OSI Systems (OSIS) Q2 2026 earnings summary

Executive summary

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

• Non-GAAP adjusted 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 for Q2 was $62 million, with a healthy backlog of $1.8 billion as of December 31, 2025.

• 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

• Security division Q2 revenues were $335 million, up 15% year-over-year, with strong service and RF business growth.

• Optoelectronics and Manufacturing Q2 revenues rose 12% year-over-year to $113 million, setting a new Q2 record.

• Six-month revenues grew 11% year-over-year to $848.7 million; six-month net income was $59.3 million.

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

• 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).

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.

• Service revenues expected to grow faster than product revenues, supporting margin expansion, especially in Q4 and beyond.

• 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.