Knowles Corporation (KN) | The Buildout — AI Infrastructure

——Mkt cap — · 52-wk —–— · YTD — · delayed

Updated Sep 22, 2026Q2 FY2026 reviewed

Knowles makes specialty electronic components — high-performance capacitors, RF filters, microphones, and balanced armature speakers.

Revenue +14% YoY

Q2 FY26 revenue $167M, above the high end of guidance.

Book-to-bill 1.4

Seventh straight quarter above 1 in Precision Devices.

FY26 guide 10-12%

Raised from a 4%-6% organic target; EBITDA +20%-24%.

MSA growth +2%

Hearing-health sales slowed; Q4 headwind flagged.

The Buildout Takeaway

Knowles is riding a broad industrial, defense, and electrification demand cycle rather than an AI one — management makes no AI claim on its calls. The open question is whether the order streak reflects durable multiyear demand or a fast-converting, partly transient book.

Analyst coverage

15 analysts·7 Buy6 Hold2 Sell

Coverage is thin — only 2 price estimates, so no target is shown

Management guidance

FY2026 revenue growth 10%-12%; adjusted EBITDA growth 20%-24% over 2025; capital spending ~5% of revenues.

Important: The Buildout is a data analytics platform. Content is generated by algorithms and AI agents using public filings, earnings transcripts, and market data. This is not personalized investment advice.

Our View

The Verdict

Knowles makes specialty electronic components: high-performance capacitors and RF filters through Precision Devices, and microphones and balanced armature speakers through MedTech & Specialty Audio. Those parts go into defense radar and electronic warfare, medical devices, factory automation, and electrification hardware. Management describes the strategy as custom-engineered solutions delivered at scale for blue-chip customers, and it makes no claim that any of this is AI-driven.

Market Cap	—
Revenue (TTM)	$635M
Revenue Growth	+12.8%
EBITDA Margin (TTM)	20.6%

Net Debt	$101M
Earnings Beats	2 of 7
P/E (TTM)	—
EV/EBITDA (TTM)	—

What We Like

Precision Devices revenue grew 25% y/y in Q2 FY26 to $98M, with all four end markets — medtech, defense, industrial, and electrification — growing y/y.
Precision Devices book-to-bill reached 1.4 in Q2 FY26, the seventh consecutive quarter above 1, on ~$140M of orders versus a little over $100M in Q1.
Management raised FY26 revenue growth guidance to 10%-12% from a 4%-6% organic target, and adjusted EBITDA growth to 20%-24% over 2025 levels.
A $15M-plus radar order, announced in July 2026, is set to ship over 36 months starting in 2027, extending visibility beyond the company's typical 12-month conversion window.
Net leverage was 0.5x at Q2 FY26 with more than $315M of cash plus unused revolver capacity.

What We’re Watching

Whether the Precision Devices book-to-bill streak extends to an eighth consecutive quarter above 1 — tested at Q3 FY26 results.
The flagged Q4 FY26 headwind in MedTech & Specialty Audio from a first-half inventory build; full-year segment growth is guided to 2%-4%.
Whether additional multiyear defense orders are disclosed — management says it intends to call out large multiyear awards as it receives them.
Whether Precision Devices gross margin reaches the 'low 40% range' in H2 FY26 and holds the full-year 100-bps improvement promise.

Bottom Line

The business momentum strengthened across the two most recent calls: guidance was raised twice, the order streak extended, and the energy order ramped on schedule with better-than-planned yields. The softer spots sit in MedTech & Specialty Audio, which decelerated to 2% growth and faces a Q4 headwind, and in the defense acceleration timeline, which management places at late 2027 and beyond. The open question is whether the order book reflects durable multiyear demand or a fast-converting set of orders that offers little cushion if end demand softens.

Next upNext up is Q3 FY26 results, testing whether the Precision Devices order streak holds, whether MedTech & Specialty Audio stays inside its 2%-4% full-year range, and whether the guided $167M-$177M revenue and 22%-24% adjusted EBIT margin land.

Last Quarter — Q2 FY2026

Earnings

Knowles reported Q2 FY26 revenue of $166.8M, up 14% y/y and above the high end of its guided range, with gross margin of 42.4%. Diluted EPS was $0.33, up 38% y/y. Precision Devices revenue rose 25% y/y to $98M while MedTech & Specialty Audio grew 2% to $69M. The standout was Precision Devices book-to-bill of 1.4, a seventh consecutive quarter above 1, with more than $5M shipped against the energy order.

