Q3 Revenue and EPS Beat
Q3 revenue of ~$8.8B, up 12% year-over-year and ~$250M above the midpoint of guidance. GAAP diluted EPS $2.59; core diluted EPS $3.16, up 24% year-over-year.
June 17th, 2026
Summary
- Earnings Call Date:
- 2026-06-17
- Change Since:
- -0.09%
- Next Earnings Date:
- 2026-09-24
Earnings Call Sentiment
PositiveThe call was decidedly positive: the company delivered a quarter that beat expectations across revenue, EPS, margins, and free cash flow, raised full-year revenue and free cash flow guidance, reported very strong Intelligent Infrastructure and AI-related growth (AI revenues now ~$13.6B for FY2026, ~50% YoY), won a third hyperscaler customer, and announced a strategic India partnership. Offsetting items include elevated inventory days, ongoing supply-chain and component tightness, near-term ramp inefficiencies as new capacity comes online, and some end-market volatility (automotive, mixed Connected Living). Overall the favorable operating and financial beats, upgraded guidance, robust cash generation, and strategic customer wins materially outweigh the manageable operational and timing risks described.
Company Guidance
Management raised guidance after a strong Q3 where revenue was ~$8.8B (+12% YoY; $250M above midpoint), GAAP operating income $445M (5.1%), core operating income $504M (5.8%), GAAP EPS $2.59 and core EPS $3.16 (+24% YoY); cash from operations was $535M, net CapEx $176M and adjusted free cash flow $359M. Q3 segment results: Regulated Industries $3.2B (+4% YoY; core margin 5.6%), Intelligent Infrastructure $4.2B (+21% YoY; core margin 6.1%; networking +>50%, capital equipment and cloud/DC double‑digit) and Connected Living & Digital Commerce $1.4B (+5% YoY; core margin 4.9%). Q4 guidance calls for enterprise revenue of $9.2B–$10.0B (~16% YoY at midpoint), Regulated ~$3.3B (+6%), Intelligent Infrastructure ~$4.9B (~+32%), Connected Living ~$1.4B (flat); core operating income $589M–$649M (~6.4% margin at midpoint), core diluted EPS $3.80–$4.20, net interest ~$80M and a ~21% core tax rate. For fiscal 2026 management now expects revenue of ~ $35B (~17% YoY), core operating margin ~5.8% (up ~10bps), core EPS ~$12.70, adjusted free cash flow >$1.4B (raised from >$1.3B), cash $1.4B, debt/core EBITDA 1.3x, Q3 buybacks of ~$291M (to finish a $1B authorization in Q4), CapEx targeted at 1.5%–2%, and inventory days of 84 (net ~68 vs. 55–60 target); AI‑related revenue is expected at ~$13.6B for FY26 (≈50% YoY growth from $9B in FY25).
Strong Intelligent Infrastructure Growth & AI Revenue
Intelligent Infrastructure revenue $4.2B, up 21% year-over-year; networking & communications >50% growth (supported by India ramp). Company now expects AI-related revenue of ~$13.6B for FY2026 (up $500M vs March outlook and up from $9B in FY2025), representing ~50% year-over-year AI-related growth (+$4.6B).
Raised FY2026 Guidance and Free Cash Flow
Fiscal 2026 revenue raised to ~$35B (from $34B), ~17% year-over-year. Adjusted free cash flow outlook raised to more than $1.4B (from >$1.3B). Q3 adjusted free cash flow was $359M (cash from ops $535M less net CapEx $176M).
Margin Expansion and Profitability
Q3 core operating income $504M with core operating margin 5.8%; Intelligent Infrastructure core margin 6.1% (up 80 bps YoY). Q4 midpoint implies core operating margin ~6.4%; management expects FY2027 core operating margin above 6%.
Balance Sheet Strength and Capital Returns
Ended Q3 with $1.4B in cash and debt to core EBITDA of 1.3x, maintaining investment-grade profile. Repurchased ~$291M of shares during Q3 and intends to complete $1B repurchase authorization in Q4.
Broad-Based Segment Upside
Revenue upside in Q3 was broad-based: Regulated Industries $3.2B (up 4% YoY; Automotive & Transportation stronger than expected), Connected Living & Digital Commerce $1.4B (up 5% YoY) with Digital Commerce noted as a higher-margin area.
New Customer Wins and Strategic Partnerships
Won a third hyperscale customer in Q3; management expects the third hyperscaler to contribute a couple hundred million in 2027 and scale to ~$1B+ in 2028. Announced a strategic alliance with Adani Enterprises to target multi-gigawatt AI infrastructure manufacturing in India (potential meaningful contributions starting FY2028).
Disciplined Capacity Expansion with Low CapEx Intensity
Adding incremental footprint (~10%) across North Carolina, Memphis, India and other locations while maintaining CapEx guidance of 1.5%-2% of revenue, preserving an asset-light model.
Accretive M&A and Higher-Margin Capabilities
Hanley acquisition is performing ahead of expectations, contributing higher-margin modular power and services capabilities; management cited double-digit margins for Hanley.
Let me close by saying Q3 delivered strong results and gives us greater confidence as we enter the final quarter of fiscal 2026. Our performance this quarter highlights the strength of our diversified portfolio, the momentum in Intelligent Infrastructure, and the disciplined execution of our teams around the world. As we move through Q4 and look ahead to fiscal 2027, our priorities remain clear and consistent
profitable growth, margin expansion, capital efficiency, and sustained cash generation. With that, I'll turn the call over to Mike, who will share more on fiscal 2026 outlook and how we're thinking about the setup into fiscal 2027.