10-Q · May 12, 2026
Qnity Electronics posted Q1 2026 revenue of $1.315 billion, up 18% year-over-year, but missed the consensus estimate of $1.270 billion. The company's diluted EPS came in at $0.72, below the expected $0.92. Strong…
Earnings analysis · 10-Q
Q earnings analysis
Filed August 4, 2026 · Our reading of the company's report
The latest report
Qnity delivered strong Q2 top-line momentum, with revenue rising 22% to $1.429 billion as both segments benefited from AI-related demand, led by 30% Interconnect Solutions growth. Gross margin improved to 46.6%, but…
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Qnity delivered strong Q2 top-line momentum, with revenue rising 22% to $1.429 billion as both segments benefited from AI-related demand, led by 30% Interconnect Solutions growth. Gross margin improved to 46.6%, but operating margin fell to 19.3% and GAAP EPS declined to $0.59, reflecting $42 million of transformation-related charges, $61 million of interest expense and a higher tax rate. Liquidity remains adequate with $961 million of cash, although first-half operating cash flow declined $104 million year over year and debt remained $4.020 billion.
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
- $0.59
What stood out
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Revenue accelerated 22% year over year
Q2 net sales were $1.429 billion, up 22% from $1.170 billion a year earlier and $114 million above Q1 2026 net sales of $1.315 billion. The year-over-year increase was driven principally by a 23% volume increase.
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Interconnect led growth and profit expansion
Interconnect Solutions sales increased 30% to $685 million from $526 million, while Adjusted Operating EBITDA rose 44% to $197 million from $137 million. Management cited AI technology ramps, content/share gains in advanced packaging, AI PCB and thermal management.
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Semiconductor Technologies grew on AI demand
Semiconductor Technologies sales increased 16% to $744 million from $644 million, supported by an 18% volume gain. Management attributed demand to improved customer utilization and AI applications in advanced nodes, advanced packaging and high-bandwidth memory.
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Gross margin improved roughly 100 bps
Gross margin improved to 46.6% as cost of sales was 53% of sales, versus 54% in Q2 2025. This occurred despite a 3% increase in material costs.
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Cash increased and debt repricing lowers cost
Cash and cash equivalents rose to $961 million at June 30, 2026 from $915 million at December 31, 2025, while total debt was essentially stable at $4.020 billion versus $4.027 billion. The July 1 repricing reduced the term-loan SOFR margin from 2.00% to 1.75%.
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Substantial repurchase capacity remains
The company repurchased $25 million of stock during Q2 at an average $136.51 per share; $450 million remained under the $500 million authorization at June 30, 2026.
What to watch
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EPS and operating margin declined
GAAP EPS was $0.59, below $0.72 in Q1 2026 and down 34% year over year. Operating margin declined to 19.3% from 20.6% in Q1 2026 and approximately 21.0% in Q2 2025 as operating expenses rose.
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Transformation charges materially increased
Transformation, integration and other charges increased to $42 million from $2 million a year earlier, including approximately $24 million for IT-independence initiatives and approximately $8 million for transformation initiatives.
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Cash conversion weakened amid working capital
First-half operating cash flow fell to $376 million from $480 million, while investing cash outflow increased to $205 million from $153 million. Management cited debt-interest payments plus higher receivables and inventory supporting sales growth; exact capex and free cash flow were not disclosed.
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Leverage creates a meaningful interest burden
Total debt was $4.020 billion at June 30, 2026, with $236 million of interest contractually due in the next 12 months and $1.5 billion of total future interest payments. Q2 interest expense was $61 million versus no interest expense in Q2 2025.
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No formal risk-factor update; global exposure remains
Item 1A states there were no material changes to risk factors from the 2025 Form 10-K. Nonetheless, management flags tariff and geopolitical uncertainty; $662 million of the $961 million cash balance was held by foreign subsidiaries at June 30, 2026.
Management's outlook
The 10-Q does not provide quantitative revenue or EPS guidance. Management expects operating cash generation and access to debt markets to provide sufficient liquidity; the July 2026 term-loan repricing is expected to reduce annual cash interest expense by approximately $6 million.
Earlier filings 2
10-K · February 26, 2026
Qnity’s 2025 Form 10-K positions the company as a newly independent, vertically broad materials supplier to the semiconductor and electronics industries following the November 1, 2025 Separation; the company reports two…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.