EnerSys (ENS) | The Buildout — AI Infrastructure
The Verdict
EnerSys sells the stored energy that keeps critical infrastructure running. Its batteries, power electronics, enclosures and service crews sit inside the uninterruptible power layer of data centers and communications networks, inside the electric forklifts that move goods through warehouses, and inside military platforms, drones, satellites and submarines. For the AI buildout, the company is upstream of the compute: it supplies the backup power train rather than the servers, and it does not disclose how much of its revenue is AI-driven. It sells to OEMs, distributors, vehicle fleets and governments, and describes itself in its 10-K as a world leader in stored energy solutions for industrial applications.
| Market Cap | — |
| Revenue (TTM) | $3.8B |
| Revenue Growth | +3.7% |
| EBITDA Margin (TTM) | 16.5% |
| Net Debt | $508M |
| Earnings Beats | 7 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Data center orders grew over 80% year over year in Q1 FY27, after +36% in the prior quarter, with deliveries extending 12 to 36 months — an order book running well ahead of revenue.
- Network & Infrastructure Solutions revenue was $428M in Q1 FY27, up 9%, at a 10.5% segment margin (+280 bps); NIS service revenue rose about 20% and services contributed roughly 100 bps of total company margin.
- Precision Power Solutions (aerospace & defense) revenue was $101M, up 24%, at an 18.2% segment margin (+300 bps). European A&D growth was 2x FY26 versus FY25, and the company says NATO/allied business outpaced the Americas for the first time.
- Net debt fell to $508.3M, down over $160M from FY26 year-end, with cash of $530.7M at July 5, 2026 and leverage at 0.8x EBITDA. Management cited nearly $900M remaining in its buyback authorization and raised the dividend 10% to $0.2875 per share.
- Greenville, South Carolina: a ~$150M DOE grant plus ~$200M of state and county incentives against an estimated ~$650M facility cost, with ~$500M of net EnerSys investment to be funded fully from operating cash flow.
What We’re Watching
- Material handling: IMS revenue fell 3% and segment margin contracted 70 bps in Q1 FY27; orders were down high single digits, and management moved the recovery to the back half of FY27, possibly Q3.
- One-time and policy items: Q1 FY27 included $31M of tariff refunds ($0.63 per share) that were not in guidance, plus $9M of 45X. In FY26, 45X contributed about $159M of the $540M in adjusted operating earnings, and Q2 FY27 guidance carries $42-47M of 45X.
- DataSafe Noir: launched June 2026 with the first 100 systems shipped and over 500 units in active quotation, but meaningful revenue is not expected until fiscal 2028 and depends on UL certification and customer validation.
- Greenville: construction does not begin until 1H fiscal 2028 and full production is about 3 years after that. The DOE award was stated at $199M in the 10-K filed 2026-05-20 and ~$150M on the August call.
The direction change looks real: two secular legs are being organized and capitalized around, and cash generation is funding them internally. But the latest quarter's magnitude is not the underlying rate — a one-time tariff refund and a large 45X credit sit inside the headline. The thesis holds only if material handling turns in the back half and the data center order book converts at the pace its delivery tail implies. The open question is whether the volume recovery arrives before the price and policy supports carrying the top line run out.
Earnings Beat
Q1 FY2027, the quarter ended July 5, 2026: net sales of $936M, up 5% year over year on 3% price/mix, 1% volume and 1% FX. Gross margin was 33.5%, up 510 bps as reported, but 25.2% after excluding the one-time tariff refunds and 45X benefits, up 110 bps. Adjusted EBITDA rose 50% as reported and 26% ex-tariff and ex-45X. The standout was orders: data center orders were up over 80% year over year, with deliveries extending 12 to 36 months.
| Metric | Q1 FY2027 | Q4 FY2026 | Q1 FY2026 | YoY |
|---|---|---|---|---|
| Revenue | $936M | $988M | $893M | +4.8% |
| Gross margin | 33.5% | 29.4% | 28.4% | +510bps |
| EBITDA | $182M | $172M | $113M | +60.4% |
| EPS | $3.10 | $2.03 | $1.46 | +111.8% |
| Book-to-bill | 1.06 | 1.1 | n/a | — |
| Data center orders YoY | up over 80% | +36% | n/a | — |
A lot of these orders extend out 12 to 36 months. The real positive to me with that, Noah, is that lead has a long tail.— EnerSys CFO, 2026-08-13
Management tone: Management read as confident on the structural strategy and candid about the cyclical miss. On the Q1 FY2027 call the CFO said the prior quarter's expectation did not materialize and that the lag is frustrating. They flagged the tariff refund as one-time and excluded from line-of-business results, and repeatedly noted what is not in the model. Data center growth framing was raised slightly, to high single-digit to low teens for fiscal 2027, while the material-handling recovery language moved out to the back half. Asked for the assumptions behind Greenville's mid-20s internal return, the CFO declined and reframed toward domestic supply-chain value and unmodeled expansion interest.
