KN
T2Knowles Corporation
AI Bottleneck '25: Passive Electr ComponentsAI Bottleneck '26: MLCCsAI Power '26: Passive Components & PlumbingHumanoid '25: Learned Memory & InterfacingHumanoid '25: Sensing & PerceptionHumanoid '25: Vision, LiDar & Imaging Systems
OverviewKnowles Corporation provides specialized electronic components. Its Precision Devices segment (59% of Q2 2026 revenue) offers high-performance capacitors and RF
Knowles Corporation provides specialized electronic components. Its Precision Devices segment (59% of Q2 2026 revenue) offers high-performance capacitors and RF products for defense, industrial, and medtech applications. The Medtech & Specialty Audio segment (41% of Q2 2026 revenue) supplies micro-acoustic microphones and balanced armature speakers for hearing health and other audio solutions. They sell custom-engineered solutions to blue-chip OEMs and distributors globally.
- What They Do (Plain English & Analogies)
- Knowles Corporation makes tiny, high-performance electronic parts that are essential for advanced devices. Think of them as specialized component builders for things that need to be very precise, reliable, and often very small. For example, they make miniature microphones and tiny speakers that go into hearing aids, premium headphones, and other audio devices, ensuring clear sound. They also produce sophisticated capacitors and radio frequency (RF) components that act like the 'plumbing' or 'traffic controllers' for electricity and signals in complex systems like medical equipment, defense systems, industrial machinery, and the high-speed networks that power artificial intelligence (AI) data centers. They focus on applications where standard parts just won't cut it, requiring custom engineering and top-notch quality.
- Very Brief History
- Founded in 1946, Knowles Corporation has a long history in acoustic innovation. Initially known for miniature audio components, particularly for hearing aids, the company has evolved significantly. A key strategic shift occurred in 2023 with the acquisition of Cornell Dubilier, a capacitor manufacturer, and the divestiture of its Consumer MEMS Microphones business. This move refocused Knowles on higher-margin, engineering-intensive niches, emphasizing high-performance capacitors and RF solutions alongside its specialty audio products.
- "Street Stereotype"
- Knowles is generally perceived as a specialized, high-performance component supplier, particularly known for its 'precision plumbing' in critical applications. Investors and analysts see them as a key enabler for advanced technologies, providing high-Q, high-frequency capacitors for AI clusters and micro-acoustic components for demanding applications like hearing health and humanoid robotics. The company is viewed as focusing on engineering-intensive, higher-margin niches rather than commoditized markets.
- Subsidiaries On Linked In*
- Cornell Dubilier Marketing, Inc.
- Knowles Europe
- Knowles Intermediate Holding Inc.
- Johanson Dominicana S.A.S.
- Knowles Electronics (Shanghai) Co Ltd of Beijing
- Knowles Electronics GmbH
- Cornell Dubilier Acquisition Corp.
- Illinois Capacitor, Inc.
- Customer Sectors & Example Clients
- Knowles serves a diverse range of customer sectors, including Medtech, Defense, Industrial, Electrification, Consumer Electronics, Mobile Devices, Hearing Health, True Wireless Stereo (TWS) products, the Internet of Things (IoT), and Computing platforms. They also cater to applications in Satellite Communications, Radar Systems, and General Communications equipment. The company serves blue-chip customers, original equipment manufacturers (OEMs), and their contract manufacturers, as well as distribution partners like TTI and Arrow Electronics. Specific ODM partners for TWS reference design kits include Fujikon, Grandsun, OBO, Risuntek, and Siyoto.
- New Customers / Segments They'Re Targeting
- Knowles is targeting new growth platforms and expanding its reach with its Micro Solutions group. The company is focused on winning next-generation designs for MEMS microphones and balanced armature speakers in the hearing health market, as well as providing solutions for next-generation medical and defense products. New segments also include the energy market, supported by a significant energy order, and downhole industrial applications. The company also supplies components for AI infrastructure.
