EnerSys (ENS) | The Buildout — AI Infrastructure
The Verdict
EnerSys produces stored energy solutions for industrial applications, including batteries and power electronics. Its Thin Plate Pure Lead (TPPL) batteries are used in uninterruptible power supplies for data centers, providing the high-rate, short-duration backup that AI servers demand, while a newly launched lithium-ion battery is designed specifically for AI-driven dynamic loads.
| Market Cap | — |
| Revenue (TTM) | $3.8B |
| Revenue Growth | +3.7% |
| EBITDA Margin (TTM) | 14.9% |
| Net Debt | $751M |
| Earnings Beats | 7 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Record FY2026 adjusted operating margin ex-45X of 10.2%, with management guiding further expansion as earnings growth outpaces revenue.
- Data center orders surged 36% y/y in Q4 FY2026, and overall book-to-bill hit 1.1x, signaling strong demand pipeline.
- Aerospace & defense business seeing structural uplift: European defense demand matching U.S. for first time, A&D revenue up mid-20%, book-to-bill 1.22.
- FY2026 free cash flow conversion reached 236% ex-45X, driving leverage to 1.1x EBITDA and funding $409M in shareholder returns while leaving $876M buyback authorization.
- Lithium data center product (DataSafe Noir) shipped to customer for commissioning, a milestone that de-risks the technology ahead of a revenue ramp expected in FY2028.
What We’re Watching
- Motive Power and Transportation recovery timing: orders inflected but actual revenue growth may be slow; management expects growth before FY2027 year-end.
- Lithium competitive timing: Vertiv already shipping lithium UPS with 800V products in 2H 2026, while ENS meaningful revenue not until FY2028; need to secure hyperscaler adoption.
- 99% Chinese LFP raw material supply chain concentration creates geopolitical risk if trade is restricted.
- Tariff exposure of ~$70M annualized before mitigations and Middle East conflict freight costs could keep near-term margin pressure elevated.
The investment case is strengthening as data center order growth and margin records demonstrate resilience, with lithium commercialization now underway. The open question is whether DataSafe Noir can win share from faster-moving competitors and whether supply chain concentration becomes a binding constraint.
Earnings Beat
Q4 FY2026 revenue of $987.9M grew 1% y/y, with adjusted gross margin of 29.5% down 190bps y/y ex-45X, pressured by $20M higher freight and tariff costs. Data center orders surged 36% y/y, while book-to-bill hit 1.1x, the highest in nearly four years.
| Metric | Q4 FY2026 | Q3 FY2026 | Q4 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $988M | $919M | $975M | +1.3% |
| Gross margin | 29.4% | 30.1% | 31.2% | -180bps |
| EBITDA | $172M | $154M | $158M | +8.7% |
| EPS | $2.03 | $2.40 | $2.39 | −15.2% |
| Book-to-Bill | 1.1 | n/a | n/a | Highest in nearly 4 years |
We set our team that they don’t get any credit unless they’re shipping a product to a customer. … it’s not an A sample or a B sample. We’ve shipped a finished product to the customer.— Shawn O’Connell, CEO, May 21, 2026
Management tone: Management displayed cautious optimism, proud of record results achieved despite a Motive Power downturn, while tempering near-term revenue expectations and highlighting realistic lithium timelines.
Management Guidance
For Q1 FY2027, management guided net sales of $915M–$955M and adjusted diluted EPS ex-45X of $1.61–$1.71. For the full year, adjusted operating earnings (ex-45X) are expected to outpace revenue growth, implying further margin expansion. Tax rate is guided to 21.5%–23.5% and capital expenditures are planned at approximately $70M, down from $80M in FY2026 as major TPPL investments wind down.
Trajectory
EnerSys's TTM revenue reached $3.75 billion, a modest 3.7% increase, as organic volume declined 6% in Q4 offset by positive price/mix and FX. However, EBITDA margin improved to 14.9% TTM, driven by the 'Energize' cost program and footprint optimization. The sharp rise in orders — book-to-bill 1.1 and data center orders up 36% y/y — suggests that revenue growth may reaccelerate as backlogs convert.
The Model
The model projects FY+1 revenue of $4,022M and EBITDA of $704M (17.5% margin), anchored by continued data center order momentum and the beginning of Motive Power recovery. By FY+2, revenue rises to $4,387M with EBITDA of $790M (18.0% margin), driven by initial lithium product revenue, further margin expansion from plant closures, and a full year of cyclical recovery.
| Metric | FY2026 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $3.8B | $4.0B | $4.4B |
| YoY Growth | — | +7.2% | +9.1% |
| EBITDA | $559M | $704M | $790M |
| EBITDA Margin | 14.9% | 17.5% | 18.0% |
Projections are the median of 5 independent model runs. The model’s revenue sits 6.3% above analyst consensus.
