Electronic components manufacturer Knowles (NYSE: KN) reported Q1 CY2026 results beating Wall Street’s revenue expectations, with sales up 15.8% year on year to $153.1 million. Guidance for next quarter’s revenue was optimistic at $157 million at the midpoint, 2.3% above analysts’ estimates. Its non-GAAP profit of $0.27 per share was 13.7% above analysts’ consensus estimates.

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StockStory’s Take

Knowles delivered year-on-year growth in the first quarter, with management attributing results to strong demand across its MedTech and Specialty Audio segment as well as the Precision Devices segment. CEO Jeffrey Niew emphasized that new product introductions by customers, especially in hearing health, and robust activity in defense and industrial markets contributed to revenue gains. The company credited its ability to deliver custom-engineered solutions for blue-chip customers as a key differentiator. Niew noted, “Our strategy of leveraging our unique technologies to design custom engineered solutions and then delivering them at scale … is proving to be a powerful combination.”

Looking ahead, Knowles expects continued momentum based on a robust backlog and ongoing order strength, particularly in defense and energy-related applications. Management plans to capitalize on capacity expansions and new design wins to drive organic revenue growth above its historical targets for the year. CFO John Anderson stated, “Our first quarter performance, combined with a robust backlog and increased order activity throughout the first four months of the year, give me confidence in our ability to deliver an increase in 2026 adjusted EBITDA above our cumulative annual growth target.”

Key Insights from Management’s Remarks

Management pointed to broad-based demand, successful execution on large energy orders, and progress in margin expansion as key drivers of the quarter’s performance.

• Precision Devices outperformance: The Precision Devices segment saw notable growth from defense, industrial, and medtech end markets, supported by demand for capacitors and RF microwave products. Management highlighted order momentum, with a book-to-bill ratio of 1.19 sustaining for a sixth consecutive quarter.
• Energy order ramp progressing: The company continued ramping up production capacity for a substantial energy sector order, which management expects to reach full capacity by the end of Q2. This ramp is expected to drive additional margin improvement in the second half of the year.
• Hearing health product launches: Within MedTech and Specialty Audio, new product introductions by customers in hearing health led to above-trend growth. Management attributed this to Knowles’ position as a supplier of MEMS microphones and balanced armature speakers.
• Pricing strategy in focus: The company is actively using targeted pricing increases—2% to 4% annually—in Precision Devices to combat input cost pressures and leverage its position in specialized applications. In contrast, pricing power in MedTech and Specialty Audio is more limited due to customer concentration.
• Capacity utilization and cost leverage: Improved factory capacity utilization, especially in the specialty film line, contributed to higher gross margins. Management emphasized the ability to scale output without major additional equipment investments, with much of incremental revenue expected to flow through to the bottom line.

Drivers of Future Performance

Knowles’ outlook is underpinned by rising demand in key end markets, ongoing capacity investments, and a robust order backlog, though management notes some potential input cost headwinds.

• Defense and industrial demand: Management anticipates elevated order activity in defense due to global geopolitical factors, with discussions underway for longer-term contracts. Industrial demand remains strong for both capacitors and specialty components, supporting high factory utilization.
• Energy sector ramp and margin gains: The full ramp of the specialty film line for a large energy order is expected to boost Precision Devices segment margins in the back half of the year. Management projects year-over-year margin improvement as production stabilizes and scales.
• Input costs and supply chain risks: Input cost pressures, such as modest increases in resin-based materials, are being managed through pricing actions and local manufacturing. Management indicated that transportation costs are minimal due to the small size of components and the structure of customer agreements.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team is watching (1) the full ramp and margin impact of the large energy sector order, (2) progress in negotiating and booking longer-term defense contracts amid ongoing geopolitical uncertainty, and (3) sustained order momentum and capacity utilization across both Precision Devices and MedTech and Specialty Audio. Expansion into next-generation product design wins and stable input costs will also be important markers of execution.

Knowles currently trades at $31.01, in line with $31.27 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).

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