Management Guidance
For Q2 FY2027 management guided net sales of $955M to $995M, adjusted diluted EPS of $3.15 to $3.25 (growing 21% versus the prior year at the midpoint), and adjusted diluted EPS excluding 45X of $1.95 to $2.05 (up in the 25% range). It held 45X benefits to cost of sales at $42M to $47M. For the full year it reaffirmed capital expenditures of about $70M, an adjusted tax rate before 45X of 21.5% to 23.5%, and adjusted operating earnings growth excluding 45X to outpace revenue growth. Management described the cadence as margin-led earnings growth in the first half shifting to top-line growth toward the end of fiscal 2027, with stronger year-over-year revenue growth in the second half, and noted the prior-year second quarter had an unusually high proportion of sales.
Trajectory
Revenue has grown modestly and on price rather than volume. FY2026 net sales were $3,751.4M, up 3.7%, while organic volume fell 2% for the year and 6% in the fourth quarter. Q1 FY2027 net sales of $936M were up 5%, with volume contributing just 1%. Margins have moved the other way in the trailing quarters: gross margin went from 28.4% in Q1 FY2026 to 29.4% in Q4 FY2026 to 33.5% in Q1 FY2027, though the latest figure is 25.2% once the one-time tariff refunds and 45X are stripped out. Management attributes the improvement to annualizing last year's cost actions, the Monterrey closure moving production to Richmond, Kentucky (about $19M of FY2027 savings), mix from power electronics and services, and 45X credits. Total book-to-bill was 1.06 in Q1 FY2027, after 1.1 in the prior quarter, which management described as its highest in nearly four years.
The Model
The model projects FY+1 revenue of $3,950M and EBITDA of $691M, a 17.5% margin. FY+2 revenue is $4,235M and EBITDA is $771M, an 18.2% margin. The near term rests on the cadence management described: margin expansion in the first half and revenue growth in the second, with material handling recovering and data center orders converting into revenue. FY+2 leans on the same two legs continuing, with DataSafe Noir meaningful revenue not expected until fiscal 2028.
| Metric | FY2026 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $3.8B | $4.0B | $4.2B |
| YoY Growth | — | +5.3% | +7.2% |
| EBITDA | $559M | $691M | $771M |
| EBITDA Margin | 14.9% | 17.5% | 18.2% |
Projections are the median of 5 independent model runs. The model’s revenue sits 3.6% above analyst consensus.
For Q2 FY2027 management guided net sales of $955M to $995M, adjusted diluted EPS of $3.15 to $3.25 (growing 21% versus the prior year at the midpoint), and adjusted diluted EPS excluding 45X of $1.95 to $2.05 (up in the 25% range). It held 45X benefits to cost of sales at $42M to $47M. For the full year it reaffirmed capital expenditures of about $70M, an adjusted tax rate before 45X of 21.5% to 23.5%, and adjusted operating earnings growth excluding 45X to outpace revenue growth. Management described the cadence as margin-led earnings growth in the first half shifting to top-line growth toward the end of fiscal 2027, with stronger year-over-year revenue growth in the second half, and noted the prior-year second quarter had an unusually high proportion of sales.
What Could Go Right — and Wrong
- Material-handling orders turn positive and convert, giving IMS full-year growth and reversing the volume deleverage that cut its segment margin 70 bps.
- DataSafe Noir converts its 500-plus active quotations into orders and clears UL certification and customer validation, opening the fiscal 2028 revenue gate.
- Gen 2 LFP material-handling lithium reaches first revenue in the second half of FY27 at the higher margins management describes, proving the lithium mix shift is margin-accretive.
- Data center orders keep compounding and convert across their 12-36 month delivery tails, building a multiyear revenue base.
- Aerospace and defense keeps growing, lifting company mix toward PPS's 18.2% segment margin.
- Material-handling recovery slips again. The company's second-half revenue acceleration depends on it, and the order data does not yet show it.
- 45X credits are curtailed, delayed or restructured. In FY26 they contributed about $159M of the $540M in adjusted operating earnings, and Q2 FY27 guidance carries $42-47M.
- Greenville slips on permitting or capital timing, or DOE support is revised again after moving from $199M in the 10-K to ~$150M on the call.
- Competitor bundling caps the data center opportunity: Vertiv sells a complete powertrain including battery systems, and ABB is gaining medium-voltage UPS share.
- Input costs bite: refined lead is the largest input-cost exposure (inferred, not a company disclosure), and the CEO says 99% of the LFP constituent supply chain is in or owned by China.