- Supply Chain And Sourcing Geographies
- Knowles operates a global supply chain with manufacturing and design centers across various regions. Its manufacturing facilities are located in the United States (Cazenovia, NY; Valencia, CA; San Diego, CA; Minden, NV), Asia (Philippines, Malaysia, China (Suzhou, Shanghai), India (Bangalore), Japan, Korea, Taiwan), and Europe (UK, Switzerland, Denmark, Hungary). The company also has operations in the Dominican Republic. Knowles indicates that it manufactures in many of the regions where it sells, and while some input costs like resins may see modest increases, transportation costs are generally low due to the small size of its components and customer agreements where customers often take possession at Knowles' dock.
- Sales Geographies And Expansion Plans
- Knowles currently sells its products globally, with a footprint spanning Asia, the United States, Europe, and other parts of the Americas. Its sales, support, and engineering facilities are located across North America, Europe, and Asia. The company's strategy focuses on leveraging its unique technologies in high-growth markets within these existing geographies, rather than explicitly detailing plans to expand into entirely new geographical regions.
- How Key Themes May Help/Hurt
- Knowles is well-positioned to benefit from the 'Humanoid '25: Sensing & Perception' theme. Its micro-acoustic components, such as MEMS microphones, are crucial for humanoid robots to perceive sound and voice commands, enabling more natural human-robot interaction. The company's high-performance capacitors and RF products are vital for the precision, low-latency control systems and communication modules required in advanced robotics, including humanoid robots and industrial automation. The demand for highly reliable and precise electronic components, especially for applications requiring sub-millimeter precision in actuators and sensors, aligns with Knowles' offerings. Furthermore, Knowles' 'Precision Plumbing' niche, providing high-Q, high-frequency capacitors for Ethernet switches linking AI clusters, directly benefits from the 'AI Power '26: Passive Components & Plumbing' theme, ensuring low latency and zero packet loss in AI infrastructure. However, the company could be hurt by risks associated with the theme, such as safety concerns and headline risks from robot malfunctions, which could erode public trust and lead to stricter regulations, potentially delaying widespread adoption. Latency challenges in perception and control loops could also undermine robot utility, reducing demand for high-performance components. Additionally, broader macroeconomic slowdowns or geopolitical tensions could impact capital expenditure plans for robotics and AI infrastructure, affecting demand for Knowles' components.
3 Main Long-Term Bull Details
- Knowles is experiencing accelerated organic growth, exceeding its 2026 revenue targets, driven by strong secular trends in high-value markets such as medtech, defense, industrial, and electrification. The company's strategy of providing high-value, custom-engineered solutions to these markets is proving effective.
- The Precision Devices segment demonstrates robust order intake, with a book-to-bill ratio of 1.4 in Q2 2026, marking the seventh consecutive quarter above 1.0. This includes significant multi-year orders, such as a $15 million-plus order for a radar application expected to ship over 36 months starting in 2027, providing strong revenue visibility and confidence in future growth.
- Knowles anticipates continued gross margin expansion, particularly in the Precision Devices segment, fueled by increased production volume, factory productivity gains, favorable product mix, and pricing power. The company aims for annual price increases in its PD business, leveraging its sole-source positions and the specialized nature of its products to enhance profitability.
3 Main Long-Term Bear Details
- While the Medtech & Specialty Audio segment is performing well, the hearing health end market is expected to grow at normal historical rates (2-4%) for the full year 2026, which could limit overall segment growth compared to the faster-growing Precision Devices segment.
- Despite current tailwinds, broader macroeconomic slowdowns or escalating geopolitical tensions could impact capital expenditure plans of major customers in defense and industrial sectors, potentially leading to reduced demand or supply chain disruptions.
- The specialized electronic components market remains competitive, and while Knowles focuses on niche, high-margin areas, intense competition could still lead to pricing pressures. Additionally, unforeseen technical hurdles or delays in scaling new product lines, such as the energy order ramp, could impact anticipated margin expansion and revenue contribution.
