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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2026
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission File Number: 000-26966

ADVANCED ENERGY INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	84-0846841
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1595 Wynkoop Street, Suite 800, Denver, Colorado	80202
(Address of principal executive offices)	(Zip Code)

(970) 407-6626

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	AEIS	Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ

Accelerated filer ◻

Non-accelerated filer ◻

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of April 29, 2026, there were 38,030,657 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

Table of Contents

ADVANCED ENERGY INDUSTRIES, INC.

FORM 10-Q

TABLE OF CONTENTS



	PART I FINANCIAL INFORMATION

ITEM 1.	UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS	3

	Consolidated Balance Sheets	3

	Consolidated Statements of Operations	4

	Consolidated Statements of Comprehensive Income (Loss)	5

	Consolidated Statements of Stockholders’ Equity	6

	Consolidated Statements of Cash Flows	7

	Notes to Consolidated Financial Statements	8

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	24

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38

ITEM 4.	CONTROLS AND PROCEDURES	39

	PART II OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	39

ITEM 1A.	RISK FACTORS	39

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	40

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	40

ITEM 4.	MINE SAFETY DISCLOSURES	40

ITEM 5.	OTHER INFORMATION	40

ITEM 6.	EXHIBITS	41

	SIGNATURES	42

Table of Contents

PART I FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

ADVANCED ENERGY INDUSTRIES, INC.

Unaudited Consolidated Balance Sheets

(In millions, except per share amounts)


		March 31,			December 31,
		2026			2025
ASSETS
Current assets:
Cash and cash equivalents		$	699.5		$	791.2
Accounts receivable, net			376.7			325.2
Inventories			458.7			411.2
Other current assets			54.4			46.3
Total current assets			1,589.3			1,573.9
Property and equipment, net			304.3			272.8
Operating lease right-of-use assets			102.0			98.1
Other assets			184.7			182.5
Intangible assets, net			112.4			117.7
Goodwill			300.2			300.8
TOTAL ASSETS		$	2,592.9		$	2,545.8

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	272.1		$	224.1
Accrued payroll and employee benefits			60.1			93.0
Other accrued expenses			72.4			78.1
Customer deposits and other			12.1			12.7
Current portion of long-term debt			568.2			567.5
Current portion of operating lease liabilities			15.7			15.8
Total current liabilities			1,000.6			991.2
Operating lease liabilities			99.2			95.7
Defined employee benefit pension plan			48.5			49.4
Other long-term liabilities			42.0			38.9
Total liabilities			1,190.3			1,175.2

Deferred compensation			18.2			7.8
Commitments and contingencies (Note 13)

Stockholders' equity:
Preferred stock, $0.001 par value, 1.0 shares authorized, none issued and outstanding			—			—
Common stock, $0.001 par value, 70.0 shares authorized; 38.0 and 37.8 issued and outstanding at March 31, 2026 and December 31, 2025, respectively			—			—
Common stock associated with deferred compensation plan			(14.8)			(2.6)
Additional paid-in capital			217.6			230.6
Accumulated other comprehensive income			2.9			6.2
Retained earnings			1,178.7			1,128.6
Total stockholders' equity			1,384.4			1,362.8
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	2,592.9		$	2,545.8

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

ADVANCED ENERGY INDUSTRIES, INC.

Unaudited Consolidated Statements of Operations

(In millions, except per share amounts)



		Three Months Ended March 31,
		2026		2025
Revenue, net		$	511.0	$	404.6
Cost of revenue			310.1		254.1
Gross profit			200.9		150.5

Operating expenses:
Research and development			62.4		54.2
Selling, general, and administrative			62.3		59.0
Amortization of intangible assets			5.3		5.5
Restructuring, asset impairments, and other charges			2.6		1.2
Total operating expenses			132.6		119.9
Operating income			68.3		30.6

Interest income			5.8		6.9
Interest expense			(4.1)		(4.2)
Other expense, net			—		(3.4)
Income from continuing operations, before income tax			70.0		29.9
Income tax provision			2.7		5.0
Income from continuing operations			67.3		24.9
Loss from discontinued operations, net of income tax			(0.5)		(0.2)
Net income		$	66.8	$	24.7

Basic weighted-average common shares outstanding			37.7		37.6
Diluted weighted-average common shares outstanding			42.2		38.1

Earnings (loss) per share:
Continuing operations:
Basic earnings per share		$	1.79	$	0.66
Diluted earnings per share		$	1.59	$	0.65
Discontinued operations:
Basic loss per share		$	(0.01)	$	(0.01)
Diluted loss per share		$	(0.01)	$	(0.01)
Net income:
Basic earnings per share		$	1.77	$	0.66
Diluted earnings per share		$	1.58	$	0.65

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

ADVANCED ENERGY INDUSTRIES, INC.

Unaudited Consolidated Statements of Comprehensive Income (Loss)

(In millions)


		Three Months Ended March 31,
		2026			2025
Net income		$	66.8		$	24.7
Other comprehensive income (loss), net of income tax
Foreign currency translation			(3.2)			4.6
Defined employee benefit plan			(0.1)			(0.1)
Comprehensive income		$	63.5		$	29.2

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

ADVANCED ENERGY INDUSTRIES, INC.

Unaudited Consolidated Statements of Stockholders' Equity

(In millions, except per share amounts)



	Common Stock
				Common Stock				Accumulated
				Associated with		Additional		Other				Total
				Deferred		Paid-in		Comprehensive		Retained		Stockholders'
	Shares	Amount		Compensation Plan		Capital		Income (Loss)		Earnings		Equity
Balances, December 31, 2024	37.7	$	—	$	(0.9)	$	189.1	$	(11.8)	$	1,026.7	$	1,203.1
Stock issued from equity plans	0.2		—		—		(9.1)		—		—		(9.1)
Stock-based compensation	—		—		—		11.6		—		—		11.6
Share repurchases	—		—		—		—		—		(0.9)		(0.9)
Dividends declared ($0.10 per share)	—		—		—		—		—		(3.8)		(3.8)
Other comprehensive income	—		—		—		—		4.5		—		4.5
Deferred compensation	—		—		—				—		0.2		0.2
Common shares issued to deferred compensation plan	—		—		(1.7)		1.7		—		—		—
Net income	—		—		—		—		—		24.7		24.7
Balances, March 31, 2025	37.9		—		(2.6)		193.3		(7.3)		1,046.9		1,230.3

Balances, December 31, 2025	37.8	$	—	$	(2.6)		230.6	$	6.2	$	1,128.6	$	1,362.8
Stock issued from equity plans	0.2		—		—		(40.6)		—		—		(40.6)
Stock-based compensation	—		—		—		13.0		—		—		13.0
Share repurchases	—		—		—		—		—		(0.3)		(0.3)
Dividends declared ($0.10 per share)	—		—		—		—		—		(3.8)		(3.8)
Other comprehensive loss	—		—		—		—		(3.3)		—		(3.3)
Deferred compensation	—		—		—		—		—		(12.6)		(12.6)
Common shares issued to deferred compensation plan, net	—		—		(12.2)		14.6		—		—		2.4
Net income	—		—		—		—		—		66.8		66.8
Balances, March 31, 2026	38.0	$	—	$	(14.8)		217.6	$	2.9	$	1,178.7	$	1,384.4

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

ADVANCED ENERGY INDUSTRIES, INC.

