Earnings Recap — Q1 FY2027
CY Q3 2026 · Reported August 12, 2026 · Beat 7 of last 7 quarters
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EnerSys' record quarter underscores the strength of the AI infrastructure buildout, with data center orders up 80% YoY and continued TPPL demand for high-rate, short-duration backup power. The company's expansion into lithium data center batteries (DataSafe Noir) and the DOE-supported defense-focused lithium plant position it to capture incremental share in the faster-growing lithium segment while maintaining its lead-acid base.
EnerSys delivered record Q1 results with net sales of $936M, up 5% YoY, and adjusted diluted EPS of $3.66, up 65% YoY. The quarter included $31M in tariff refunds and $115M in 45X tax benefits, boosting margins and cash flow. Segment performance was mixed: Network & Infrastructure Solutions grew 9% with operating margin up 280bps, Precision Power Solutions grew 24% with margin up 300bps, while Industrial Mobility Solutions declined 3% on continued material handling weakness. The company announced finalization of a DOE grant for a $650M lithium cell plant in Greenville, SC, with $150M in DOE funding and ~$200M in state/local incentives.
Management raised Q2 FY2027 guidance, expecting net sales of $955M-$995M and adjusted diluted EPS of $3.15-$3.25. They expect stronger revenue growth in the second half of fiscal 2027, driven by a recovery in material handling and continued momentum in data centers, communications, and aerospace & defense. The company confirmed its $70M CapEx plan for FY2027, with construction on the DOE-supported lithium plant in Greenville, SC expected to begin in H1 FY2028 and full production ~3 years later, expecting an internal return in the mid-20s. Management reiterated confidence in managing tariff exposure and expects earnings growth to shift from margin expansion to top-line growth as new products (DataSafe Noir, Gen 2 lithium) ramp in fiscal 2028.
“We are very excited to announce the finalization of our Department of Energy grant, an important milestone in our aerospace and defense growth strategy.”
on DOE grant finalization
“We also received very strong data center orders in the quarter, up over 80% versus prior year with deliveries extending into the future, increasing our visibility in this project-based business and reinforcing the multiyear demand opportunities for our lead-based offerings.”
on Data center demand
“This was just an outstanding cash flow quarter. Operating cash flow of $230 million, offset by CapEx of only $12 million resulted in free cash flow of $218 million in the quarter versus negative $32 million in prior year Q1.”
on Cash flow performance
Can you put some context around the 80% year-over-year data center order growth and whether you already have orders in hand for the new lithium offering?
Management noted that data center orders extend 12-36 months, providing long-term visibility. For the lithium product, they have already shipped the first 100 systems to prime the supply chain and have over 500 units in active quotation, with revenue expected to begin in fiscal 2028.
Can you provide more detail on the implied margin expansion sequentially in Q2 and the turnaround in the service business?
Management explained that early fiscal 2027 earnings growth is driven by margin expansion from annualized cost actions, 45X benefits, and facility rationalizations, with top-line growth accelerating later. The service business, particularly in NIS, grew revenue ~20% YoY with margins up ~100bps, driven by disciplined project management and upskilling.
How do you ascertain where we are in the material handling cycle, and are you seeing any acceleration in the shift from lead to lithium?
Management cited leading indicators like forklift truck order data and customer conversations, noting Hyster-Yale's strongest booking quarter in 3 years. They expect recovery in Q3 FY2027. The lead-to-lithium conversion rate remains steady, but the new Gen 2 lithium (LFP) at a more attractive price point is expected to drive volume and margin gains in the second half.