- Competitors And Differentiation
- Knowles' competitors vary by end market but include companies like Kyocera, Murata, and Yageo. In the hearing health sector, Sonion is a direct rival. Larger Asian suppliers and integrated semiconductor firms such as TDK, AAC Technologies, Goertek, and STMicroelectronics also pose competition, particularly in broader audio markets that Knowles has largely exited. Knowles differentiates itself by focusing on niche markets where precision, certification, and long product life are paramount. The company competes on miniaturization, acoustic precision, and qualification depth rather than volume. It positions itself as a sole-source supplier on key defense programs and emphasizes delivering unique, custom-engineered solutions with superior technology and reliability to blue-chip customers in high-growth markets.
- Recent Performance & What The Market'S Focused On
- Knowles reported strong Q2 2026 results, with revenue of $167 million, up 14% year-over-year, exceeding the high end of its guided range. Non-GAAP EPS of $0.33 was up 38% year-over-year, also above guidance. Cash generated from operations was $28 million. The Precision Devices segment saw revenue up 25% year-over-year to $98 million, while Medtech & Specialty Audio revenue was up 2% to $69 million. The book-to-bill ratio for Precision Devices was 1.4, marking the seventh consecutive quarter above 1.0. For the full year 2026, Knowles raised its revenue growth guidance to between 10% and 12%. The market is focused on Knowles' sustained accelerated organic growth, particularly in the Precision Devices segment, driven by strong demand across medtech, defense, industrial, and electrification markets. Investors are also closely watching the company's ability to expand gross margins through increased production volume, favorable mix, and pricing power, with a path towards 30% EBITDA margins in the next 2-3 years. The acceleration in the defense market and the ramp-up of new growth platforms like the energy order are also key areas of interest.
- Revenue Segments And Estimated Mix
- Medtech & Specialty Audio — Mix: ~41.3%; Source: Q2 2026 transcript; Trend: Up 2% year-over-year
- Precision Devices — Mix: ~58.7%; Source: Q2 2026 transcript; Trend: Up 25% year-over-year
- Product Brands
- SiSonic
Bull / Bear DetailsKnowles Corporation (KN) presents a compelling long opportunity as of July 25, 2026, driven by accelerated organic growth and significant margin expansion. Leve
Thesis
Knowles Corporation (KN) presents a compelling long opportunity as of July 25, 2026, driven by accelerated organic growth and significant margin expansion. Leveraging specialized electronic components in high-growth markets like defense, medtech, and industrial, the company's Precision Devices segment is outperforming. Strong order momentum, successful new product ramps, and strategic pricing reinforce its robust market position and path to enhanced profitability.
Bull case
Knowles is experiencing accelerated organic growth, with Q2 2026 revenue up 14% year-over-year and Precision Devices (PD) revenue up 25% year-over-year, exceeding guidance. The company raised its 2026 revenue growth outlook to 10-12% and reported a robust PD book-to-bill ratio of 1.4, indicating sustained strong demand across its diverse end markets.
The Precision Devices segment is poised for significant gross and EBITDA margin expansion. PD gross margins are expected to reach the low 40% range in the second half of 2026, with further expansion anticipated in 2027. Management projects adjusted EBITDA margins to exceed 25% in 2026, with a clear path to nearly 30% over the next 2-3 years.
Knowles' strategy of providing custom-engineered solutions to blue-chip customers in high-growth secular markets like defense, medtech, and industrial is proving highly effective. The defense market, in particular, is growing faster than anticipated, with multi-year orders like a $15M+ radar application for 2027-2030, and potential 2x-4x volume increases in missile programs.
Bear case
While the Precision Devices segment is strong, the Medtech & Specialty Audio (MSA) segment's growth is expected to be slower in the second half of 2026 due to inventory building in the first half, limiting overall segment growth to historical rates of 2-4% for the full year. This could temper overall company growth despite PD's strength.
Despite current tailwinds from increased defense spending and industrial demand, broader macroeconomic slowdowns or escalating geopolitical tensions could still impact capital expenditure plans of major customers. While management reports strong bookings, a sudden shift could lead to reduced demand or supply chain disruptions, affecting timely delivery and costs.