Unaudited Consolidated Statements of Cash Flows

(In millions)


		Three Months Ended March 31,
		2026			2025
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	66.8		$	24.7
Less: loss from discontinued operations, net of income tax			(0.5)			(0.2)
Income from continuing operations, net of income tax			67.3			24.9
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization			15.8			16.1
Stock-based compensation			18.1			13.0
Amortization and write-off of debt issuance costs and debt discount			0.8			0.7
Deferred income taxes			1.2			—
Other			—			0.4
Changes in operating assets and liabilities, net of assets acquired
Accounts receivable, net			(52.4)			(10.7)
Inventories			(48.4)			(7.3)
Other assets			(6.4)			(5.0)
Accounts payable			45.5			15.4
Operating lease right-of-use assets and operating lease liabilities, net			(0.5)			0.8
Other liabilities and accrued expenses			(46.6)			(19.1)
Net cash from operating activities from continuing operations			(5.6)			29.2
Net cash from operating activities from discontinued operations			(0.4)			(0.3)
Net cash from operating activities			(6.0)			28.9

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of long-term investments			(1.4)			(1.2)
Purchases of property and equipment			(36.6)			(13.9)
Net cash from investing activities			(38.0)			(15.1)

CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend payments			(3.8)			(3.8)
Purchase and retirement of common stock			(0.5)			(0.5)
Net payments related to stock-based awards			(40.6)			(9.1)
Net cash from financing activities			(44.9)			(13.4)

Effect of currency translation on cash, cash equivalents and restricted cash			(0.9)			0.5

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			(89.8)			0.9
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period			791.2			722.1
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period		$	701.4		$	723.0

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Advanced Energy Industries, Inc., a Delaware corporation, and its consolidated subsidiaries (“we,” “us,” “our,” or “Advanced Energy”) provides highly engineered, critical, precision power conversion, measurement, and control solutions to our global customers. We design, manufacture, sell, and service precision power products that transform, refine, and modify the raw electrical power coming from either the utility or the building facility and convert it into various types of highly controllable, usable power that is predictable, repeatable, and customizable to meet the necessary requirements for powering a wide range of complex equipment. Many of our products enable customers to reduce or optimize their energy consumption through increased power conversion efficiency, power density, power coupling, and process control across a wide range of applications.

In management’s opinion, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary to present fairly Advanced Energy’s financial position as of March 31, 2026, and the results of our operations and cash flows for the three months ended March 31, 2026 and 2025.

The unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted pursuant to such rules and regulations. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2025 and other financial information filed with the SEC.

Use of Estimates in the Preparation of the Consolidated Financial Statements

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The significant estimates, assumptions, and judgments include, but are not limited to, excess and obsolete inventory, income taxes and other provisions, and acquisitions and asset valuations.

Significant Accounting Policies

Our accounting policies are described in Note 1. Summary of Operations and Significant Accounting Policies and Estimates to our audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025.

New Accounting Standards

From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification (“ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, will not have a material impact on the consolidated financial statements upon adoption.

New Accounting Standards Adopted

In July 2025, the FASB issued ASU 2025-05 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets.” ASU 2025-05 permits the use of certain estimates and assumptions in developing forecasts used for determining expected credit losses on accounts receivable. We adopted this guidance on January 1, 2026, and it was not material to our consolidated financial statements.

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

New Accounting Standards Issued But Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03 “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. This guidance will be effective for us on January 1, 2027. We do not expect the above guidance to materially impact our consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06 “Intangibles – Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software.” ASU 2025-06 eliminates the consideration of project development stages in determining whether a cost is eligible for capitalization. Instead, cost capitalization will be based on a “probable to complete” threshold. This guidance will be effective for us on January 1, 2028. We are evaluating the impact, if any, that the adoption of ASU 2025-06 may have on our consolidated financial statements.

NOTE 2. REVENUE

Disaggregation of revenue

The following tables present additional information regarding our revenue:

Revenue by Market


		Three Months Ended March 31,
		2026		2025

		(in millions)
Semiconductor Equipment		$	219.4	$	222.2
Data Center Computing			194.2		96.2
Industrial and Medical			72.0		64.3
Telecom and Networking			25.4		21.9
Total		$	511.0	$	404.6

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Revenue by Significant Countries


		Three Months Ended March 31,
		2026						2025

		(in millions)
United States		$	142.5		27.9	%		$	144.2		35.7	%
Mexico			133.0		26.0				41.7		10.3
All others			235.5		46.1				218.7		54.0
Total		$	511.0		100.0	%		$	404.6		100.0	%

We attribute revenue to individual countries based on the customer’s ship to location. Excluding the specific countries listed above, no individual country exceeded 10% of our total consolidated revenues during the periods presented.

Revenue by Category


		Three Months Ended March 31,
		2026		2025

		(in millions)
Product		$	465.3	$	360.2
Services and other			45.7		44.4
Total		$	511.0	$	404.6

Other revenue includes certain spare parts and products sold by our service group.

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3. BALANCE SHEET INFORMATION

Accounts Receivable, Net

We record accounts receivable at net realizable value. Our accounts receivable, net balance on the Consolidated Balance Sheets was $376.7 million as of March 31, 2026. As of March 31, 2026 and December 31, 2025, expected credit losses related to receivables were $0.7 million and $0.6 million, respectively.

Inventories

We value inventories at the lower of cost or net realizable value, computed on a first-in, first-out basis. Components of inventories were as follows:


		March 31,			December 31,
		2026			2025

		(in millions)
Parts and raw materials		$	362.7		$	313.6
Work in process			31.5			27.3
Finished goods			64.5			70.3
Total		$	458.7		$	411.2

Warranties

Our sales agreements include customary product warranty provisions, which generally range from 12 to 36 months after shipment. We record the estimated warranty obligations cost when we recognize revenue. This estimate is based on historical experience by product and configuration.

Our estimated warranty obligation is included in other accrued expenses in our Consolidated Balance Sheets. Changes in our product warranty obligation were as follows:


	(in millions)
December 31, 2025	$	7.2
Warranty expenditures		(0.4)
March 31, 2026	$	6.8

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4. INTANGIBLE ASSETS AND GOODWILL

Intangible assets consisted of the following:


		March 31, 2026
		Gross Carrying			Accumulated			Net Carrying			Weighted-Average Remaining
		Amount			Amortization			Amount			Useful Life (in years)

		(in millions)
Technology		$	101.5		$	(79.3)		$	22.2		6.5
Customer relationships			171.2			(89.3)			81.9		7.5
Trademarks and other			27.2			(18.9)			8.3		3.4
Total		$	299.9		$	(187.5)		$	112.4		7.0

		December 31, 2025
		Gross Carrying			Accumulated			Net Carrying			Weighted-Average Remaining
		Amount			Amortization			Amount			Useful Life (in years)

		(in millions)
Technology		$	101.8		$	(78.2)		$	23.6		6.6
Customer relationships			171.4			(86.3)			85.1		7.7
Trademarks and other			27.3			(18.3)			9.0		3.6
Total		$	300.5		$	(182.8)		$	117.7		7.2

Amortization expense related to intangible assets is as follows:


		Three Months Ended March 31,
		2026			2025

		(in millions)
Amortization expense		$	5.3		$	5.5

Estimated future amortization expense related to intangibles is as follows:


Year Ending December 31,		(in millions)
2026 (remaining)	$	14.8
2027		17.8
2028		16.6
2029		15.0
2030		13.4
Thereafter		34.8
Total	$	112.4

The following table summarizes the changes in goodwill:


	(in millions)
December 31, 2025	$	300.8
Foreign currency translation and other		(0.6)
March 31, 2026	$	300.2

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5. LEASES

Components of total operating lease cost were as follows:


	Three Months Ended March 31,
	2026			2025

	(in millions)
Operating lease cost	$	6.6		$	6.5
Short-term and variable lease cost		1.7			1.4
Total operating lease cost	$	8.3		$	7.9

Estimated future payments on our operating lease liabilities are as follows:


Year Ending December 31,		(in millions)
2026 (remaining)	$	17.4
2027		22.2
2028		21.9
2029		18.2
2030		16.7
Thereafter		58.4
Total lease payments		154.8
Less: Interest		(39.9)
Present value of lease liabilities	$	114.9

In addition to the above, we have a lease agreement with total payments of $8.9 million that commences in the third quarter of 2026 and extends through 2031.