Metric	Q2 FY2026	Q1 FY2026	Q2 FY2025	YoY
Revenue	$167M	$153M	$146M	+14.3%
Gross margin	42.4%	41.3%	40.8%	+160bps
EBITDA	$35M	$25M	$27M	+28.6%
EPS	$0.22	$0.11	$0.09	+147.9%
PD book-to-bill	1.4	1.19	n/a	—

as we've kind of pivoted to an industrial tech company, EBITDA is a really important metrics, even more important to us than gross margin.— John Anderson, CFO, 2026-07-23

Management tone: Management's tone shifted from qualitative optimism to quantified commitments. On the Q1 FY26 call, FY26 revenue growth was described as 'above' the high end of a 4%-6% target; on the Q2 FY26 call it became an explicit 10%-12%, with adjusted EBITDA growth of 20%-24%. Management was direct on harder questions, volunteering that the energy order booked 'like 0' in Q2, and candid about the MedTech & Specialty Audio headwind and hearing-aid data it said it 'honestly has not been able to fully digest.'

Management Guidance

For FY2026, management guides revenue growth of 10%-12% and adjusted EBITDA growth of 20%-24% over 2025 levels, with capital spending at approximately 5% of revenues tied to Precision Devices capacity. For Q3 FY26, it guides revenue of $167M-$177M (up 12.5% y/y at the midpoint), EPS of $0.34-$0.38, adjusted EBIT margin of 22%-24%, cash from operations of $35M-$45M, and capital spending of $10M. Management expects Precision Devices gross margin in the low 40% range in the second half and reaffirmed full-year MedTech & Specialty Audio growth of 2%-4%, with a Q4 headwind from a first-half inventory build.

Business Trajectory

Trajectory

Revenue has stepped up over the last six quarters, from $132.2M in Q1 FY25 to $166.8M in Q2 FY26, growing sequentially in three of the last four periods. The mix is rotating toward Precision Devices, which grew 25% y/y in Q2 FY26 against 2% for MedTech & Specialty Audio. Both segments reported year-over-year gross-margin gains — Precision Devices at 40.1% (+140 bps) and MedTech & Specialty Audio at 53.1% (+250 bps). Management attributes the Precision Devices gain to production volume and factory capacity utilization, and expects further expansion in the second half.

Revenue & Margin Trajectory

Gross margin as reported.

Share Price — 12 Months

52-week range $21–$41.

Share Price — 12 Months

52-week range $21–$41.

The Numbers

The Model

The model projects FY+1 revenue of $663.9M and EBITDA of $141M (21.2% margin), then FY+2 revenue of $744.3M and EBITDA of $173M (23.2% margin). The near-term anchor is the raised FY26 guidance and the seventh-quarter order streak. The FY+2 step assumes the defense multiyear awards and the energy platform convert to revenue, and that gross-margin expansion carries through to operating leverage.

Revenue & EBITDA Projections

Solid bars are reported actuals; outlined bars are model projections — not company guidance.

Metric	FY2025	Next FY (E)	Following FY (E)
Revenue	$593M	$664M	$744M
YoY Growth	—	+11.9%	+12.1%
EBITDA	$114M	$141M	$173M
EBITDA Margin	19.3%	21.2%	23.2%

Projections are the median of 5 independent model runs. The model’s revenue sits 9.9% above analyst consensus.

What Could Go Right — and Wrong

What good looks like

Precision Devices book-to-bill stays above 1 and July bookings strength persists into the second half.
Additional multiyear defense orders are disclosed, extending visibility beyond the 12-month conversion window.
Missile-program volume language turns into booked orders, moving defense from a 2027-2028 expectation to a quantified ramp.
Specialty film pilots (~20 customers per quarter) convert to named programs and the $50M-$65M 2026 specialty film revenue frame proves conservative.
MedTech & Specialty Audio hearing-aid data resolves toward ~4% growth and next-generation design wins land.

What could go wrong

The flagged Q4 FY26 MedTech & Specialty Audio headwind is worse than described, pushing full-year segment growth below the 2%-4% range.
Defense acceleration slips beyond late 2027/2028, or the proposed White House budget is cut, removing the funding source for the multiyear thesis.
Book-to-bill falls below 1, or the 'transient' share of the book proves larger than management assesses.
Precision Devices gross margin stalls short of the low 40% range, breaking the EBITDA path toward ~30%.
A sole-source ASIC/MEMS foundry disruption, or a MedTech & Specialty Audio concentration shock such as a WS Audiology inventory correction.

What’s Next

Looking Ahead

Over the next 12 months, the tests are operational and concentrated in Precision Devices. The company has to deliver its FY26 10%-12% revenue and 20%-24% EBITDA growth, land the guided second-half Precision Devices gross-margin expansion, and show the order streak is durable. Management points to defense as the fastest-moving end market, with budget-driven acceleration placed at late 2027 into 2028 and missile restocking on a one-to-two year frame. A likely Investor Day in the first half of 2027 is expected to detail growth platforms — energy, the Micro Solutions Group, inductors, and downhole applications — none of which are framed as AI.