The specialized electronic components market remains competitive. While Knowles avoids commoditized products and commands pricing power, misjudging demand sustainability for certain products or unforeseen technical hurdles in scaling new platforms could impact profitability. The company's selective M&A approach, while prudent, might also limit growth opportunities if suitable targets are scarce.
Bull / Bear Case
- Bear Case
- Despite the strong performance in Precision Devices, the Medtech & Specialty Audio (MSA) segment's growth is expected to be slower in the second half of 2026 due to inventory building in the first half, limiting overall segment growth to historical rates of 2-4% for the full year. This could temper overall company growth despite PD's strength. Broader macroeconomic slowdowns or escalating geopolitical tensions could still impact capital expenditure plans of major customers in defense and industrial sectors, potentially leading to reduced demand or supply chain disruptions. The specialized electronic components market remains competitive, and while Knowles avoids commoditized products, misjudging demand sustainability for certain products or unforeseen technical hurdles in scaling new platforms could impact anticipated profitability. Additionally, current valuation metrics suggest the stock may be overvalued relative to its intrinsic value and industry peers.
- Bull Case
- Knowles Corporation is experiencing accelerated organic growth, with Q2 2026 revenue up 14% year-over-year and Precision Devices (PD) revenue up 25% year-over-year, exceeding guidance. The company raised its 2026 revenue growth outlook to 10-12% and reported a robust PD book-to-bill ratio of 1.4, indicating sustained strong demand across diverse end markets like defense, medtech, and industrial. The Precision Devices segment is poised for significant gross and EBITDA margin expansion, with PD gross margins expected to reach the low 40% range in the second half of 2026 and a clear path to nearly 30% adjusted EBITDA margins over the next 2-3 years. Knowles' strategy of providing custom-engineered solutions to blue-chip customers in high-growth secular markets is proving highly effective, evidenced by multi-year defense orders and the successful ramp of the energy order.
- More Compelling & Why
- Bear. Given the current valuation, the bear case is more compelling. Knowles is trading at a forward P/E of approximately 27x-28x, which is above the industry average of 24x, and intrinsic value models suggest significant overvaluation. While the company's accelerated organic growth and margin expansion are positive, the current price appears to have already factored in much of this upside. A sustained period of revenue growth significantly exceeding the 10-12% guidance, coupled with EBITDA margin expansion beyond the projected 30% target, would justify the premium and flip my view.
Key Factors
| Key Factor | Why It Matters | What To Watch | What It Signals | Where/How To Track | Free Alt Data | Paid Alt Data |
|---|---|---|---|---|---|---|
| Overall 2026 Revenue Growth Guidance | Updates to the full-year revenue growth guidance reflect broad-based demand, successful execution of strategic initiatives, and market momentum, validating the company's thesis of accelerated organic growth. | Any updates to the full-year 2026 revenue growth guidance in subsequent earnings calls. Current guidance is 10% to 12%. Monitor Q3 2026 revenue against the guided range of $167 million to $177 million. | Bullish if the full-year 2026 revenue growth guidance is maintained or raised further, or if Q3 2026 revenue exceeds the high end of the guided range. | Q3 and Q4 2026 earnings reports and conference calls. | ||
| New Multi-Year Defense Contracts | Securing additional long-term defense orders provides significant revenue visibility, reinforces Knowles' position as a sole-source supplier, and indicates robust demand in a rapidly growing defense market. | Announcements of additional multi-year defense orders, similar to the $15 million-plus radar application order received in July 2026, which is expected to ship over 36 months starting in 2027. | Bullish if Knowles announces one or more new multi-year defense contracts of significant value (e.g., >$15M) or if discussions about 2x-4x volume increases in missile programs materialize into firm orders. | Company press releases, SEC filings (Form 8-K for material contracts), and future earnings calls. | USASpending.gov: Government contract awards >$15M for Knowles Corporation. | GovWin IQ: Defense contract awards and pipeline analysis for Knowles. |
| Precision Devices (PD) Segment Book-to-Bill Ratio | A consistently strong book-to-bill ratio above 1.0 indicates robust and sustainable demand, providing clear visibility into future revenue generation, particularly in high-growth markets like defense and industrial. | The reported book-to-bill ratio for the Precision Devices segment in Q3 and Q4 2026. The Q2 2026 ratio was 1.4, marking the seventh consecutive quarter above 1.0. | Bullish if the book-to-bill ratio remains above 1.0, especially if it sustains or exceeds the Q2 2026 level of 1.4. | Q3 and Q4 2026 earnings reports and conference calls. | ||