Looking Ahead
The next twelve months turn on three dated items. Material handling has to recover in the back half of FY27, possibly Q3, after the timeline already slipped once. Gen 2 LFP material-handling lithium needs to reach first revenue in the second half of FY27 at the margins management describes. And DataSafe Noir has to clear UL certification and customer validation on the way to meaningful revenue in fiscal 2028. Behind those, Greenville moves through NEPA and permitting toward a construction start in 1H fiscal 2028, and aerospace and defense converts its backlog — liquid-reserve revenue through fiscal 2027 and thermal batteries late in the year.
- Q2 FY2027Q2 FY27 results — Tests material-handling orders and the sequential margin step-up.
- 2H fiscal 2027Gen 2 lithium revenue — First LFP material-handling lithium revenue at stated higher margins.
- Late fiscal 2027A&D thermal batteries — Order-to-revenue conversion on project awards.
- Fiscal 2027Material handling recovery — Order growth turning positive and converting to revenue.
- Fiscal 2028DataSafe Noir revenue — Gated on UL certification and customer validation.
- 1H fiscal 2028Greenville construction start — NEPA, permitting and capital timing all land here.
Financials
Annual Summary
| Metric | FY2025 | FY2026 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $3.6B | $3.8B | $3.8B | +3.7% |
| Gross Margin | 30.1% | 29.2% | 30.5% | 88bps |
| EBITDA | $566M | $559M | $627M | -1.2% |
| EBITDA Margin | 15.6% | 14.9% | 16.5% | 74bps |
| Net Income | $364M | $294M | $352M | -19.3% |
| Free Cash Flow | $139M | $468M | $717M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)30.5%
- EBITDA Margin (TTM)16.5%
- Net Margin (TTM)9.3%
- ROIC16.3%
- FCF Conversion114.3%
- SBC / Revenue0.7%
The Company
EnerSys describes itself in its 10-K as "a world leader in stored energy solutions for industrial applications." It designs, makes and distributes energy systems, motive power batteries, specialty batteries, battery chargers, power equipment, battery accessories and outdoor equipment enclosures. In practice it sells the batteries, the power electronics around them, the enclosures that hold them, and the service organization that installs, commissions and maintains them. Its products serve four demand pools: data centers and communications networks for backup power, warehouses and factories for electric forklifts and material handling, defense and aerospace for military platforms, drones, satellites, submarines and soldier power, and transportation for premium starting, lighting and ignition.
The company operates six U.S. production facilities that are CMMC- and ITAR-compliant — the certification gate for selling into U.S. defense programs — making nine chemistries of lithium batteries. Its plant footprint spans the Americas, APAC and EMEA, though the 10-K's plant table does not parse cleanly in the extracted source. It sells globally to OEMs, distribution partners, vehicle fleets and directly to governments including the United States, Germany and the United Kingdom, and states that no single customer accounts for more than 10% of revenues. A defense-focused lithium cell plant in Greenville, South Carolina is in development with U.S. Department of Energy support.
Business Segments
Competitive Landscape
The 10-K sets out competitive sets market by market, and their breadth varies widely. Energy Systems lists more than a dozen competitors — East Penn Manufacturing, Exide Technologies (Stryten), Fiamm, SAFT, Hoppecke, New Power, C&D Technologies, Vertiv, OmniOn Power, Yuasa, Amphenol and Delta Electronics, "as well as Chinese producers." The traditional lead-acid Motive Power field is similarly broad and largely undifferentiated. The aerospace and defense field is narrow, with two named competitors, EaglePicher and SAFT, which is consistent with the pricing and margin advantage the company reports in that segment. The 10-K's single-source disclosure extract is empty, and no named single-source dependency is flagged in the filing.
- East Penn ManufacturingNamed in the 10-K competitive sets for Energy Systems, Motive Power and Specialty; not discussed.
- Exide Technologies (Stryten)Named in the 10-K competitive sets for Energy Systems, Motive Power and Specialty; not discussed.
- VertivNamed in the 10-K Energy Systems competitive set. The neighbor read-through says Vertiv delivers a "complete powertrain, including switchgear, UPS, and battery systems."
- SAFTNamed in the 10-K Energy Systems set and in the specialized aerospace and defense set; not discussed.
- EaglePicherNamed in the 10-K as a competitor in specialized aerospace and defense; not discussed.
Supply Chain
EnerSys buys refined lead, lithium cells and electronic components, then assembles, installs and services the resulting batteries and power electronics. Refined lead is its largest input-cost exposure and the LFP chain is concentrated in China. No neighbor in the source set names EnerSys directly.
More on ENS: Earnings recap