The following tables present additional information about our lease agreements:


		March 31,				December 31,
		2026				2025
Weighted-average remaining lease term (in years)			8.1				8.2
Weighted-average discount rate			6.3	%			6.4	%


	Three Months Ended March 31,
	2026			2025

	(in millions)
Cash paid for operating leases	$	6.9		$	6.3
Right-of-use assets obtained in exchange for operating lease liabilities	$	8.4		$	12.3

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6. LONG-TERM DEBT

Long-term debt on our Consolidated Balance Sheets consists of the following:


		March 31,			December 31,
		2026			2025

		(in millions)
Convertible Notes due 2028, 2.5% interest		$	575.0		$	575.0
Less: debt discount			(6.8)			(7.5)
Net long-term debt			568.2			567.5
Less: current maturities			(568.2)			(567.5)
Net long-term debt		$	—		$	—

As of March 31, 2026, we were in compliance with the covenants under all debt agreements.

The following table summarizes interest expense related to our debt:


		Three Months Ended March 31,
		2026			2025

		(in millions)
Interest expense		$	3.6		$	3.5
Amortization of debt issuance costs			0.8			0.7
Total interest expense related to debt		$	4.4		$	4.2

Credit Agreement

On May 8, 2025, we terminated our prior credit agreement, dated as of September 10, 2019 (and subsequently amended) and entered into a new credit agreement (the “Credit Agreement”) consisting of a senior unsecured term loan facility (“Term Loan Facility”) and a senior unsecured revolving facility (“Revolving Facility”), both maturing on May 8, 2030. The maturity date may be accelerated to the date that is 91 days prior to the maturity date of our $575.0 million aggregate principal amount of 2.50% convertible senior notes due September 15, 2028 (the “Convertible Notes”), if the sum of our consolidated cash and cash equivalents plus the undrawn balance on the Revolving Facility is less than 120% of the redemption amount of the Convertible Notes.

The financing terms of the new Credit Agreement are substantially the same as the terms of the prior credit agreement. As part of the new credit facility, HSBC Bank USA, N.A. (“HSBC”) was appointed as the administrative agent for the lender group.

At the time of termination, no borrowings were outstanding under the prior credit agreement, and there have been no borrowings under the Credit Agreement to date. As of March 31, 2026, we had $600.0 million available on the Revolving Facility.

In addition to our available capacity on the Revolving Facility, prior to the maturity date of the Credit Agreement, we may request an increase to the financing commitments in either the Term Loan Facility or Revolving Facility by an aggregate amount not to exceed $250.0 million. Any requested increase is subject to lender approval.

Should we have future borrowings under the Term Loan Facility or Revolving Facility, they will bear interest, at our option, at a rate based on the Base Rate or SOFR, as defined in the Credit Agreement, plus an applicable margin.

Convertible Senior Notes due 2028

On September 12, 2023, we completed a private, unregistered offering of the Convertible Notes.

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The remaining outstanding principal amount of the Convertible Notes, amounting to $568.2 million, net of unamortized issuance costs, was classified as current as of March 31, 2026. Pursuant to the indenture governing the Convertible Notes, because the last reported sale price of the Company’s common stock for at least 20 trading days during the period of 30 consecutive trading days ending on March 31, 2026 was greater than or equal to $179.76 on each applicable trading day, the holders have the right to surrender any portion of their Convertible Notes (in minimum denominations of $1,000 in principal amount or an integral multiple thereof) for conversion during the calendar quarter ending June 30, 2026, and only during such calendar quarter. We reassess the classification of the Convertible Notes at each quarterly reporting period, considering the trading price of our common stock relative to the conversion criteria. The redemption price is 100% of the principal amount plus accrued and unpaid interest.

The Convertible Notes mature on September 15, 2028, unless earlier repurchased, redeemed, or converted. Interest is payable semi-annually in arrears in March and September. Exclusive of any early conversion elections by the convertible noteholders, there are no scheduled debt maturities until 2028.We do not maintain a sinking fund.

Concurrent with the Convertible Notes issuance, we entered into hedges (“Note Hedges”) with respect to our common stock and sold warrants to purchase our common stock (“Warrants”). In combination, the Note Hedges and Warrants synthetically increase the initial conversion price on the Convertible Notes from $137.46 to $179.76, reducing the potential dilutive effect.

We use level 2 measurements to estimate the fair value of our debt. As of March 31, 2026 and December 31, 2025, we estimate the fair value of our Convertible Notes to be $1.3 billion and $951.1 million, respectively.

NOTE 7. STOCKHOLDERS’ EQUITY AND EARNINGS PER SHARE

Accumulated Other Comprehensive Income (Loss)

The following table summarizes the components of, and changes in, accumulated other comprehensive income
(loss), net of income taxes.


		Foreign Currency Translation		Defined Employee Benefit Plan		Total

	(in millions)
Balance at December 31, 2024	$	(22.3)	$	10.5	$	(11.8)
Other comprehensive income (loss) prior to reclassifications		4.5		—		4.5
Amounts reclassified from accumulated other comprehensive income (loss)		0.1		(0.1)		—
Balance at March 31, 2025	$	(17.7)	$	10.4	$	(7.3)

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


		Foreign Currency Translation		Defined Employee Benefit Plan		Total

	(in millions)
Balance at December 31, 2025	$	(7.1)	$	13.3	$	6.2
Other comprehensive income (loss) prior to reclassifications		(3.2)		—		(3.2)
Amounts reclassified from accumulated other comprehensive income (loss)		—		(0.1)		(0.1)
Balance at March 31, 2026	$	(10.3)	$	13.2	$	2.9

Amounts reclassified from accumulated other comprehensive income (loss) to the specific caption within the
Consolidated Statements of Operations were as follows:


	Three Months Ended March 31,						To Caption on Consolidated
	2026		2025				Statements of Operations

	(in millions)
Foreign currency translation	$	—	$	(0.1)			Other expense, net
Defined employee benefit plan		0.1		0.1			Other expense, net
Total reclassifications	$	0.1	$	—

Earnings Per Share

The following table summarizes our earnings per share (“EPS”):


		Three Months Ended March 31,
		2026			2025

		(in millions, except per share amounts)
Income from continuing operations		$	67.3		$	24.9


Basic weighted-average common shares outstanding			37.7			37.6
Dilutive effect of Convertible Notes			2.2			—
Dilutive effect of Warrants			1.6			—
Dilutive effect of stock awards			0.7			0.5
Diluted weighted-average common shares outstanding			42.2			38.1


EPS from continuing operations
Basic EPS		$	1.79		$	0.66
Diluted EPS		$	1.59		$	0.65


Anti-dilutive shares not included above
Warrants			—			2.4

We compute basic earnings per share of common stock (“Basic EPS”) by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period.

See Note 7. Long-Term Debt in our Annual Report on Form 10-K for the year ended December 31, 2025 for information regarding our Convertible Notes, Note Hedges, and Warrants. For diluted earnings per share of common

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

stock (“Diluted EPS”), we increase the weighted-average number of common shares outstanding during the period, as needed, to include the following:

●

Additional common shares that would have been outstanding if our outstanding stock awards had been converted to common shares using the treasury stock method. We exclude any stock awards that have an anti-dilutive effect;

●

Dilutive impact associated with the Convertible Notes using the if-converted method. The Convertible Notes are repayable in cash up to par value and in cash or shares of common stock for the excess over par value. When the stock price is lower than the strike price, there is no dilutive or anti-dilutive impact. When the stock price is higher than the initial strike price, there is a dilutive impact associated with the Convertible Notes. Prior to conversion, we do not consider the Note Hedges for purposes of Diluted EPS as their effect would be anti-dilutive. Upon conversion, we expect the Note Hedges to offset the dilutive effect of the Convertible Notes when the stock price is above $137.46 but below $179.76; and

●

Dilutive effect of the Warrants issued concurrently with the Convertible Notes using the treasury stock method. For all periods presented, the Warrants increased the weighted-average number of common shares outstanding because the average market price of our common stock exceeded the $179.76 exercise price of the Warrants.

