Manufacturing equipment and systems provider Advanced Energy (NASDAQ: AEIS) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 23.8% year on year to $463.3 million. On top of that, next quarter’s revenue guidance ($470 million at the midpoint) was surprisingly good and 5.5% above what analysts were expecting. Its non-GAAP profit of $1.74 per share was 18.5% above analysts’ consensus estimates.

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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.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Advanced Energy’s 4.5% annualized revenue growth over the last five years was tepid. This was below our standard for the industrials sector and is a tough starting point for our analysis.

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 shows its demand has slowed as its revenue was flat over the last two years.

Advanced Energy also breaks out the revenue for its most important segments, Semiconductor Equipment and Industrial and Medical Equipment, which are 42.4% and 15.4% of revenue. Over the last two years, Advanced Energy’s Semiconductor Equipment revenue (i.e., plasma power) averaged 5.4% year-on-year growth. On the other hand, its Industrial and Medical Equipment revenue (i.e., robotics) averaged 23.2% declines.

This quarter, Advanced Energy reported robust year-on-year revenue growth of 23.8%, and its $463.3 million of revenue topped Wall Street estimates by 5%. Company management is currently guiding for a 13.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 5.7% over the next 12 months. While this projection suggests 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

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

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 8.6%, higher than the broader industrials sector.

Analyzing the trend in its profitability, Advanced Energy’s operating margin decreased by 3.1 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 Q3, Advanced Energy generated an operating margin profit margin of 10.6%, up 13.6 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 unimpressive 4.5% 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.

Although it wasn’t great, Advanced Energy’s two-year annual EPS growth of 4% topped its flat revenue.

Diving into the nuances of Advanced Energy’s earnings can give us a better understanding of its performance. Advanced Energy’s operating margin has expanded over the last two years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, Advanced Energy reported adjusted EPS of $1.74, up from $0.98 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 $5.77 to grow 8.3%.

Key Takeaways from Advanced Energy’s Q3 Results

We were impressed by how significantly Advanced Energy blew past analysts’ adjusted operating income expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. On the other hand, its Semiconductor Equipment revenue missed. Overall, we think this was still a decent quarter with some key metrics above expectations. The stock traded up 12.2% to $219.03 immediately following the results.

Advanced Energy put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.