ATI Inc. (ATI) | The Buildout — AI Infrastructure
The Verdict
ATI produces specialty materials — nickel-based superalloys, titanium, precision forgings, machined parts, and zirconium/hafnium/niobium alloys — for aerospace engines, airframes, defense systems, and specialty energy. Its role in the AI buildout is indirect: gas turbines and nuclear power built to serve data centers consume ATI alloys, but that channel is secondary to aerospace and defense demand.
| Market Cap | — |
| Revenue (TTM) | $4.6B |
| Revenue Growth | +2.9% |
| EBITDA Margin (TTM) | 18.2% |
| Net Debt | $1.4B |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Record backlog of $4.4B, up 18% y/y, with about 70% expected to convert to revenue within 12 months.
- AA&S segment margin reached 23.7% in Q2 2026, up 930 bps y/y; underlying margin about 22% excluding a $10M asset sale gain.
- Defense revenue rose 36% y/y in Q2 to an all-time high, with missile revenue up 4x.
- Naval nuclear agreement with BWXT is $1B over five years, more than doubles annual revenue, and 2/3 of the step-up is price/mix.
- Customer-funded capex of $55–65M expected in 2026; $21M in Q1 and $23M in Q2.
What We’re Watching
- HPMC qualification timing at Mexico and EB2 shifted $30–40M of revenue from H1 to H2; another slip would defer the H2 margin step.
- Specialty energy declined 6% y/y in Q2 on defense prioritization; the full-year mid-teens guide requires an H2 rebalance.
- AA&S margin durability needs consecutive quarters above 20%; one quarter is not proof.
- No formal 2027 guidance yet; formal update expected in Q4 2026, with more at Investor Day later in 2026.
The thesis is strengthening: ATI delivered a second consecutive full-year guidance raise, record backlog, defense acceleration, and customer-funded capacity. The open question is whether the HPMC qualification delays stay one-time and whether the AA&S margin step persists beyond one quarter.
Earnings Beat
Q2 2026 sales were $1.26B, up 11% y/y. Adjusted EBITDA was $284M, up 37% y/y, and adjusted EBITDA margin was 22.6%, up 440 bps. Net income attributable to ATI was $151M, up 50% y/y; AA&S segment margin reached an all-time high of 23.7%.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $1.2B | $1.2B | $1.1B | +0.6% |
| Gross margin | 22.8% | 23.2% | 20.7% | +210bps |
| EBITDA | $216M | $214M | $192M | +12.2% |
| EPS | $0.85 | $0.69 | $0.67 | +26.1% |
| Order backlog | $4.4B | $4.1B | n/a | +18% y/y |
Specifically, we have committed contracts in place. This is not speculative.— Rob Foster, Senior Vice President and CFO, August 6, 2026
Management tone: Management's tone on the Q2 call was confident, direct, and more emphatic than Q1. Management quantified HPMC qualification deferrals, separated the $10 million asset sale gain from underlying AA&S performance, and declined to provide formal 2027 numbers, deferring to Q4 2026 and Investor Day.
Management Guidance
For FY2026, management guided adjusted EBITDA midpoint to $1.160B (about 35% growth), adjusted EPS midpoint to $5.04, and adjusted free cash flow midpoint to $575M. Full-year consolidated incremental margins are guided at about 50%, HPMC margin mid-20s, AA&S low-20s, jet engines and defense high-teens, and specialty energy mid-teens; A&D is expected above 70% of sales. Q3 2026 adjusted EBITDA is guided to $305M–$315M and adjusted EPS to $1.31–$1.37.
Trajectory
The code-computed signal labels ATI's revenue trajectory as accelerating. Q2 2026 sales rose 11% y/y to $1.26 billion, led by defense up 36% and jet engines up 13%, while specialty energy fell 6% as ATI allocated capacity to defense. Adjusted EBITDA margin expanded to 22.6% from 18.2% a year earlier, driven by AA&S segment margin reaching 23.7% versus 14.4%; HPMC margin was 24.1%, up 40 bps.
The Model
The model projects FY+1 revenue of $4,941M and EBITDA of $1,033M (20.9% margin), anchored by guided defense and jet-engine growth. FY+2 revenue is $5,350M with EBITDA of $1,198M (22.4% margin), reflecting nickel capacity contributions toward 2028 and continued AA&S mix improvement.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $4.6B | $4.9B | $5.3B |
| YoY Growth | — | +7.7% | +8.3% |
| EBITDA | $814M | $1.0B | $1.2B |
| EBITDA Margin | 17.7% | 20.9% | 22.4% |
Projections are the median of 5 independent model runs. The model’s revenue sits 1.8% below analyst consensus.
