10-Q · May 4, 2026
Avery Dennison reported a strong Q1 2026, with revenue of $2.299 billion, a 7% increase from the prior year and exceeding consensus estimates. Diluted EPS improved to $2.47, beating expectations of $2.42, driven by…
Earnings analysis · 10-Q
AVY earnings analysis
Filed August 4, 2026 · Our reading of the company's report
The latest report
Avery Dennison delivered a strong Q2, with revenue up 10.9%, gross margin expanding to 29.6%, and GAAP diluted EPS rising 10.8% to $2.67. Materials Group drove the result, while Solutions Group remained broadly flat on…
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Avery Dennison delivered a strong Q2, with revenue up 10.9%, gross margin expanding to 29.6%, and GAAP diluted EPS rising 10.8% to $2.67. Materials Group drove the result, while Solutions Group remained broadly flat on reported sales and year-to-date profit. Cash generation and working-capital efficiency improved substantially, though higher restructuring, tax and interest costs—and elevated tariff uncertainty—remain key offsets.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $2.67
What stood out
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Revenue growth accelerated to 10.9%
Q2 net sales rose 10.9% year over year to $2.4629B from $2.2205B and increased 7.2% sequentially from implied Q1 sales of $2.2985B. Organic sales rose 8%, primarily from higher volume, despite unfavorable mix.
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Gross margin expanded 80 basis points YoY
Gross profit increased to $729.4M from $639.1M, lifting gross margin to 29.6% from 28.8% a year earlier and approximately 28.9% in Q1. GAAP operating margin was approximately 12.7%, versus 12.9% a year ago and approximately 11.8% sequentially.
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GAAP EPS rose 10.8% year over year
GAAP diluted EPS increased to $2.67 from $2.41, while net income rose to $204.1M from $189.0M. The $2.67 GAAP result was below the separately reported adjusted EPS of $2.89, reflecting $21.1M of other expense, including restructuring.
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Materials delivered double-digit organic growth
Materials Group was the principal growth engine: sales increased $245.9M to $1.7961B and adjusted operating income increased $41.5M to $284.0M. Organic sales grew 10%, supported by higher volume, customer inventory stocking and pricing actions.
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Cash conversion improved sharply
First-half operating cash flow was $544.7M, up from $192.5M, and adjusted free cash flow was $469.8M versus $135.8M. Capital expenditures were $67.5M, equal to 1.4% of first-half sales of $4.7614B.
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Working-capital efficiency strengthened
Operational working capital improved to 13.2% of annualized quarterly sales from 15.2% a year ago; inventory turnover improved to 6.7x from 6.2x and DSO declined to 66 days from 67 days.
What to watch
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Solutions reported sales remain pressured
Solutions Group Q2 sales declined 0.5% to $666.8M from $670.3M despite 3% organic growth, and first-half segment sales fell 1.7% to $1.3160B from $1.3385B. First-half adjusted operating income was essentially flat at $135.0M versus $135.2M.
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Restructuring charges increased materially
Other expense increased to $21.1M in Q2 from $0.5M, including $18.6M of restructuring-related severance, impairment and lease-cancellation charges. The company recorded $34.7M of 2026 restructuring charges in the first half tied to a reduction of approximately 600 positions.
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Higher tax rate constrains earnings
The effective tax rate increased to 27.8% from 26.0% in Q2 and to 28.8% from 26.4% year to date. Management expects the full-year effective tax rate to remain in the high-20% range.
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Interest expense is trending higher
Interest expense rose to $35.9M from $34.0M in Q2 and to $71.5M from $64.9M year to date, primarily due to €500M of senior notes issued in September 2025. Management also expects higher interest expense for full-year 2026.
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Tariff and geopolitical exposure remains elevated
The updated risk factor cites evolving tariffs: the U.S. applied new 10.0% and 12.5% tariffs on certain imports from 60 countries in July 2026. The company estimates tariff effects reduced overall apparel-category sales at a low-single-digit rate across Q2 through Q4 2025; 69% of 2025 sales originated outside the U.S.
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Capital returns and investment use liquidity
Cash and equivalents were $227.3M at June 30, while total debt was $3.68B, although debt declined approximately $55M in the first half. The company used $198.2M for repurchases, paid $148.5M in dividends, and made an approximately $75M minority investment in Wiliot during the first half.
Management's outlook
The 10-Q does not provide numeric revenue or EPS guidance. Management expects favorable foreign-currency translation to support full-year 2026 net sales and operating income, incremental restructuring savings net of transition costs, higher interest expense, and a full-year effective tax rate in the high-20% range; it also expects operating-income pressure from normalization of prior-year temporary cost actions.
Earlier filings 4
10-K · February 25, 2026
Avery Dennison positions itself as a global materials-science and digital-identification leader with a two-segment model (Materials Group and Solutions Group) and a strong international footprint. The 2025 10-K…
10-K · February 26, 2025
Avery Dennison positions itself as a global materials science and digital identification solutions company, with a two-segment model (Materials Group ~69% of 2024 net sales; Solutions Group ~31%). The company emphasizes…
10-K · February 22, 2023
Avery Dennison’s 2022 Form 10-K describes a strategic realignment into two reportable segments (Materials Group and Solutions Group), continued international scale (~72% of net sales outside the U.S.), and targeted…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.