Manufacturing equipment and systems provider Advanced Energy (NASDAQ: AEIS) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 23.8% year on year to $463.3 million. On top of that, next quarter’s revenue guidance ($470 million at the midpoint) was surprisingly good and 5.5% above what analysts were expecting. Its non-GAAP profit of $1.74 per share was 18.5% above analysts’ consensus estimates.

Is now the time to buy AEIS? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Advanced Energy’s third quarter saw a positive market reaction, reflecting the company’s outperformance against Wall Street expectations. Management attributed the robust quarterly results to a significant surge in data center revenue, which more than doubled year over year, as well as operational execution and cost savings from the closure of its China manufacturing facility. CEO Stephen Kelley emphasized that “strong revenue, solid execution and cost savings from our China factory closure pushed gross margin higher,” while also highlighting the benefits of Advanced Energy’s diversified end-market strategy in stabilizing profits and cash flow.

Looking forward, Advanced Energy’s guidance is shaped by continued strength in data center demand, particularly from AI-driven applications, and the company’s ongoing investments in new technologies and expanded production capacity. Management expects further growth from recent program wins and the ramp-up of its new Thailand factory, while also noting that product development for next-generation power solutions is already underway. However, CFO Paul Oldham cautioned that “tariffs are expected to increase in the fourth quarter,” and operating expenses will rise to support future growth initiatives and research and development.

Key Insights from Management’s Remarks

Management identified surging demand in data center and successful cost initiatives as primary drivers of the quarter’s performance, while highlighting new product adoption and manufacturing progress as key differentiators.

• Data center momentum: Revenue from data center computing more than doubled year over year, driven by AI infrastructure investments and improved capacity from earlier capital expenditures. This segment is now a core contributor to total company growth.
• Manufacturing optimization: The closure of the China factory contributed to margin expansion, and the new Thailand facility is ready for rapid production scale-up, supporting both current and anticipated demand surges.
• Product innovation in semiconductors: Management highlighted the adoption of eVoS and eVerest platforms in leading-edge semiconductor equipment, with customer validations expected to drive market share gains as new designs move to volume production next year.
• Industrial and Medical segment recovery: Inventory normalization and new design wins in aerospace, defense, and medical markets are supporting a sequential recovery, with management optimistic about further market share gains in these areas.
• Ongoing cost management: Benefits from improved factory loading, lower near-term tariff costs, and disciplined operating expenses helped offset margin headwinds from a higher mix of data center revenue, positioning the company for continued margin improvement.

Drivers of Future Performance

Advanced Energy’s outlook is centered on sustained demand in data centers, margin management despite tariffs, and new customer and product ramps across core markets.

• AI-driven data center growth: Management anticipates robust demand for high-efficiency power solutions in AI and cloud infrastructure, with recently secured customer programs expected to enter volume production in early 2026.
• Margin targets amid changing mix: While higher data center revenue could pressure gross margins, the company aims to offset this through ongoing cost reductions, efficiency improvements, and tariff mitigation efforts, targeting a gross margin above 40% in the near term.
• R&D and operational investments: Elevated capital expenditures and increased research and development spending will continue as Advanced Energy invests in next-generation product platforms and the expansion of its Thailand facility to support both established and new customers.

Catalysts in Upcoming Quarters

Looking ahead, our team will closely watch (1) the ramp in production and customer adoption of the Thailand facility, (2) the pace of new product wins in both data center and semiconductor markets, and (3) Advanced Energy’s ability to manage gross margins as the data center mix grows and tariffs fluctuate. Execution on operational efficiencies and the success of new technology platforms will be critical signposts for sustained performance.

Advanced Energy currently trades at $201, up from $195.25 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

Stocks That Trumped Tariffs

Fresh US-China trade tensions just tanked stocks—but strong bank earnings are fueling a sharp rebound. Don’t miss the bounce.

Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.