| Precision Devices (PD) Segment Gross Margin Improvement | Improved gross margins in the Precision Devices segment demonstrate Knowles' pricing power, efficient capacity utilization, and favorable product mix, which are critical drivers of overall company profitability and potential valuation re-rating. | Reported PD gross margins in Q3 and Q4 2026. Management expects PD gross margins to reach the 'low 40% range in that PD segment in the back half of the year' and anticipates further expansion in 2027. | Bullish if PD gross margins reach or exceed the low 40% range in H2 2026 and management reiterates or strengthens the outlook for margin expansion in 2027. | Q3 and Q4 2026 earnings reports and conference calls. | ||
| Specialty Film Line Energy Order Revenue Contribution in H2 2026 | This factor confirms the successful execution and ramp-up of a major high-margin order, directly impacting the Precision Devices segment's revenue growth and overall company profitability. | Monitor the reported revenue contribution from the energy order in Q3 and Q4 2026. Management expects this order to contribute '$25 million-plus at pretty good gross margins for the rest of the year.' | Bullish if the H2 2026 revenue contribution from the energy order meets or exceeds $25 million and is accompanied by strong gross margins. | Q3 and Q4 2026 earnings reports and conference calls. |
Key Reported Metrics, Reratings Triggers & ResultsThis segment is a key growth driver, benefiting from secular trends in defense, medical, industrial, and electrification. Continued strong growth validates the
| Key reported metrics | Rerating thresholds | Earnings results | ||||||
|---|---|---|---|---|---|---|---|---|
| Metric | Last period | Why it matters | What's needed for rerating | Rerating context | Earnings date | Actual reported | Hit target? | Notes |
| Precision Devices Revenue | 25% | This segment is a key growth driver, benefiting from secular trends in defense, medical, industrial, and electrification. Continued strong growth validates the strategy and the impact of design wins and the energy order ramp. | Precision Devices Revenue needs to demonstrate year-over-year growth of 20% or higher in Q2 2026, exceeding the 17% growth seen in Q1 2026 and significantly surpassing management's full-year organic growth target of 'above the high end of 6% to 8%'. This must be coupled with clear confirmation that the specialty film line for the $75 million-plus energy order is fully ramped by the end of Q2 2026, and strong guidance for its anticipated '$25 million-plus' revenue contribution in the second half of 2026, along with the projected 100 basis point gross margin improvement for the Precision Devices segment for the full year. | Hitting this threshold is crucial as Precision Devices is a primary growth engine for Knowles, capitalizing on secular trends in defense, medical, industrial, electrification, and AI infrastructure. Sustained high double-digit growth, particularly driven by the successful ramp of the high-margin energy order, validates the company's strategy of providing custom-engineered solutions in premium markets. This signals robust demand, strong execution, and significant margin expansion potential, which are key factors for increasing investor confidence and driving a higher valuation. | ||||
| Total Revenue | 14% | Total Revenue indicates overall company performance and market demand. Exceeding guidance signals strong execution and positive momentum, validating management's thesis of accelerated organic growth. | Knowles Corporation's Total Revenue needs to hit $169 million or higher for Q2 2026. This would represent a year-over-year growth rate of approximately 16% or more, significantly exceeding the high end of the company's Q2 guidance range of $152 million to $162 million. | Hitting this threshold confirms Knowles' accelerated organic growth thesis, validating strong demand in high-growth markets like defense and AI infrastructure. It signals successful execution of the specialty film line ramp and pricing power, justifying a higher valuation multiple and sustained margin expansion. | $167 million (14% y/y growth) | No | Knowles reported Q2 2026 revenue of $167 million, which was above the high end of their guided range of $152 million to $162 million. However, this figure fell short of the rerating trigger of $169 million or higher (16% y/y growth). The actual year-over-year growth was 14%, missing the 16% target. | |
| EPS | 38% | EPS reflects the company's profitability and operational efficiency. Strong year-over-year growth demonstrates effective cost management and leverage from increased revenue, directly impacting shareholder value. | ||||||
Key QuestionsWill Knowles Corporation's Precision Devices segment achieve gross margins in the low 40% range in Q3 2026, driven by the fully ramped energy order and stronger
Will Knowles Corporation's Precision Devices segment achieve gross margins in the low 40% range in Q3 2026, driven by the fully ramped energy order and stronger pricing?
