NN, Inc. (NNBR) | The Buildout — AI Infrastructure
The Verdict
NN, Inc. makes the precision metal parts that go inside other companies' machines. Its link to the AI buildout is physical: it makes the connectors and couplings that carry coolant to the cold plates inside data center racks, the cold plates themselves, and the stamped parts that move and control electrical power — busbar components, transformer parts, disconnects, and breaker parts. It also sells into defense electronics and medical devices, which management treats as separate growth markets rather than AI. The company's stated edge rests on fluid management trade secrets and machining and plating capabilities that keep coolant lines leakproof and free of burrs.
| Market Cap | — |
| Revenue (TTM) | $456M |
| Revenue Growth | +5.1% |
| EBITDA Margin (TTM) | 5.1% |
| Net Debt | $190M |
| Earnings Beats | 4 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Combined data center and electric grid revenue is $80M on a trailing-12-month basis, up from over $70M the prior quarter, with the near-term goal raised to $120M.
- FY2026 guidance was raised for a second consecutive quarter, to $460–480M net sales and $55–65M adjusted EBITDA, and the long-term model was pulled forward to 2029 from 2030.
- New business wins through July already hit the bottom of the raised FY target; first-half wins were $65M, and management called the awards records.
- Power Solutions net sales rose 40% year over year in Q2 2026 to $62.3M, at roughly a 20% adjusted EBITDA margin.
- The $124M refinancing cut annual PIK interest by about $13M and left a roughly $35M preferred stub carrying a 10% rate, below the prior 14.5%.
What We’re Watching
- The November 2026 data center marker: management says the 50-machine Wuxi ramp lifts sales above $1M a month and builds into Q1 2027.
- Capacity is the binding constraint — roughly 100,000 sq ft and at least another 200 machines are needed within 12 months of the August call.
- The roughly $35M preferred stub carries a $5M discount if retired by December 31, 2026, and the term-loan refinance has no announced terms or timing.
- Automotive is still about 40% of the company and soft in China, and Q4 visibility is limited outside data center.
The thesis is strengthening on the evidence: guidance has been raised twice in two quarters, wins are running ahead of plan, and management has attached dates and numbers to the data center build-out. What tempers it is that the AI-linked revenue is small and mostly un-shipped — management said the three announced growth programs had zero contribution in the first half. The open question is whether the November ramp and the Wuxi expansion land on schedule, because that is what turns the narrative into reported revenue.
Earnings Beat
NN reported second-quarter 2026 net sales of $128.7M, up about 19% year over year, with both segments growing. Reported gross margin was 17.0%; the company separately reported an adjusted gross margin of 20.3%, up 80 basis points. Reported EBITDA was $10.3M at an 8.0% margin, against company-reported adjusted EBITDA of $17.9M, up 36%, at a 13.9% margin.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $129M | $118M | $108M | +19.3% |
| Gross margin | 17.0% | 8.6% | 16.9% | +10bps |
| EBITDA | $10M | $7M | $8M | +37.3% |
| EPS | $-0.13 | $-0.14 | $-0.16 | −21.2% |
| Adjusted EBITDA margin | 13.9% | 11.9% | n/a | +170 bps y/y |
Our momentum has not peaked. Our momentum is building and things have traction here at the company.— Harold Bevis, CEO, 2026-08-06
Management tone: Management's tone shifted between the two calls. The Q2 2026 call replaced pipeline and process language with dated, quantified commitments — 50 machines ordered and 25 in-house, roughly 100,000 square feet of new space, a November data center ramp marker, and a multiyear defense agreement. At the same time management was direct about what it cannot see: Q4 demand outside data center, and the fact that the announced wins had no first-half contribution.
Management Guidance
Management raised all three FY2026 guidance metrics — net sales, adjusted EBITDA, and new business wins — from the prior-quarter ranges. Its long-term model remains about $600M in net sales with roughly $80M of adjusted EBITDA, pulled forward to 2029 from 2030; in Q&A management indicated the long-term adjusted EBITDA margin is now more like 14% to 16%, versus a prior ~13%, with a formal update promised. Management described the range as slightly conservative and said Q4 is seasonally the lightest quarter, with visibility limited outside data center.
Trajectory
Revenue turned up over the past two quarters. After roughly flat-to-down quarters through 2025, net sales were $118.5M in Q1 2026 (up 12.1% y/y) and $128.7M in Q2 2026 (up about 19% y/y), with first-half sales of $247.2M (up 16%). Power Solutions is doing the accelerating — up 27% in Q1 and 40% in Q2 — while Mobile Solutions returned to growth at about 1.4% and then 5%. On margins, the company reported adjusted gross margin of 19.5% in Q1 and 20.3% in Q2, and adjusted EBITDA margin of 11.9% and then 13.9%; management attributes the improvement to cost taken out over the prior eight quarters or more, accretive new business, and mix. It also says precious-metals pass-through inflates revenue dollars at zero margin and consumes working capital.
The Model
The model projects FY+1 revenue of $485M and EBITDA of $64M, a 13.2% margin, then FY+2 revenue of $540M and EBITDA of $77M, a 14.2% margin. The near-term anchor is the second-half ramp management has described — the data center machine program, the defense multiyear agreement, and the medical robotic-surgery orders — none of which contributed in the first half. The FY+2 step assumes those programs reach scale.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $422M | $485M | $540M |
| YoY Growth | — | +14.9% | +11.3% |
| EBITDA | $17M | $64M | $77M |
| EBITDA Margin | 4.1% | 13.2% | 14.2% |
Projections are the median of 5 independent model runs. The model’s revenue sits 10.7% above analyst consensus.