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Share Repurchases

To repurchase shares of our common stock, we periodically enter into share repurchase agreements. The following table summarizes these repurchases:


		Three Months Ended March 31,
		2026			2025

		(in millions, except share and per share amounts)
Amount paid or accrued to repurchase shares		$	0.3		$	0.9
Number of shares repurchased			1,500			9,636
Average repurchase price per share		$	209.36		$	94.26

There were no share repurchases from related parties during the three months ended March 31, 2026.

As of March 31, 2026, the remaining amount authorized by the Board of Directors (“our Board” or “the Board”) for future share repurchases was $166.6 million with no time limitation.

NOTE 8. FAIR VALUE MEASUREMENTS

The following tables present information about our non-pension assets and liabilities measured at fair value on a recurring basis. We classify all items below within level 2 of the fair value hierarchy. See Note 6. Long-Term Debt for information regarding the fair value of our Convertible Notes.


			March 31,			December 31,
			2026			2025

Description	Balance Sheet Classification		(in millions)
Certificates of deposit	Other current assets		$	0.2		$	0.2
Foreign currency forward contracts	Other accrued expenses		$	0.1		$	0.1
Investments	Other assets		$	17.3		$	13.5
Deferred compensation liabilities	Other liabilities		$	17.7		$	13.4

NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS

Changes in foreign currency exchange rates impact our results of operations and cash flows. We may manage these risks through the use of derivative financial instruments, primarily forward contracts with banks. These forward contracts manage the exchange rate risk associated with assets and liabilities denominated in nonfunctional currencies. Typically, we execute these derivative instruments for one-month periods and do not designate them as hedges for accounting purposes; however, they do partially offset the economic fluctuations of certain of our assets and liabilities due to foreign exchange rate changes. The gains and losses related to these foreign currency exchange contracts are intended to offset the corresponding gains and losses on the revaluation of the underlying assets and liabilities. Both are included as a component of other expense, net in our Consolidated Statements of Operations.

As of March 31, 2026 and December 31, 2025, we had $73.2 million and $60.5 million, respectively, of foreign currency forward contracts outstanding.

See Note 8. Fair Value Measurements for information regarding fair value of derivative instruments.

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As a result of using derivative financial instruments, we are exposed to the risk that counterparties to contracts could fail to meet their contractual obligations. We manage this credit risk by reviewing counterparty creditworthiness on a regular basis and limiting exposure to any single counterparty.

NOTE 10. RESTRUCTURING, ASSET IMPAIRMENTS, AND OTHER CHARGES

Details of restructuring, asset impairments, and other charges are as follows:


	Three Months Ended March 31,
	2026		2025

	(in millions)
Restructuring	$	2.0	$	0.6
Other charges		0.6		0.6
Total restructuring, asset impairments, and other charges	$	2.6	$	1.2

Restructuring

We have the following restructuring plans in process. The amounts incurred as a result of the approved actions are estimates, and actual results may differ, which could result in incremental restructuring charges in future periods.

2026 Plan

In 2026, we reorganized our Global Sales, Marketing and Operations team to meet our current and future needs including geographic needs (the “2026 Plan”). We expect these activities to conclude in 2026 and do not expect to incur significant additional charges.

2025 Plan

During the second quarter of 2025, we approved actions related to consolidating our research and development, sales, and administrative functions in connection with our manufacturing and footprint consolidation (the “2025 Plan”). We expect these actions to be substantially complete during 2027 and do not expect to incur significant additional charges.

2024 Plan

In 2024, we approved actions in furtherance of our manufacturing consolidation initiatives intended to optimize our manufacturing footprint and cost structure, including the closure of our Zhongshan, China manufacturing facility (the “2024 Plan”). Manufacturing operations in Zhongshan ceased during the second quarter of 2025. Final closure activities are in progress and expected to conclude in 2026. During the quarter, we recognized expenses of $0.5 million related to these actions and may incur additional charges to complete the closure.

2023 Plan

In 2023, we approved a plan intended to optimize and further consolidate our manufacturing operations and functional support groups as well as a general reduction-in-force to align our expenses to revenue levels (the “2023 Plan”). We expect final activities to conclude in the first quarter of 2027 and do not expect to incur significant additional charges.

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Changes in restructuring liabilities were as follows:


	2026 Plan		2025 Plan			2024 Plan		2023 Plan		Total

	(in millions)
December 31, 2025	$	—	$	4.5		$	3.4	$	3.2	$	11.1
Costs incurred and charged to expense		1.4		—			0.5		0.1		2.0
Costs paid		—		(0.2)			(1.4)		(0.5)		(2.1)
March 31, 2026	$	1.4	$	4.3		$	2.5	$	2.8	$	11.0

The above restructuring liability of $11.0 million is comprised of $6.6 million in other accrued expenses and $4.4 million in other long-term liabilities on our Consolidated Balance Sheets.


	Cumulative Cost Through
	March 31, 2026
	2026 Plan				2025 Plan		2024 Plan			2023 Plan			Total

	(in millions)
Severance and related charges	$	1.4		$	4.7		$	31.2		$	16.0		$	53.3
Facility relocation and closure charges		—			—			0.1			—			0.1
Total restructuring charges	$	1.4		$	4.7		$	31.3		$	16.0		$	53.4

Other Charges

Other charges relate to personnel transition costs and costs related to organizational restructuring activities of our legal entities.

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11. STOCK-BASED COMPENSATION

The Compensation Committee of our Board administers our stock plans. As of March 31, 2026, we have two active stock-based incentive compensation plans: the Amended and Restated 2023 Omnibus Incentive Plan (the “2023 Incentive Plan”) and the Employee Stock Purchase Plan (“ESPP”). We issue all new equity compensation grants under the 2023 Incentive Plan. Outstanding awards previously issued under inactive plans will continue to vest and remain exercisable in accordance with the terms of the respective plans. We do not have material outstanding stock option awards.

The 2023 Incentive Plan provides for the grant of awards including stock options, stock appreciation rights, performance stock units, performance units, stock, restricted stock, restricted stock units, and cash incentive awards.

The following table summarizes information related to our stock-based incentive compensation plans:


		March 31, 2026
		(in millions)
Shares available for future issuance under the 2023 Incentive Plan		1.2
Shares available for future issuance under the ESPP		0.5

Stock-Based Compensation Expense

We recognize stock-based compensation expense based on the fair value of the awards issued and the functional area of the employee receiving the award. During the three months ended March 31, 2026, stock-based compensation expense included $0.9 million related to the acquisition of Airity Technologies, Inc. in June 2024. Stock-based compensation was as follows:


		Three Months Ended March 31,
		2026			2025

		(in millions)
Stock-based compensation expense		$	18.1		$	13.0

Restricted Stock Units

Generally, we grant restricted stock units (“RSUs”) with a three-year time-based vesting schedule. Certain RSUs contain performance-based or market-based vesting conditions in addition to the time-based vesting requirements. RSUs are generally granted with a grant date fair value based on the market price of our stock on the date of grant. For RSUs that vest based on our relative total shareholder return over the performance period to a predetermined peer group, fair value is predetermined based on a Monte Carlo simulation as of the date of the grant.