- Question 2
Can Knowles Corporation maintain its accelerated organic revenue growth and a Precision Devices book-to-bill ratio above 1.0 in Q3 2026, confirming sustained strong demand across its key markets?
- Question 3
Will Knowles Corporation provide further details or secure additional significant multi-year orders from its new growth platforms, particularly in defense, that will drive accelerated growth in 2027 and beyond?
Earnings Transcript Summary
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Transcript Tidbits
| About Expanding Eligible Market | About Competition | About The Broader Industry | Where Things Are Headed | Updates On Theme | Broader Themes Emerging | Bullish-Leaning Quotes (Short) | Bearish-Leaning Quotes (Short) | Hiring |
|---|---|---|---|---|---|---|---|---|
| Knowles is seeing positive momentum in new growth platforms and markets that are expected to drive additional growth in 2027 and beyond. The Micro Solutions group's ability to expand its reach as a new platform is expected to increase growth in that segment. The company is well-positioned to win next-generation designs for MEMS microphones and balanced armature speakers, aiming to increase content per device in next-generation hearing health products. Medtech growth is supported by strong sales across applications like defibrillators and MRI machines. In defense, RF microwave products support growth in many communications applications, and the company received a $15 million-plus order for a radar application expected to ship over 36 months starting in 2027. Robust design wins are noted in the industrial space, including a New Product Introduction in the HVAC repair sector. The previously announced energy order, exceeding $5 million, is fully ramped with better-than-planned yields. The company also highlighted future growth platforms like inductors and downhole applications, and anticipates potential 2x to 4x volume increases in missile programs over the next 1-2 years, driven by stock replenishment and increased defense spending by U.S. allies. | Knowles differentiates itself by delivering unique solutions with superior technology and reliability. The company continues to be a sole-source supplier on a number of key defense programs for its RF microwave products. In the Precision Devices segment, Knowles is not a commodity product supplier and typically raises prices annually, with the pricing environment being stronger this year compared to last. The company avoids adding capacity for transient orders of commoditized products, focusing instead on sustainable, long-term bookings. Management emphasized being selective in M&A, looking for additive deals where '1 plus 1 equals 3' given the strong organic growth opportunities. | The Hearing Health market is expected to grow at historical rates of 2% to 4% annually in 2026, though recent data suggests it could be closer to the 4% range. The medtech market benefits from increasing life expectancy and an aging population. The defense market is growing at a more rapid rate than anticipated, driven by global conflicts, increased defense spending, and electronic warfare, with an expectation of continued strong organic growth and potential acceleration in the midterm due to proposed larger defense budgets, replenishment of stocks (e.g., related to the Iran conflict), and increased spending by U.S. allies. The industrial market is also growing faster than previously believed, with demand for manufacturing automation and product optimization. The broader passives market is experiencing a 'rising tide environment' with stronger demand in the second half of the year across industrial, medtech, and defense sectors. | Knowles expects continued strong organic revenue growth and margin expansion, anticipating 2026 revenue growth between 10% and 12%, well above its previous 4% to 6% target. For Q3 2026, revenues are projected to be between $167 million and $177 million, up 12.5% year-over-year at the midpoint, with EPS between $0.34 and $0.38 per share. The company expects sequential growth from Q3 to Q4, with the Precision Devices segment continuing its growth rate. Precision Devices gross margins are expected to further improve in the second half of 2026, reaching the low 40% range, driven by a favorable pricing environment, mix, and increased factory overhead absorption, with opportunities for further expansion in 2027. Full-year capital spending is expected