KN Q4 Deep Dive: Broad-Based Demand and Energy Ramp Set Stage for 2026 Growth

Electronic components manufacturer Knowles (NYSE:KN) reported revenue ahead of Wall Street’s expectations in Q4 CY2025, with sales up 13.8% year on year to $162.2 million. On top of that, next quarter’s revenue guidance ($148 million at the midpoint) was surprisingly good and 3.4% above what analysts were expecting. Its non-GAAP profit of $0.36 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

Knowles delivered a positive Q4, with revenue growth fueled by broad-based demand across its Precision Devices and Medtech & Specialty Audio segments. Management attributed the results to normalized channel inventories and new design wins in high-growth markets such as medical, defense, and energy. CEO Jeffrey Niew emphasized the company’s ability to leverage custom-engineered solutions and close customer relationships to secure next-generation projects. He pointed to strong bookings and a healthy backlog, noting, “Our customers continue to choose our innovative and differentiated solutions, resulting in a robust pipeline of new design wins.”

Looking forward, Knowles’ guidance reflects expectations for continued organic growth, particularly as production ramps for a large energy order and specialty film products. Management highlighted the expansion of its customer base in both energy and medical applications, as well as ongoing investments in capacity and automation. CFO John Anderson stated, “We have a robust backlog and increased order activity, which gives me confidence in our ability to continue to achieve revenue, earnings, and cash flow growth.” The company remains focused on scaling new products, executing on its specialty film line, and pursuing both organic and inorganic growth opportunities.

Key Insights from Management’s Remarks

Management credited Q4’s performance to strong execution in core end markets, successful new product ramps, and ongoing strength in both direct and distribution channels.

• Precision Devices momentum: Precision Devices saw double-digit year-over-year growth, with management citing normalized inventories and heightened demand across medical, defense, industrial, EV, and energy markets. The segment’s gross margin improved as production volumes in ceramic capacitors and RF microwave products rose.
• Energy market ramp: The specialty film line, particularly for a large energy order, is expected to drive substantial revenue in the back half of 2026. Management noted that customer applications have broadened beyond initial markets, including medical and military uses, and the Greenville, SC facility is scaling production to meet demand.
• Medtech and Specialty Audio resilience: The Medtech and Specialty Audio segment delivered steady growth, underpinned by Knowles’ reputation for reliability and power-efficient solutions in hearing health. Management sees further content opportunities in next-generation devices and is optimistic about leveraging existing technologies into new medical applications.
• Defense and industrial strength: The defense business benefited from secular shifts toward electronic warfare, while industrial demand rebounded with normalized distribution channels. Management reported strong order volumes and noted increasing momentum in industrial applications, especially robotics and automation.
• Operational efficiency and cash flow: Improved factory utilization and cost controls contributed to margin expansion and cash generation. The company continues to invest in automation and capacity, particularly in specialty films, to support future demand and operational leverage.

Drivers of Future Performance

Knowles expects its growth trajectory to continue, driven by energy market ramps, medical design wins, and sustained demand across diversified end markets.

• Energy specialty film scale-up: Management anticipates the specialty film line will be a major driver in 2026, as the large energy order reaches full production in late Q2 and broadens to additional customers. This scale-up is expected to boost both revenue and factory efficiency.
• Pipeline of medical and defense projects: New design wins in medtech and defense are set to ramp over the next 24–36 months, with management highlighting ongoing non-recurring engineering (NRE) projects and long design cycles that can yield recurring high-value orders in future years.
• Potential supply constraints and pricing: Management flagged emerging concerns about industry-wide component shortages, which could impact supply but also provide pricing power. The company is monitoring demand closely and investing in capacity to avoid bottlenecks as order volumes increase.

Catalysts in Upcoming Quarters

Over the next few quarters, our analysts will be watching (1) the successful ramp of specialty film production for the large energy order, (2) evidence of sustained design win momentum in medical and defense applications, and (3) the company’s ability to maintain or expand margins as capacity utilization increases. The pace of adoption in new industrial applications and management’s execution on capacity expansion will also be important indicators of ongoing progress.

Knowles currently trades at $24.99, in line with $24.74 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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