Changes in our RSUs were as follows:


		Three Months Ended March 31, 2026
				Weighted-
				Average
		Number of		Grant Date
		RSUs		Fair Value
		(in millions)
RSUs outstanding at beginning of period		1.0		$	111.72
RSUs granted		0.3		$	281.24
RSUs vested		(0.4)		$	105.93
RSUs forfeited		(0.1)		$	116.88
RSUs outstanding at end of period		0.8		$	170.34

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

RSUs that vested during the period were higher than RSUs granted due to performance of our stock price.

Deferred Compensation Plan

We offer certain employees the opportunity to defer compensation and stock awards and maintain a rabbi trust in connection with this deferred compensation plan. Assets of the rabbi trust are consolidated as we are the primary beneficiary. Although we cannot use the rabbi trust’s assets for any purpose other than meeting our obligations under the deferred compensation plan, the trust’s assets, liabilities, and activity are included in our consolidated financial statements.

Assets of the rabbi trust not held in Company shares are presented in other assets, and the fair value of the Company shares held in the rabbi trust is classified in stockholders’ equity.

After a holding period, employees have the option to diversify the Company shares into other funds. Stock awards that have been elected for deferral but have not yet vested and are probable of vesting are reported as deferred compensation in the temporary equity section of the Consolidated Balance Sheets. The stock awards recorded in temporary equity are recognized at fair value, with any difference from stock-based compensation recorded in retained earnings.

The following table summarizes information regarding the rabbi trust’s assets and liabilities:


		March 31,		December 31,
		2026		2025

Description	Balance Sheet Classification	(in millions)
Investments	Other assets	$	17.3	$	13.5
Deferred compensation liabilities	Other liabilities	$	17.7	$	13.4
Stock awards elected for deferral	Temporary equity	$	18.2	$	7.8
Company shares of common stock	Stockholders' equity	$	14.8	$	2.6

NOTE 12. INCOME TAX

The following table summarizes tax provision and the effective tax rate for our income from continuing operations:


		Three Months Ended March 31,
		2026			2025

		(in millions)
Income from continuing operations, before income tax		$	70.0		$	29.9
Income tax provision		$	2.7		$	5.0
Effective tax rate			3.9	%		16.7	%

Our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the benefit of earnings in foreign jurisdictions which are subject to lower tax rates, as well as tax credits, partially offset by net U.S. tax on foreign operations. The effective tax rate as of March 31, 2026 is lower than the same period in 2025 primarily due to excess tax benefits recognized from stock-based compensation.

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ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

early 2026 which is generally beneficial to U.S. parented organizations, but will require adoption by member countries to implement. As countries continue to make revisions to legislation and release additional guidance with respect to the global minimum tax, we continue to monitor and evaluate potential cash tax expense and associated impacts to the effective tax rate in the jurisdictions in which the Company operates.

On July 4, 2025, the One Big Beautiful Bill (“OBBB”) Act, which includes a broad range of elective tax law items available in 2025 and prescribed tax law changes in 2026, was signed into law in the United States. The Company has reflected the impact of the OBBB’s elective tax law items in its financial statements for the period ending March 31, 2026. The OBBB is expected to have an overall positive effect on the GAAP and non-GAAP effective tax rate of the Company, benefiting from revisions to foreign-derived intangible income (FDII) and the foreign tax credit rules.

NOTE 13. COMMITMENTS AND CONTINGENCIES

We are involved in disputes and legal actions arising in the normal course of our business. While we currently believe that the amount of any ultimate loss would not be material to our financial position, the outcome of these actions is inherently difficult to predict. In the event of an adverse outcome, the ultimate loss could have a material adverse effect on our financial position or reported results of operations. An unfavorable decision in intellectual property litigation also could require material changes in production processes and products or result in our inability to ship products or components found to have violated third party intellectual property rights. We accrue loss contingencies in connection with our commitments and contingencies, including litigation, when it is probable that a loss has occurred, and the amount of such loss can be reasonably estimated. We are not currently a party to any other legal action that we believe would have a material adverse impact on our business, financial condition, results of operations or cash flows.

NOTE 14. SUPPLEMENTAL CASH FLOW INFORMATION AND OTHER DISCLOSURES

Certain of our cash and non-cash activities were as follows:


	Three Months Ended March 31,
	2026			2025

	(in millions)
Non-cash investing activities:
Capital expenditures in accounts payable and other accrued expenses	$	36.4		$	14.6
Cash paid for:
Interest	$	7.2		$	7.2
Income taxes	$	4.8		$	2.9
Cash received from income taxes	$	2.2		$	1.1
Restricted cash (in Other current assets)	$	1.9		$	-

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the Securities and Exchange Commission (the “SEC”) on February 13, 2026 (the “2025 Form 10-K”).

Special Note on Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “report”) contains, in addition to historical information, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements in this report that are not historical information are forward-looking statements. For example, statements relating to our beliefs, expectations, and plans are forward-looking statements, as are statements that certain actions, conditions, events, or circumstances will continue. The inclusion of words such as “anticipate,” “expect,” “estimate,” “can,” “may,” “might,” “continue,” “enable,” “plan,” “intend,” “should,” “could,” “would,” “will,” “likely,” “potential,” “believe,” and similar expressions and the negative versions thereof indicate forward-looking statements; however, not all forward-looking statements may contain such words or expressions.

These forward-looking statements are based upon information available as of the date of this report and management’s current estimates, forecasts, and assumptions. Although we believe that our expectations reflected in or suggested by these forward-looking statements are reasonable, we may not achieve the results, performance, plans, or objectives expressed or implied by such forward-looking statements. Forward-looking statements involve risks and uncertainties, which are difficult to predict and many of which are beyond our control.

Risks and uncertainties to which our forward-looking statements are subject include:

●

volatility and cyclicality, economic conditions, and business fluctuations in the industries in which we compete;

●

risks associated with availability and price of certain semiconductor and other components which may be in limited supply relative to global demand;

●

risks related to global economic and political conditions, such as the impact of tariffs and export regulations, escalating global conflicts on macroeconomic conditions, including recent developments in the Middle East, economic uncertainty, market volatility, rising interest rates, inflation, lack of growth in our markets, fluctuations in commodity prices and currency exchange rates, or recession;

●

our ability to achieve design wins with new and existing customers;

●

our ability to accurately forecast and meet customer demand;

●

risks associated with scaling our manufacturing capacity and securing sufficient critical components to meet customer demand;

●

pricing pressure from customers and competitors;

●

concentration of our customer base;

●

risks associated with potential breach of our information security measures— either external breach or internal data theft;

●

difficulties with the implementation of our enterprise resource planning and other enterprise-wide information technology system applications;

●

our loss of or inability to attract and retain key personnel;

●

risks associated with our manufacturing footprint optimization and movement of manufacturing locations for certain products;

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●

disruptions to our manufacturing operations or those of our customers or suppliers;

●

our ability to successfully identify, close, integrate and realize anticipated benefits from our acquisitions or divestitures;

●

quality issues, unanticipated costs in fulfilling our warranty obligations or adequacy of our warranty reserves, claims outside of warranty, or product liability claims;

●

our ability to enforce, protect and maintain our proprietary technology and intellectual property rights and avoid claims alleging infringement of the intellectual property rights of others;

●

legal matters, claims, investigations, and proceedings;

●

changes to tax laws and regulations or our tax rates;

●

changes to and maintaining compliance with U.S. federal, state, local and foreign regulations, including with respect to trade compliance, privacy and data protection, supply chain, and environmental, health and safety regulation;

●

effect of our debt obligations and restrictive covenants on our ability to operate our business;

●

risks related to our unfunded pension obligations;

●

our estimates of the fair value of intangible assets;

●

the potential impact of dilution and counterparty default risk related to our convertible debt, hedge, and warrant transactions;

●

risks relating to ownership of our common stock; and

●

the risks and uncertainties described in Part I, Item 1A in the 2025 Form 10-K.

