10-Q: Knowles Corp. Reports Strong Q2 2026 Financial Performance

Knowles Corporation announced a significant increase in revenue and net earnings for the second quarter of 2026, driven by strong demand across its key markets.

Summary

• Knowles Corporation reported revenues of $166.8 million for the second quarter of 2026, a 14.3% increase from $145.9 million in the same period last year.
• Net earnings for the quarter were $19.4 million, a substantial rise from $7.8 million in Q2 2025.
• Diluted earnings per share from continuing operations were $0.21, up from $0.09 in the prior year's second quarter.
• The Precision Devices segment saw a 25.2% revenue increase, while MedTech & Specialty Audio segment revenues grew by 1.6%.
• The company repurchased 416,060 shares of common stock during the three months ended June 30, 2026.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a positive report, with strong revenue and earnings growth, improved margins, and solid performance across key segments, indicating a healthy business trajectory.

Positives

• Revenue increased by 14.3% to $166.8 million in Q2 2026 compared to Q2 2025.
• Net earnings more than doubled to $19.4 million in Q2 2026 from $7.8 million in Q2 2025.
• Gross profit margin improved to 44.7% in Q2 2026 from 41.5% in Q2 2025.
• Precision Devices segment revenue grew by 25.2% year-over-year.
• MedTech & Specialty Audio segment showed revenue growth of 1.6% year-over-year.
• Diluted EPS from continuing operations increased to $0.21 from $0.09.
• The company ended the quarter with $49.6 million in cash and cash equivalents.
• Remaining authorization for share repurchases stands at $106.5 million.

Negatives

• Cost of goods sold increased by 12.7% to $92.1 million, outpacing revenue growth slightly.
• Selling and administrative expenses increased by 9.2% to $39.2 million.
• Adjusted free cash flow decreased to $19.8 million in the first six months of 2026 from $57.9 million in the same period of 2025.

Risks

• Fluctuations in operating results and cash flows.
• Risks associated with increasing inventories in advance of anticipated orders.
• Escalating international trade tensions, new or increased tariffs, and trade wars.
• Disruption caused by a cybersecurity incident.
• Increases in the costs of critical raw materials and components.
• Dependence on a limited number of large customers.
• Increasing competition and new entrants in the market for products.

Future Outlook

The company expects to remain in compliance with all debt covenants over the next twelve months. Capital expenditures in 2026 are expected to be approximately 5% of revenues.

Management Comments

• "Revenues for the second quarter of 2026 were $166.8 million, compared with $145.9 million for the second quarter of 2025, an increase of $20.9 million or 14.3%."
• "The increases in gross profit and gross profit margin were primarily due to higher shipping volumes, impairment charges in 2025 that did not recur in 2026, pricing, and increased factory capacity utilization, partially offset by unfavorable product mix and increased production transfer costs in our ceramic capacitor business."
• "The Company believes that our future cash flow from operations and access to capital markets will provide adequate resources to fund our working capital needs, capital expenditures, strategic investments, and share repurchases."

Industry Context

StockSavvy.ai notes that Knowles Corporation's performance in Q2 2026 reflects a broader trend of recovery and growth in the specialty electronic components market, particularly driven by demand in industrial, medtech, and defense sectors, which are key growth areas for advanced component manufacturers.

Comparison to Industry Standards

• The revenue growth of 14.3% for the quarter is strong compared to the average semiconductor industry growth rates seen in recent quarters.
• The improvement in gross profit margin to 44.7% indicates efficient operations and effective pricing strategies, which are crucial for maintaining competitiveness against peers like Analog Devices or Texas Instruments in specific niche markets.
• The company's focus on medtech and defense markets aligns with industry trends where high-reliability components command premium pricing and stable demand, differentiating it from companies solely focused on consumer electronics.

Legal Proceedings

• The company is involved in various legal proceedings and claims arising in the ordinary course of business, including commercial, warranty, employment, and intellectual property matters.
• The company believes the disposition of these legal proceedings, individually or in the aggregate, will not have a material adverse effect on its financial condition.

Related Party Transactions

• Knowles Corporation received Syntiant Series D-2 preferred stock as partial consideration for the sale of CMM, valued at $77.2 million.
• The company provided $6.4 million in financing to Syntiant, with a balance of $5.9 million as of June 30, 2026.
• Knowles shares in certain separation costs with Syntiant, with a remaining credit balance of $3.1 million as of June 30, 2026.
• Lease payments of $0.3 million were applied to the separation credit for the six months ended June 30, 2026.
• Revenues from transactions with Syntiant totaled $7.1 million for the six months ended June 30, 2026.

Stakeholder Impact

• Shareholders benefit from increased earnings per share and potential share price appreciation due to improved financial performance.
• Employees may see continued investment in development activities and potential for growth-related headcount increases.
• Customers benefit from the company's focus on providing innovative solutions and reliable components for demanding applications.
• Suppliers may experience increased demand for raw materials and components due to higher production volumes.

Next Steps

• Continue to monitor developments on tariff policy and evaluate any changes to the applicability of tariffs to the business.
• The company expects capital expenditures to be approximately 5% of revenues in 2026.
• The company expects to remain in compliance with all of its debt covenants over the next twelve months.

Key Dates

Recommendation

The company has shown strong performance improvements in Q2 2026 with significant revenue and earnings growth. However, the decrease in adjusted free cash flow and ongoing risks related to trade tensions and competition warrant a cautious 'hold' rating until sustained positive trends are confirmed.

Keywords

specialty electronic components, Precision Devices, MedTech & Specialty Audio, capacitors, RF filters, microphones, speakers, industrial electronics