For FY2026, management guided adjusted EBITDA midpoint to $1.160B (about 35% growth), adjusted EPS midpoint to $5.04, and adjusted free cash flow midpoint to $575M. Full-year consolidated incremental margins are guided at about 50%, HPMC margin mid-20s, AA&S low-20s, jet engines and defense high-teens, and specialty energy mid-teens; A&D is expected above 70% of sales. Q3 2026 adjusted EBITDA is guided to $305M–$315M and adjusted EPS to $1.31–$1.37.
What Could Go Right — and Wrong
- Mexico and EB2 qualifications complete, converting $30–40M of deferred HPMC revenue at 40–50% margins.
- AA&S holds underlying margin at or above 20% for consecutive quarters and trends toward mid-20s.
- Formal 2027 guidance lands at or above the Q4 2026 implied EBITDA exit rate of about $1.35B annualized.
- Missile and naval nuclear orders accelerate further, sustaining defense growth above guided high-teens.
- Specialty energy rebalances in H2 and reaches mid-teens full-year growth, validating the indirect AI/data-center channel.
- Another qualification slip at Mexico, EB2, or nickel remelt/VIM would defer the H2 HPMC margin step and the 2027–2028 capacity story.
- AA&S margin reverts if hafnium/zirconium pricing cools or defense mix shifts lower.
- Airframe H2 ramp misses, since H1 airframe was slightly down and the full-year guide is H2-weighted.
- Specialty energy mid-teens guide breaks, failing the H2 catch-up after Q2's 6% decline.
- Customer production-rate execution at Boeing or Airbus slips, weakening committed order-book conversion.
Looking Ahead
Over the next 12 months, the story turns on qualification gates and a formal 2027 framework. The midpoint of guidance implies Q4 2026 adjusted EBITDA around $335 million. Nickel remelt is expected online during 2026, the primary VIM furnace online by end-2027, and formal 2027 guidance in the Q4 2026 timeframe, with more detail at Investor Day.
- Q3 2026Q3 results — Tests guided adjusted EBITDA of $305–315M and HPMC deferred conversion.
- H2 2026Mexico and EB2 qualifications — Unlock $30–40M deferred HPMC revenue at 40–50% margins.
- Q4 20262027 guidance update — Formal 2027 numbers measured against ~$1.35B annualized exit rate.
- 2026Nickel remelt online — On schedule; first volume uptick about 5% expected beginning next year.
- End 2027Primary VIM furnace online — Adds 8–10% primary melt toward +15–20% nickel capacity by early 2028.
- UndatedInvestor Day — More forward framework after the Q4 2026 formal guidance update.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $4.4B | $4.6B | $4.6B | +5.2% |
| Gross Margin | 21.0% | 22.0% | 22.5% | +100bps |
| EBITDA | $735M | $814M | $2.8B | +10.7% |
| EBITDA Margin | 16.8% | 17.7% | 18.2% | +89bps |
| Net Income | $368M | $404M | $426M | +9.9% |
| Free Cash Flow | −$124M | $480M | $402M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)22.5%
- EBITDA Margin (TTM)18.2%
- Net Margin (TTM)9.3%
- ROIC16.4%
- FCF Conversion66.0%
- SBC / Revenue0.6%
The Company
ATI makes nickel-based superalloys, titanium and titanium-based alloys, advanced metallic powder alloys, precision forgings, machined parts, and 3D-printed aerospace products. Aerospace & defense was approximately 68% of fiscal 2025 sales, and management expects it to exceed 70% in 2026; jet engines are the largest growth market.
The company operates a domestic-heavy manufacturing network with melting in North Carolina, Washington, New York, Oregon, and Pennsylvania, forgings and machining in Wisconsin, California, and Poland, zirconium/hafnium production in Oregon and Alabama, and a joint-venture finishing operation in Shanghai. Its Elevation operating system prioritizes existing-asset throughput before new capacity, with every project required to meet a 30% internal return threshold.
Business Segments
Competitive Landscape
ATI's competitive position rests on scarcity and qualification. It produces 6 of the 7 most advanced nickel-based superalloys, with 5 of those sole-source, and is 1 of 3 qualified Western-world producers of high-purity hafnium and zirconium. Demand continues to exceed available capacity, with lead times extending.
Supply Chain
ATI sits between upstream raw materials and downstream aerospace, defense, and specialty-energy buyers. Its AI exposure is indirect—through gas-turbine and nuclear power demand—rather than direct data-center sales. No data-center name is a documented customer.
More on ATI: Earnings recap