Catalysts

Q3 FY26Q3 results test order streak — Tests whether PD book-to-bill stays above 1 and MSA holds 2%-4%.
H2 FY26Precision Devices margin expansion — Tests the guide to 'low 40% range' PD gross margin in the back half.
2027Radar order begins shipping — The $15M-plus radar order ships over 36 months starting in 2027.
1H 2027Investor Day on growth platforms — Expected detail on energy, Micro Solutions Group, inductors, downhole.
Late 2027 into 2028Defense budget effect — Management places budget-driven defense acceleration in this window.
2027 and beyondIran-conflict stock replenishment — A dated driver management cites for defense demand.

Numbers

Financials

Annual Summary

Metric	FY2024	FY2025	TTM	YoY
Revenue	$554M	$593M	$635M	+7.2%
Gross Margin	39.7%	41.1%	42.3%	+147bps
EBITDA	$99M	$114M	$131M	+15.9%
EBITDA Margin	17.9%	19.3%	20.6%	+145bps
Net Income	−$240M	$44M	$68M	+118.5%
Free Cash Flow	$116M	$82M	$64M	—
Net Cash	—	—	—	—

Key Ratios (Trailing)

Valuation

P/E TTM—
EV/EBITDA TTM—
EV/Revenue TTM—
Price/FCF TTM—

Profitability

Gross Margin (TTM)42.3%
EBITDA Margin (TTM)20.6%
Net Margin (TTM)10.6%
ROIC8.2%
FCF Conversion48.6%
SBC / Revenue2.6%

Reference

The Company

Knowles is a manufacturer of specialty electronic components. Its Precision Devices segment designs and delivers high-performance capacitors — high voltage, high temperature, and high reliability — plus RF filtering solutions serving defense, industrial, medtech, and electrification and energy markets. Its MedTech & Specialty Audio segment designs balanced armature speakers and microphones for hearing health and specialty audio. The 10-K says the products perform 'unique, critical functions' and enable demanding applications across medtech, defense, industrial, and electrification/energy markets.

Knowles runs an owned and leased manufacturing footprint across eight disclosed sites, including owned plants in Cebu in the Philippines, Liberty, South Carolina, and Cazenovia, New York, plus leased operations in Suzhou, China, Mexicali, Mexico, and New Bedford, Massachusetts. Facilities range from 95,000 to 284,000 square feet. Management describes the model as custom-engineered solutions delivered at scale for blue-chip customers, and on the Q2 FY26 call the CFO framed the company as pivoting to an 'industrial tech company' measured on EBITDA.

Business Segments

Precision Devices (PD)

$98M Q2 FY26 revenue, +25% y/y

Custom high-performance capacitors and RF filters for defense, industrial, medtech, and electrification/energy.

Growth driver: Defense multiyear orders and energy platform ramp

MedTech & Specialty Audio (MSA)

$69M Q2 FY26 revenue, +2% y/y

Balanced armature speakers and microphones for hearing health and specialty audio applications.

Growth driver: Hearing-aid market growth of 2%-4%

Competitive Landscape

Knowles competes in specialty passives and hearing-health components. The 10-K names Kyocera AVX, Yageo Corporation's Kemet products, and Vishay Intertechnology as Precision Devices competitors, alongside 'a broad range of specialty companies and brands.' In MedTech & Specialty Audio, the 10-K names Sonion as the primary competitor — a single named rival for that segment. Management positions its edge as custom engineering and sole-source status on key defense programs, and it deliberately walks away from commodity sockets where price, not differentiation, decides the sale.

Kyocera AVX
Named in the 10-K as a Precision Devices competitor; not discussed further.
Yageo Corporation's Kemet products
Named in the 10-K as a Precision Devices competitor; not discussed further.
Vishay Intertechnology
Named in the 10-K as a Precision Devices competitor. The supply-chain read-through treats Vishay as a direct competitive threat, citing its book-to-bill of 1.32 and capacity to populate over 80% of components on a power-application board.
Sonion
Named in the 10-K as the primary MedTech & Specialty Audio competitor.

Competitors are as named in the 10-K; the Vishay supply-chain detail comes from the neighbor read-through.

Supply Chain

Knowles buys polymer film, ceramic dielectric powders, and precious-metal pastes, and depends on ASIC and MEMS foundries it calls sole sources. It sells through distributors like TTI and Arrow Electronics and directly to defense and hearing-health customers. No value-chain neighbor mentions Knowles by name.

Supplier

DuPont

Electrode pastes and dielectric compositions (inferred)

Supplier

Heraeus

Precious metal pastes (inferred)

Sole Source

ASIC and MEMS foundry partners

Sole source per the 10-K; counterparties unnamed

→

Sole source on defense programs

Vertically integrated custom component manufacturing