Management raised all three FY2026 guidance metrics — net sales, adjusted EBITDA, and new business wins — from the prior-quarter ranges. Its long-term model remains about $600M in net sales with roughly $80M of adjusted EBITDA, pulled forward to 2029 from 2030; in Q&A management indicated the long-term adjusted EBITDA margin is now more like 14% to 16%, versus a prior ~13%, with a formal update promised. Management described the range as slightly conservative and said Q4 is seasonally the lightest quarter, with visibility limited outside data center.
What Could Go Right — and Wrong
- The 50-machine data center ramp at Wuxi lifts sales above $1M a month in November and keeps building through Q1 2027.
- The roughly 100,000 sq ft Wuxi expansion and at least another 200 machines are secured within 12 months, clearing the capacity gate.
- New business wins land at the top of the FY target and convert into second-half revenue.
- The defense multiyear agreement ($12–15M from one customer) and the medical robotic-surgery win show up in reported revenue.
- Adjusted gross margin holds near or above the recently reported 20% as newer, higher-margin business becomes a larger share.
- The November data center marker slips, or the wins ramp more slowly than the immediate ramp-up management describes.
- Capacity is not secured in time, capping data center revenue regardless of demand.
- Precious-metals pass-through inflates revenue dollars at zero margin and consumes working capital, with a pass-through lag that pinches profitability.
- Automotive, still about 40% of the company and soft in China, offsets growth-market gains.
- Competition in liquid cooling from larger players, or a customer pushing pricing terms or moving parts in-house.
Looking Ahead
Over the next 12 months the story turns on execution. Management has committed to a November ramp in data center machining, a Wuxi expansion within 12 months, and a busbar plating line by the end of 2026, alongside defense and medical ramps, plus retiring the preferred stub by December 31, 2026 and refinancing the term loan. Against that, Q4 visibility outside data center is limited, automotive is soft in China, and the announced wins have not yet shipped.
- Coming weeks and quarterTerm-loan refinance — Management flagged better terms with Marathon; no timing or terms announced.
- November 2026Data center ramp step-up — 50 Wuxi machines to lift sales starting November, building into Q1 2027.
- End of 2026Busbar plating line online — Enables full bill-of-material quoting for busbars; status not updated at Q2.
- December 31, 2026Preferred stub deadline — Retiring the ~$35M stub by this date captures a $5M discount.
- Within 12 monthsWuxi capacity expansion — ~100,000 sq ft and at least 200 more machines to clear the capacity gate.
- Next updateLong-term goal update — Formal revised long-term targets, including the indicated 14–16% margin.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $464M | $422M | $456M | -9.1% |
| Gross Margin | 14.8% | 14.1% | 13.0% | 77bps |
| EBITDA | $18M | $17M | $23M | -3.9% |
| EBITDA Margin | 3.8% | 4.1% | 5.1% | +22bps |
| Net Income | −$38M | −$34M | −$32M | +11.2% |
| Free Cash Flow | −$7M | −$4M | $11M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)13.0%
- EBITDA Margin (TTM)5.1%
- Net Margin (TTM)-7.1%
- ROIC-5.1%
- FCF Conversion48.1%
- SBC / Revenue0.7%
The Company
NN, Inc. is a precision metal components manufacturer. It designs and makes high-precision parts and assemblies that go inside other companies' machines, organized in two reporting segments. Mobile Solutions, which management also calls the Machined Products business, makes complex, tight-tolerance components for power steering, braking, transmissions, gasoline fuel systems, HVAC, and diesel injection and emissions systems. Power Solutions makes electrical contacts, connectors, contact assemblies, and precision stampings, plus high-precision parts for aerospace and defense and tools and instruments for orthopedics and medical/surgical use.
The company operates a global footprint its 10-K lists across the United States, China, Poland, France, Mexico, and Brazil. Its data center machining work is centered on a plant in Wuxi, China, a suburb of Shanghai, where management says it holds the customer approvals for data center sampling. It also holds a 49%-owned Wuxi joint venture accounted for under the equity method, whose income is recorded in Mobile Solutions. Management now organizes growth around a five-pillar program — data center/electric grid, defense electronics, medical, high-value vehicle parts, and high-value stamping — and says it closed four plants and laid off 800 people in recent years.
Business Segments
Competitive Landscape
NN competes across several parts of its business, and its 10-K names competitors by segment. In Mobile Solutions they are other precision machining suppliers; in Power Solutions they are electrical contact and stamping makers. In data center liquid cooling, management named Danfoss, Parker and Stäubli as well-known fluid management companies and noted that all the couplings are also metal. The record shows no sole-source position anywhere in the supplied material, and the 10-Q flags both captive-production risk — customers making parts themselves — and dependence on major customers that are not parties to long-term agreements.
- Listed in the 10-K as a Power Solutions competitor. The intel file's wiring map separately tags Eaton as a customer from a generation source, a conflict it flags as unverified.
- DanfossNamed on the Q1 2026 call as part of the fluid management set competing in liquid-cooling couplings.
- Parker (Parker-Hannifin)Named on the Q1 2026 call in the same fluid management set; the wiring map adds Parker-Hannifin as a liquid-cooling competitor.
- StäubliNamed on the Q1 2026 call alongside Danfoss and Parker in the fluid management set.
- CIE Automotive, S.A.Named in filings; not discussed.
Supply Chain
NN sits upstream of the data center, supplying precision metal parts to OEMs building cooling, power distribution, defense and medical equipment. No neighbor transcript in the source pack names NN directly, and only one customer relationship — NVIDIA — is documented by name.
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