These risks and uncertainties could cause actual results to differ materially and adversely from those expressed in any forward-looking statements, and readers are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update any forward-looking statements or provide reasons why our actual results may differ.

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BUSINESS AND MARKET OVERVIEW

Company Overview

Advanced Energy provides highly engineered, critical, precision power conversion, measurement, and control solutions to our global customers. We design, manufacture, sell, and service precision power products that transform, refine, and modify the raw electrical power coming from either the utility or the building facility and convert it into various types of highly controllable, usable power that is predictable, repeatable, and customizable to meet the necessary requirements for powering a wide range of complex equipment. Many of our products enable customers to reduce or optimize their energy consumption through increased power conversion efficiency, power density, power coupling, and process control across a wide range of applications.

We are organized on a global, functional basis and operate as a single segment of power electronics conversion products. Within this segment, our products are sold in the Semiconductor Equipment, Data Center Computing, Industrial and Medical, and Telecom and Networking markets.

Product and Services

Our precision power products and solutions are designed to enable process technologies, improve productivity, lower the cost of ownership, and/or provide critical power capabilities for our customers.

Our plasma power products enable innovation in complex semiconductor and thin film plasma processes such as dry etch and deposition. Our broad portfolio of high and low voltage power products is used in a wide range of applications, such as semiconductor equipment, data center computing, industrial production, medical and life science equipment, aerospace and defense, networking, and telecommunications.

Our network of global service support centers provides repair services, calibration, conversions, upgrades, refurbishments, and used equipment to companies that use our products.

End Markets Summary and Trends

We continue to monitor developments related to tariffs and trade policy, including recent court rulings affecting certain U.S. tariffs. While the tariff impact was not material to our results, we remain focused on potential governmental responses and development of potential future recoveries to adjust our mitigation strategies with our customers. In addition, heightened geopolitical instability, including the conflicts in the Middle East, has contributed to volatility in energy markets, disruptions to global shipping, and broader macroeconomic uncertainty. Increased demand relative to supply for AI-related equipment and semiconductors is extending lead times and increasing prices of certain components, impacting both timing of some customer demand and many of our suppliers. We continue to take actions to procure strategic supply of materials and recover increased costs through pricing actions. While these factors were not material to our results in the current quarter, they could become material in future periods and adversely affect our costs such as higher energy and supply chain costs, as well as negatively impact our ability to sell our products and provide services.

Advanced Energy generates revenue from the sale of a broad range of advanced and system power products and services to global original equipment manufacturers (“OEMs”), distributors, and end customers. Our customers select our products based on various performance metrics such as high power conversion efficiency, high power density, low noise emission, and lower power consumption as well as our ability to tailor our solutions to meet the unique requirements of their critical applications. The future growth and demand for our products is driven by a combination of factors within each of the end markets we serve, as follows:

Semiconductor Equipment Market

The Semiconductor Equipment market supports and enables the long-term need for production capacity and new process technologies to meet demand for semiconductor devices across many applications driven by megatrends such as artificial intelligence (“AI”), energy efficiency, automobile electrification, and Internet of things.

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Our portfolio of power conversion and related products sold into this market includes plasma power, high-voltage power, system power, and adjacent sensing solutions. Our plasma power solutions are used to create plasma-based etch and deposition processes. Our semiconductor market products are incorporated into a wide range of applications, including dry etch and strip, deposition, ion implant, inspection and metrology, thermal, epitaxy, and back-end test and packaging.

The Semiconductor Equipment market continues to be driven by demand for leading-edge devices in logic and memory used in AI applications, partially offset by lower trailing-edge demand due to capacity underutilization, particularly in China, U.S. export restrictions to China, and the impact of tariffs. However, end market conditions started to improve in the fourth quarter of 2025. We expect these improving conditions to continue in 2026 and to accelerate demand for our products in the remainder of the year.

Data Center Computing Market

The Data Center Computing market is being driven by the rapid growth of AI and related investments. The accelerated power rating of next-generation AI processors and increased density of AI processors in IT racks have significantly increased the power requirements for AI-based servers and racks which, in turn, increased the importance of high power efficiency, density, and reliability for server rack power solutions.

Our products are designed into data center server and storage systems and are also used by cloud service providers and their partners in their custom designed server racks and power shelves.

Due to increased investments in AI applications by leading hyperscale customers, along with adoption of our next-generation high-power solutions, revenue in the Data Center Computing market more than doubled in the first quarter of 2026 compared to the same quarter in the previous year.

We expect these trends to continue supporting healthy demand in the remainder of the year.

Industrial and Medical Market

The Industrial and Medical market is fueled by continued investment in complex manufacturing processes, increased adoption of new industrial technologies such as automation and clean energy, and increased breadth and precision requirements of medical devices and life science equipment.

We supply this market with critical, precision power conversion products that deliver precise and highly reliable, low noise and/or differentiated power. In addition, our sensing, control, and instrumentation products complement our power solutions. Our products are used in a wide variety of applications, such as advanced material fabrication, medical devices, life science, test and measurement equipment, robotics, industrial production, defense, aerospace, and large-scale lighting applications.

We believe that the Industrial and Medical market began to recover starting in the second quarter of 2025 following a major industry downturn as a result of macroeconomic conditions and supply chain disruptions from prior years. The recovery continued in the first quarter of 2026 compared to the same quarter in the previous year. In addition, we expect demand to continue to improve in the remainder of 2026, paced by overall economic conditions.

Telecom and Networking Market

Demand in the Telecommunication and Networking market is driven by adoption of more advanced mobile standards, such as 5G technologies, networking investments by telecommunication service providers, enterprises upgrading their communication networks, and data centers investing in their networks for AI-driven increased bandwidth.

We serve this market by providing application-specific power conversion products to many leading OEMs of wireless infrastructure equipment and computer networking equipment.

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End demand in the Telecom and Networking market remained stable in 2025. Revenue in the first quarter of 2026 increased primarily due to growth in AI-related applications. We expect this trend to continue for the remainder of the year.

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Results of Continuing Operations

The analysis presented below is organized to provide the information we believe will be helpful for an understanding of our historical performance and relevant trends going forward and should be read in conjunction with our “Unaudited Consolidated Financial Statements” in Part I, Item 1 of this report, including the notes thereto. Also included in the following analysis are measures that are not prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). A reconciliation of the non-GAAP measures to U.S. GAAP is provided below.

The following table sets forth certain data derived from our Consolidated Statements of Operations:


	Three Months Ended March 31,
	2026				2025

	(in millions)
Revenue	$	511.0	100.0	%	$	404.6	100.0	%
Gross profit		200.9	39.3			150.5	37.2
Operating expenses		132.6	25.9			119.9	29.6
Operating income from continuing operations		68.3	13.4			30.6	7.6
Interest income		5.8	1.1			6.9	1.7
Interest expense		(4.1)	(0.8)			(4.2)	(1.0)
Other expense, net		—	—			(3.4)	(0.8)
Income from continuing operations, before income tax		70.0	13.7			29.9	7.4
Income tax provision		2.7	0.5			5.0	1.2
Income from continuing operations	$	67.3	13.2	%	$	24.9	6.2	%

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Revenue

The following tables summarize net sales and percentages of net sales by markets:


		Three Months Ended March 31,										Change 2026 v. 2025
		2026					2025					Dollar			Percent

		(in millions)
Semiconductor Equipment		$	219.4	42.9	%		$	222.2	54.9	%		$	(2.8)		(1.3)	%
Industrial and Medical			72.0	14.1				64.3	15.9				7.7		12.0	%
Data Center Computing			194.2	38.0				96.2	23.8				98.0		101.9	%
Telecom and Networking			25.4	5.0				21.9	5.4				3.5		16.0	%
Total		$	511.0	100.0	%		$	404.6	100.0	%		$	106.4		26.3	%

Revenue by Market

Semiconductor Equipment revenue for the three months ended March 31, 2026 was relatively flat as compared to the same period in the prior year, but increased sequentially from the fourth quarter on strengthening demand.