to be approximately 5% of revenues, with increased absolute spending to support capacity expansion in the PD segment for 2027. Knowles projects adjusted EBITDA growth of 20% to 24% for 2026, with a path to achieve EBITDA margins close to 30% over the next 2 to 3 years. An Investor Day is planned for the first half of next year to detail new growth platforms. | Sensing | Increased global defense spending driven by geopolitical conflicts, manufacturing automation and product optimization, and a general 'rising tide' environment for passive electronic components. | I'm very pleased with our performance. We had another quarter of strong broad-based organic growth. We are beginning to see positive momentum in some of our new growth platforms and markets that bodes well to drive additional growth in 2027 and beyond. We delivered revenue of $167 million, up 14% year-over-year, exceeding the high end of our guided range. EPS of $0.33 was up 38% year-over-year, above the high end of our guided range. Book-to-bill in Precision Devices was 1.4. This marked the seventh consecutive quarter with a book-to-bill greater than 1. I believe Knowles has entered a period of accelerated organic growth. We now expect our revenue growth in 2026 to be between 10% and 12%, well above the high end of our organic revenue growth target of 4% to 6%. The pricing environment is definitely stronger than it was last year, and we're probably going to get more pricing this year. Bookings are strong again in July. I feel really good about where we are with our products. We clearly see an opportunity to further improve PD gross margins in the second half of this year. EBITDA margins will be in excess of 25% this year. We see a path over the next 2 to 3 years to get EBITDA margins close to 30%. | The MSA segment is going to be slower because kind of what we talked about before, inventory building in the first half of the year, but no real problems there, 2% to 4% for the full year. I honestly have not been able to fully digest what this all means. We don't want to be adding capacity for what I would call our transient orders, where we get orders for commoditized product because the other guys lead times go really long. |
| About Expanding Eligible Market | About Competition | About The Broader Industry | Where Things Are Headed | Updates On Theme | Broader Themes Emerging | Bullish-Leaning Quotes (Short) | Bearish-Leaning Quotes (Short) | Hiring |
|---|---|---|---|---|---|---|---|---|
| Knowles is positioned to increase content per device in next-generation hearing health products and expand reach with its Microsolutions group, aiming to increase growth rates above historical rates beyond 2026. The company is seeing strong demand in the industrial market for capacitor products, supporting applications in semiconductor equipment and downhole applications. In the satellite business, Knowles focuses on providing super high-performance RF filters where differentiation is key, rather than commoditized portions of the market. | Knowles differentiates itself by leveraging unique technologies to design custom-engineered solutions and delivering them at scale for blue-chip customers in high-growth markets, allowing it to garner premium margins. The company continues to be a sole supplier on a number of key defense programs for its RF microwave products. Knowles aims to avoid commoditized portions of the market, including some aspects of the satellite business, focusing instead on unique and special requirements where good gross margins can be achieved. | The hearing health end market is expected to grow at normal historical rates in 2026. The defense market is showing strength across product families, with demand for capacitors supporting OEM investments and new products. Increasing demand in defense is expected in 2027 and beyond, driven by the replenishment of stocks in connection with the Iran conflict. The industrial market continues to grow with strong order activity across a wide range of capacitor products. Knowles' businesses are well-positioned in markets with strong secular growth trends, including defense, medical, industrial, and electrification, which are forecasted to be positive for the foreseeable future. The overall demand across industries is currently high, with a book-to-bill ratio of 1.19 on top of 16% growth, and strong order rates continuing into April. Discussions are increasing with defense customers