For Q1 FY2027, management guided net sales of $915M–$955M and adjusted diluted EPS ex-45X of $1.61–$1.71. For the full year, adjusted operating earnings (ex-45X) are expected to outpace revenue growth, implying further margin expansion. Tax rate is guided to 21.5%–23.5% and capital expenditures are planned at approximately $70M, down from $80M in FY2026 as major TPPL investments wind down.
What Could Go Right — and Wrong
- Data center orders sustain >30% growth, converting to revenue and lifting Energy Systems to >10% annual growth.
- Lithium data center product achieves hyperscaler qualification and generates $200M+ in incremental revenue by FY2028.
- Motive Power and Transportation recovery materializes in H2 FY2027, driving volume growth and operating leverage.
- Tariff refunds and EPA reimbursements flow at scale, boosting cash flow above guidance.
- A&D demand broadens further, with European defense orders matching U.S. levels, driving Specialty segment growth above 15%.
- Motive Power and Transportation volumes fail to recover; recession deepens, delaying revenue growth and pressuring margins.
- Competitive lithium UPS from Vertiv/ABB becomes standard in hyperscale data centers, leaving ENS's lithium product with limited market share.
- Chinese lithium supply disruption due to trade restrictions halts commercial lithium ramp and raises battery costs.
- 45X tax credit repeal eliminates ~$150M annual benefit, reducing reported earnings and slowing reshoring incentives.
- Data center capex moderates, causing lumpy project revenue and book-to-bill to fall below 1.0.
Looking Ahead
Over the next twelve months, EnerSys's trajectory will be shaped by the conversion of its surging order book, particularly in data centers and transportation, and by the ramp of its lithium data center battery through customer validation. The segment realignment to three segments starting Q1 FY2027 will provide new transparency, while the Greenville DOE grant award will clarify the timeline for domestic A&D lithium cell production.
- Q1 FY2027Motive Power order trends — Tests whether sequential order improvement persists and book-to-bill stays above 1.0.
- H2 FY2027Motive Power revenue recovery — Management expects volume growth before FY2027 year-end; key inflection point.
- FY2027Greenville DOE grant award — Defines A&D lithium cell plant scope, capital commitment, and production timeline.
- Through FY2027DataSafe Noir validation milestones — Hyperscaler and OEM qualification progress; first revenue recognition would be a catalyst.
- FY2028 (early)Lithium revenue ramp begins — Meaningful data center and BESS lithium revenue expected, though scale uncertain.
Financials
Annual Summary
| Metric | FY2025 | FY2026 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $3.6B | $3.8B | $3.8B | +3.7% |
| Gross Margin | 30.1% | 29.2% | 29.3% | 88bps |
| EBITDA | $566M | $559M | $1.1B | -1.2% |
| EBITDA Margin | 15.6% | 14.9% | 14.9% | 74bps |
| Net Income | $364M | $294M | $294M | -19.3% |
| Free Cash Flow | $139M | $468M | $607M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)29.3%
- EBITDA Margin (TTM)14.9%
- Net Margin (TTM)7.8%
- ROIC13.2%
- FCF Conversion83.6%
- SBC / Revenue1.0%
The Company
EnerSys is a global stored energy solutions provider for industrial applications, designing and manufacturing batteries, chargers, power electronics, and outdoor enclosures. Its products are foundational to backup power in data centers, motive power for electric forklifts and material handling, and specialty batteries for aerospace and defense.
The company operates a global manufacturing footprint with facilities across the Americas, EMEA, and APAC. It develops multiple battery chemistries internally, including nine lithium chemistries for A&D applications, while outsourcing commercial lithium cells from Asian suppliers. A segment realignment to three segments — Network & Infrastructure, Motive Power, and Specialty — takes effect in Q1 FY2027.
Business Segments
Competitive Landscape
EnerSys competes in a fragmented industrial battery landscape, facing East Penn, Exide/Stryten, and local Chinese producers in lead-acid, while in data center power it contends with Vertiv and ABB, which are moving faster into lithium UPS solutions. In A&D specialty batteries, the company enjoys high barriers from qualification requirements and government relationships, with competition limited to EaglePicher and SAFT.
- East Penn ManufacturingNamed in 10-K as a competitor across multiple segments; not discussed in detail.
- Exide Technologies (Stryten)Competitor in lead-acid motive power and energy systems, per 10-K.
- VertivData center power competitor, shipping lithium UPS and planning 800V solutions; ENS acknowledges fast-moving.
- ABBElectrification competitor pursuing integrated 800V DC solutions; mentioned in New Ventures and electrification.
- SAFTAerospace and defense specialty battery competitor, alongside EaglePicher.
Supply Chain
EnerSys sits as a battery and power systems manufacturer, supplying UPS batteries to data center integrators and directly to end-users, while sourcing raw materials like lead and lithium cells from global suppliers.