The increase in Data Center Computing revenue was due to increased AI investments by leading hyperscale customers and growth associated with design wins secured previously.

The increase in Industrial and Medical revenue was primarily due to recovery in the end markets as a result of ongoing customer inventory rebalancing and an improved demand environment.

The increase in Telecom and Networking revenue was primarily driven by growth in AI-related applications.

Gross Profit and Gross Margin


	Three Months Ended March 31,						Change 2026 v. 2025
	2026			2025			Dollar			Percent

	(in millions)
Gross profit	$	200.9		$	150.5		$	50.4		33.5	%
Gross margin		39.3	%		37.2	%

The increase in gross profit was largely due to an increase in revenue and manufacturing cost improvements. Gross margin improved mainly due to the impact of higher volume, and approximately 60 basis points resulting from manufacturing cost reduction programs, partially offset by the impact of tariffs during the three months ended March 31, 2026.

Operating Expenses

The following table summarizes our operating expenses and as a percentage of revenue:


		Three Months Ended March 31,
		2026						2025

		(in millions)
Research and development		$	62.4		12.2	%		$	54.2		13.4	%
Selling, general, and administrative			62.3		12.2				59.0		14.6
Amortization of intangible assets			5.3		1.0				5.5		1.4
Restructuring, asset impairments, and other charges			2.6		0.5				1.2		0.3
Total operating expenses		$	132.6		25.9	%		$	119.9		29.6	%

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Research and Development

The increase in research and development expense was driven by higher compensation costs related to stock-based compensation and annual merit increases, and higher engineering program and materials costs compared to the same period in the prior year.

Selling, General and Administrative

The increase in selling, general, and administrative expense was mainly due to higher compensation costs including stock-based compensation and annual merit increases.

Amortization of Intangibles Assets

Amortization expense declined primarily due to certain intangible assets reaching the end of their estimated useful life.

Restructuring, Asset Impairments and Other Charges

The increase in restructuring, asset impairments, and other charges is primarily driven by the timing of our restructuring plan decisions.

For additional information about this and prior restructuring plans, see Note 10. Restructuring, Asset Impairments, and Other Charges in Part I, Item 1 “Unaudited Consolidated Financial Statements.”

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Interest Income, Interest Expense, and Other Expense, Net

We experienced a decrease in interest income caused by lower cash balances.

Other expense, net consists primarily of foreign exchange gains and losses and other miscellaneous items. For the three months ended March 31, 2026, we had a $3.4 million improvement in other expense, net compared to the same period in the prior year primarily as a result of foreign exchange gains.

Interest expense remained relatively flat compared to the same period in prior year. See Note 6. Long-Term Debt in Part I, Item 1 “Unaudited Consolidated Financial Statements” for information regarding our debt.

Income Tax Provision

The following table summarizes tax provision and the effective tax rate for our income from continuing operations:



		Three Months Ended March 31,
		2026			2025

		(in millions)
Income from continuing operations, before income tax		$	70.0		$	29.9
Income tax provision		$	2.7		$	5.0
Effective tax rate			3.9	%		16.7	%

As of March 31, 2026, certain countries in which the Company operates have implemented or are in the process of implementing the Pillar II minimum global effective tax rate regime as put forth by the Organization for Economic Cooperation and Development (“OECD”). Specifically, the OECD released prospective “Side-by-Side” guidance in early 2026 which is generally beneficial to U.S. parented organizations, but will require adoption by member countries to implement. As countries continue to make revisions to legislation and release additional guidance with respect to the global minimum tax, we continue to monitor and evaluate potential cash tax expense and associated impacts to the effective tax rate in the jurisdictions in which the Company operates.

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Non-GAAP Results

Management uses non-GAAP net income, non-GAAP operating income, and non-GAAP earnings per share (“EPS”) to evaluate business performance without the impacts of certain non-cash charges and other charges which are not part of our usual operations. We use these non-GAAP measures to assess performance against business objectives, and make business decisions, including developing budgets and forecasting future periods. In addition, management’s incentive plans include certain of these non-GAAP measures as criteria for achievements. These non-GAAP measures are not prepared in accordance with U.S. GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. However, we believe these non-GAAP measures provide additional information that enables readers to evaluate our business from the perspective of management. The presentation of this additional information should not be considered a substitute for results prepared in accordance with U.S. GAAP.

The non-GAAP results presented below exclude the impact of non-cash related charges, such as stock-based compensation, amortization of intangible assets, and long-term unrealized foreign exchange gains and losses. In addition, we exclude discontinued operations and other items such as acquisition-related costs, facility, infrastructure, and other transition costs, and restructuring expenses, as they are not indicative of future performance. The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments. Non-GAAP results also exclude non-recurring discrete tax expenses or benefits. Finally, non-GAAP diluted weighted-average common shares are adjusted to reflect the dilutive impact of our convertible notes based on the higher note hedge strike price instead of the initial conversion price.


Reconciliation of non-GAAP measures
Non-GAAP gross profit, gross margin, operating expenses,		Three Months Ended March 31,
operating income, and operating margin		2026			2025

		(in millions)
Gross profit from continuing operations, as reported		$	200.9		$	150.5
Adjustments to gross profit:
Stock-based compensation			1.5			1.1
Facility, infrastructure, and other transition costs			2.4			1.8
Non-GAAP gross profit			204.8			153.4

GAAP gross margin			39.3%			37.2%
Non-GAAP gross margin			40.1%			37.9%

Operating expenses from continuing operations, as reported			132.6			119.9
Adjustments:
Amortization of intangible assets			(5.3)			(5.5)
Stock-based compensation			(16.6)			(11.9)
Acquisition-related costs			(0.2)			(1.0)
Facility, infrastructure, and other transition costs			(0.9)			(1.7)
Restructuring, asset impairments, and other charges			(2.6)			(1.2)
Non-GAAP operating expenses			107.0			98.6
Non-GAAP operating income		$	97.8		$	54.8

Operating income, as reported		$	68.3		$	30.6
Adjustments to gross profit			3.9			2.9
Adjustments to operating expenses			25.6			21.3
Non-GAAP operating income		$	97.8		$	54.8

Income from continuing operations, as reported		$	67.3		$	24.9
GAAP operating margin			13.4%			7.6%
Non-GAAP operating margin			19.1%			13.5%

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Reconciliation of non-GAAP measure		Three Months Ended March 31,
Non-GAAP income, net of income tax		2026			2025

		(in millions)
Income from continuing operations, net of income tax		$	67.3		$	24.9
Adjustments:
Amortization of intangible assets			5.3			5.5
Acquisition-related costs			0.2			1.0
Facility, infrastructure, and other transition costs			3.3			3.5
Restructuring, asset impairments, and other charges			2.6			1.2
Unrealized foreign currency loss (gain)			(1.9)			1.6
Stock-based compensation			18.1			13.0
Tax effect of non-GAAP adjustments, including certain discrete tax benefits			(11.5)			(3.8)
Non-GAAP income, net of income tax		$	83.4		$	46.9


Reconciliation of non-GAAP measure		Three Months Ended March 31,
Non-GAAP diluted weighted-average common shares		2026			2025

		(in millions)
Diluted weighted-average common shares outstanding			42.2			38.1
Dilutive effect of convertible notes			(2.2)			—
Non-GAAP diluted weighted-average common shares outstanding			40.0			38.1


