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 growth in Security and Optoelectronics, while Healthcare declined.

• Net income for Q2 was $38.7 million, with GAAP EPS at $2.22 (flat year-over-year) and non-GAAP EPS at $2.58 (up 7%).

• Backlog remained strong at $1.8 billion, supporting confidence for future growth.

• Bookings in Security were lower than expected due to order delays from the U.S. government shutdown and international customers, but the pipeline remains robust.

• Gross profit rose to $151.6 million, but gross margin declined to 32.7% from 35.0% due to less favorable product mix.

Financial highlights

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

• Q2 operating cash flow was $62 million; cash and cash equivalents at December 31, 2025, were $336.7 million.

• 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).

• Net leverage at Q2 end was approximately 2.2; completed $575 million convertible notes transaction at 0.5% coupon, enhancing liquidity.

• Q2 gross margin was 32.7%; Q2 operating margin was 12.7% (GAAP) and 14.0% (non-GAAP).

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.

• Q3 expected to face a $50 million year-over-year headwind from Mexico contracts, with stronger growth anticipated in Q4.

• Guidance excludes potential impairment, restructuring, amortization of acquired 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.