Knowles earnings for the third quarter of 2026 exceeded revenue guidance as Precision Devices sales rose 33%. The specialty electronic components manufacturer announced on October 22 that revenue reached $184 million for the quarter ended September 30, up 20% from a year earlier. Strong bookings extended visibility into 2027, although management said production capacity would limit near-term sequential growth.
Key Takeaways
- Precision Devices generated $117 million in revenue and nearly $180 million in orders.
- Non-GAAP diluted earnings reached $0.38 per share, while GAAP continuing-operations earnings were $0.24 per share.
- Management expects strong year-over-year growth in early 2027, but capacity constraints will limit Precision Devices output growth.
Table of Contents
- Knowles earnings beat revenue guidance
- Precision Devices orders outpace sales
- Fourth-quarter outlook points to further annual growth
- Capacity spending and stamping exit shape 2027
- Conclusion
Knowles earnings beat revenue guidance
Knowles’ third-quarter financial results showed revenue above the high end of management’s guidance, while non-GAAP diluted earnings per share and operating cash flow reached the top of their respective ranges. Revenue increased from $152.9 million a year earlier and $166.8 million in the second quarter.
Non-GAAP diluted earnings per share rose to $0.38 from $0.33 a year earlier. GAAP diluted earnings from continuing operations increased to $0.24 from $0.21. The adjusted measure excludes items including stock-based compensation, intangible amortization and restructuring charges; it is not a substitute for GAAP earnings.
Profitability presented a mixed picture. Non-GAAP gross margin declined to 45.3% from 46.2% a year earlier, but adjusted EBITDA margin increased to 26.3% from 25.8%. Adjusted EBITDA totaled $48.3 million, compared with $39.5 million.
| Item | Details |
|---|---|
| Q3 share repurchases | 695,000 shares bought for $25 million. |
| Q3 debt reduction | $15 million of bank borrowings repaid. |
| Quarter-end cash | $47 million. |
| Revolving credit borrowings | $116 million. |
| Net leverage | 0.4 times trailing 12-month adjusted EBITDA. |
| Available liquidity | More than $330 million. |
Precision Devices orders outpace sales
Precision Devices revenue rose 33% year over year to $117 million, compared with 4% growth to $67 million in MedTech and Specialty Audio. The faster-growing segment supplied almost two-thirds of total quarterly revenue.
Precision Devices booked nearly $180 million in orders and recorded a book-to-bill ratio of 1.5, meaning orders exceeded sales during the quarter. Chief Executive Jeffrey Niew said the ratio had remained above one for eight consecutive quarters.
Niew said customers were already scheduling orders into the first half of 2027. However, the business was operating near its capacity limits. Management therefore expects strong year-over-year growth but roughly flat sequential sales in Precision Devices during that period. The distinction matters: stronger bookings do not immediately translate into higher shipments.
Fourth-quarter outlook points to further annual growth
For the quarter ending December 31, 2026, Knowles forecast revenue of $180 million to $190 million and non-GAAP diluted earnings of $0.39 to $0.43 per share. GAAP diluted earnings from continuing operations are expected to be $0.31 to $0.35 per share.
At the revenue midpoint, full-year sales would reach approximately $689 million, up 16% from 2025. Management also expects full-year adjusted EBITDA growth of 24% at the midpoint, with both growth rates above the high end of its Investor Day targets.
Knowles guided to fourth-quarter operating cash flow of $60 million to $70 million and capital spending of $8 million. Those remain forecasts, compared with actual third-quarter operating cash flow of $44.6 million.
Capacity spending and stamping exit shape 2027
Management expects capital spending to rise to 5%–7% of revenue in 2027, above the historical 3%–5% range. The higher investment requirement accompanies the production constraints identified in Precision Devices.
Within MedTech and Specialty Audio, exiting the stamping business is expected to create a 2%–3% revenue headwind in 2027, concentrated in the first half. Niew said the cost-plus business generated little profit, so its departure should not affect EBIT. Management expects the segment’s full-year revenue to grow roughly 2%–4%.
Chief Financial Officer John Anderson said MedTech and Specialty Audio gross margin should improve by about one percentage point in 2027. That outlook separates the expected loss of low-profit revenue from the performance of the remaining business.
Conclusion
The next checkpoint for Knowles earnings is the quarter ending December 31, 2026, against management’s $180 million–$190 million revenue range. Beyond that, the key operating question is how much of the strong Precision Devices order flow can be converted into shipments while capacity remains constrained.
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