Reconciliation of non-GAAP measure		Three Months Ended March 31,
Non-GAAP earnings per share		2026			2025
Diluted earnings per share from continuing operations, as reported		$	1.59		$	0.65
Add back:
Per share impact of non-GAAP adjustments, net of tax			0.50			0.58
Non-GAAP earnings per share		$	2.09		$	1.23

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Reconciliation of non-GAAP measure		Three Months Ended March 31,
Non-GAAP provision for income taxes		2026			2025

		(in millions)
Provision for income taxes, as reported		$	2.7		$	5.0
Adjustment:
Non-GAAP items and other discrete tax items excluding stock-based compensation			7.7			1.1
Tax effect of stock-based compensation			3.8			2.7
Non-GAAP provision for income taxes		$	14.2		$	8.8


Reconciliation of non-GAAP measure		Three Months Ended March 31,
Non-GAAP income before income taxes		2026			2025

		(in millions)
Income from continuing operations, before income tax		$	70.0		$	29.9
Adjustments:
Amortization of intangible assets			5.3			5.5
Stock-based compensation			18.1			13.0
Acquisition-related costs			0.2			1.0
Facility, infrastructure, and other transition costs			3.3			3.5
Restructuring, asset impairments, and other charges			2.6			1.2
Unrealized foreign currency loss (gain)			(1.9)			1.6
Non-GAAP income before income taxes		$	97.6		$	55.7
Effective tax rate, as reported			3.9%			16.7%
Non-GAAP effective tax rate			14.5%			15.8%

Liquidity and Capital Resources

Liquidity

Adequate liquidity and cash generation are important to the execution of our strategic initiatives. Our ability to fund our operations, acquisitions, capital expenditures, and product development efforts may depend on our ability to generate cash from operating activities, which is subject to future operating performance, as well as general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control. Our primary sources of liquidity continue to be our available cash, cash generated from operations, and available borrowing capacity under the Revolving Facility (defined in Note 6. Long-Term Debt in Part I, Item 1 “Unaudited Consolidated Financial Statements”).

As of March 31, 2026, our cash and cash equivalents totaled $699.5 million, while our available funding under our undrawn Revolving Facility was $600.0 million. We believe our sources of liquidity will be adequate to meet operational needs, including capital expenditures, as well as anticipated debt service, share repurchase programs, dividends, and strategic investments.

During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust our expenditures to reflect the current market conditions and our projected revenue and demand. Our capital expenditures are primarily directed towards manufacturing and operations and can materially influence our available cash for other initiatives. In the past year and through the first quarter, our capital expenditures increased as we are investing in our factories to expand capacity and in our new ERP system. In addition, we may seek additional debt or equity financing from time to time; however, such additional financing may not be available on acceptable terms, if at all.

Debt

See Note 6. Long-Term Debt in Part I, Item 1 “Unaudited Consolidated Financial Statements” for information regarding the Credit Agreement.

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As of March 31, 2026, our only outstanding debt is the $575.0 million Convertible Notes, which mature on September 15, 2028 and carry a 2.5% interest rate. Should we have future borrowings under our Term Loan Facility or Revolving Facility, those borrowings would be subject to a variable rate.

As of March 31, 2026, our common stock traded above the conversion price for at least 20 trading days during a 30 consecutive trading-day period, which resulted in the Convertible Notes becoming convertible at the option of the holders and presented as current debt. Exclusive of any early conversion elections by the convertible noteholders, there are no scheduled debt maturities until 2028. See Note 7. Long-Term Debt in our Annual Report on Form 10-K for the year ended December 31, 2025 for information regarding the Convertible Notes.

As of March 31, 2026, no amounts were outstanding under the Revolving Facility, and we had $600.0 million in available funding. In addition to the available capacity on the Revolving Facility, prior to the maturity date of the Credit Agreement, we may request an increase to the financing commitments in either the Term Loan Facility or Revolving Facility by an aggregate amount not to exceed $250.0 million. Any requested increase is subject to lender approval.

Dividends

During the three months ended March 31, 2026, we paid quarterly cash dividends of $0.10 per share, totaling $3.8 million. We currently anticipate that a cash dividend of $0.10 per share will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, business conditions, and other factors.

Share Repurchases

During the three months ended March 31, 2026, we repurchased $0.3 million of our common stock.

Cash Flows

A summary of our cash from operating, investing, and financing activities is as follows:


		Three Months Ended March 31,
		2026			2025

		(in millions)
Net cash from operating activities from continuing operations		$	(5.6)		$	29.2
Net cash from operating activities from discontinued operations			(0.4)			(0.3)
Net cash from operating activities			(6.0)			28.9
Net cash from investing activities			(38.0)			(15.1)
Net cash from financing activities			(44.9)			(13.4)
Effect of currency translation on cash, cash equivalents and restricted cash			(0.9)			0.5
Net change in cash, cash equivalents and restricted cash			(89.8)			0.9
Cash, cash equivalents and restricted cash, beginning of period			791.2			722.1
Cash, cash equivalents and restricted cash, end of period		$	701.4		$	723.0

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Operating Activities

Net cash used in continuing operations for the three months ended March 31, 2026 was $5.6 million, as compared to cash from continuing operations of $29.2 million for the same period in the prior year. The $34.8 million decrease was primarily driven by increases in accounts receivable as a result of higher revenue and increased inventories to support anticipated future demand partially offset by increased accounts payable. In addition, accrued expenses decreased primarily due to the timing of incentive compensation payments.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2026 was $38.0 million primarily due to $36.6 million in purchases of property and equipment, which was largely driven by continued investments in our manufacturing footprint and capacity, our new ERP system, and investments in other capabilities across multiple sites.

Net cash used in investing activities for the three months ended March 31, 2025 was $15.1 million primarily due to $13.9 million in purchases of property and equipment, which was largely driven by investments in our manufacturing footprint and capacity, and $1.2 million in purchases of investments.

Financing Activities

Net cash used in financing activities for the three months ended March 31, 2026 was $44.9 million and included $0.5 million for repurchase of common stock, $40.6 million in net payments related to stock-based award activities, and $3.8 million for dividend payments.

Net cash used in financing activities for the three months ended March 31, 2025 was $13.4 million and included $3.8 million for dividend payments, $0.5 million for repurchase of common stock, and $9.1 million in net payments related to stock-based award activities.

Effect of Currency Translation on Cash

During the three months ended March 31, 2026, foreign currency translation had a minimal impact on cash. See “Foreign Currency Exchange Rate Risk” in Part I, Item 3 for more information.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Note 1. Summary of Operations and Significant Accounting Policies and Estimates to the consolidated financial statements in the 2025 Form 10-K describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. Our critical accounting estimates, discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the 2025 Form 10-K, include assessing excess and obsolete inventories, accounting for income taxes, and estimates for the valuation of assets and liabilities acquired in business combinations.

Such accounting policies and estimates require significant judgments and assumptions to be used in the preparation of the consolidated financial statements and actual results could differ materially from the amounts reported based on variability in factors affecting these estimates.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk and Risk Management

In the normal course of business, we typically have exposure to interest rate risk from our investments and the Credit Agreement. We also have exposure to foreign exchange rate risk related to our foreign operations and foreign currency transactions.

See “Risk Factors” set forth in Part I, Item 1A of the 2025 Form 10-K and Part II of this report, for more information about the market risks to which we are exposed. There have been no material changes in our exposure to market risk from December 31, 2025.

Foreign Currency Exchange Rate Risk

We are impacted by changes in foreign currency exchange rates through revenue and purchasing transactions when we sell products and purchase materials in currencies different from the currency in which product and manufacturing costs were incurred. Our reported financial results of operations, including the reported value of ou

ADVANCED ENERGY INDUSTRIES INC 10-Q