about placing larger orders, potentially for 3- to 5-year durations, compared to the typical one-year orders. | Knowles started 2026 with solid financial results and strong momentum for the rest of the year. The Medtech & Specialty Audio segment is projected to grow within the 2% to 4% range for the full year 2026. The Precision Devices segment is confident in growing revenue above the high end of its organic growth target of 6% to 8% for 2026. Knowles expects its overall revenue growth in 2026 to be above the high end of its target organic revenue target of 4% to 6%. For Q2 2026, revenues are expected to be between $152 million and $162 million, up 8% year-over-year at the midpoint, with EPS projected between $0.28 and $0.32 per share, up 25% year-over-year at the midpoint. Precision Devices gross margins are expected to improve further in the second half of 2026, driven by increased production volume in the specialty film line, with a full-year improvement of 100 basis points anticipated. Gross margins in 2027 are expected to be similar to the higher margins achieved at the exit of 2026. The ramp-up of the large energy order is on track from both a production and yield standpoint, with all equipment on site and the process being primarily blocking and tackling. | Passive | We started 2026 with solid financial results in Q1 and great momentum entering the rest of the year. I believe Knowles has entered a period of accelerated organic growth. The order rate in April is already strong again. I will be surprised at full year, we don't improve gross margins within the PD segment by 100 basis points. | However, the hearing health end market is expected to continue to grow at normal historical rates in 2026. Just a little bit on input costs. We don't really want to be in the commoditized portions of the market. | SG&A expenses increased due to additional headcount within the Precision Devices segment to support future revenue growth and new product initiatives. The company anticipates needing to hire more direct labor as businesses continue to ramp up. |
Upcoming Events
| Catalyst ID | Estimated Timing | Estimated Date Start | Estimated Date End | Catalyst | Why It Matters | Ticker Or Theme Specific | Transcript Date | Source Type |
|---|---|---|---|---|---|---|---|---|
| KN_f5dcf974 | starting in 2027 | 2027-01-01 | 2027-03-31 | Knowles will begin shipping on a $15 million-plus order for a radar application. | This order provides significant long-term revenue visibility and underscores strong demand in the defense market, supporting future organic growth for Knowles. | Ticker | 2026-07-23 | earnings_transcript |
| KN_dc866f28 | sometime in the first half of next year | 2027-01-01 | 2027-06-30 | Knowles plans to host an Investor Day to provide more details on new growth platforms. | This event is expected to unveil detailed plans for future growth drivers such as energy, Micro Solutions Group, inductors, and downhole applications, potentially boosting investor confidence and valuation. | Ticker | 2026-07-23 | earnings_transcript |
| KN_a7276e3f | over the next, say, quarter | 2026-07-01 | 2026-09-30 | Delivery of specialty film pilot programs to 20 different customers for various applications, including downhole and energy transmission. | Successful pilot deliveries are crucial for converting these programs into larger production orders, which would be a significant driver of future revenue growth for the specialty film line and the Precision Devices segment. | Ticker | 2026-04-23 | earnings_transcript |
| KN_e3d5ddde | a lot of negotiations and discussion going on about that right now | 2026-04-23 | 2026-09-30 | Potential securing of larger, multi-year (3-5 year) orders from defense customers. | These long-term agreements would provide significant revenue visibility and stability for the defense segment, potentially impacting future guidance and enhancing investor confidence. | Ticker | 2026-04-23 | earnings_transcript |
| KN_ab773319 | second half of 2026 | 2026-07-01 | 2026-12-31 | Realization of further improvement in Precision Devices gross margins, driven by increased capacity utilization in the specialty film line and other product lines. | This improvement, potentially 100 basis points for the full year and 200-250 basis points better than Q1 in the PD segment, would significantly boost overall profitability and investor sentiment. | Ticker | 2026-04-23 | earnings_transcript |