 34.7% | 2.4 pp | - Manufacturing cost reduction programs positively impacted gross margin by 110 basis points during the three months ended June 30, 2025, and 190 basis points during the six months ended June 30, 2025[109] Operating Expenses Total operating expenses increased for both the three and six months ended June 30, 2025, primarily due to higher compensation costs in R&D and SG&A, and increased restructuring, asset impairments, and other charges. Amortization of intangible assets declined as some assets reached the end of their useful life | Operating Expense (in millions) | Q2 2025 | Q2 2024 | % Change (YoY) | YTD 2025 | YTD 2024 | % Change (YoY) | | :------------------------------------ | :------ | :------ | :------------- | :------- | :------- | :------------- | | Research and development | $59.0 | $52.3 | 12.8% | $113.2 | $102.2 | 10.8% | | Selling, general, and administrative | $60.2 | $55.1 | 9.3% | $119.2 | $110.1 | 8.3% | | Amortization of intangible assets | $5.6 | $6.8 | -17.6% | $11.1 | $13.7 | -19.0% | | Restructuring, asset impairments, and other charges | $7.0 | $0.6 | 1066.7% | $8.2 | $0.9 | 811.1% | | Total operating expenses | $131.8| $114.8| 14.8%