OSI Systems (OSIS) Q2 2026 earnings summary

Executive summary

• Achieved record Q2 revenues of $464.1 million, up 11% year-over-year, driven by strong Security and Optoelectronics divisions, partially offset by a decline in Healthcare.

• Adjusted non-GAAP EPS reached a Q2 record of $2.58, up 7% year-over-year, while GAAP EPS was $2.22, flat year-over-year.

• Net income for Q2 was $38.7 million, up from $37.8 million in the prior year.

• Operating cash flow was $62 million for Q2, with expectations for even stronger cash flow in the second half of fiscal 2026.

• Backlog remained strong at $1.8 billion as of December 31, 2025.

Financial highlights

• Security division revenue grew 15% year-over-year to $335 million; Optoelectronics grew 12% to $113 million.

• Gross margin for Q2 was 32.7%, down from 35.0% year-over-year due to less favorable product mix.

• Q2 operating margin was 12.7% (GAAP) and 14.0% (non-GAAP); Security at 17.8%, Optoelectronics at 12.9%.

• SG&A expenses were $70.2 million (15.1% of sales), down 1% year-over-year; R&D expenses increased to $19.8 million (4.3% of revenues).

• Six-month revenues grew 11.1% year-over-year to $848.7 million; six-month non-GAAP EPS rose 9% to $4.00.

Outlook and guidance

• Fiscal 2026 non-GAAP EPS guidance raised to $10.30–$10.55, representing 10–13% year-over-year growth.

• Revenue guidance maintained, with Q3 expected to face a $50 million year-over-year headwind from Mexico contracts; Q4 growth anticipated to be significantly stronger.

• Guidance excludes potential impairments, restructuring, amortization of intangibles, and discrete tax items.

• Management expects available funds, credit facilities, and cash flow from operations to be sufficient for operational needs for at least the next 12 months.

• The company continues to monitor global macroeconomic factors, supply chain, inflation, and geopolitical risks, which may impact future results.