Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported July 22, 2026 · Beat 1 of last 6 quarters
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Graco's results reinforce the broad-based nature of the AI infrastructure buildout, with semiconductor-related expansion markets bookings up 58% and data center construction driving demand for protective coatings, foam, and thermal interface materials. The company's ability to participate across multiple layers of the buildout—from chip manufacturing equipment to facility construction—positions it as a diversified beneficiary of sustained AI capex.
Graco delivered record Q2 sales of $591M and record earnings, with growth across all three segments. Contractor returned to organic growth in the Americas for the first time in nearly two years, while Industrial grew 3% despite powder finishing timing headwinds and Expansion Markets grew 3% with semiconductor bookings up 58%. Adjusted EPS rose 17% to $0.91, with gross margin up 130 bps and operating margin up 400 bps to 30%. The company announced the acquisition of VELCRO Meltan, expected to close in Q3, and repurchased 4.2M shares for $331M in the first half.
Management maintained full-year revenue guidance of low single-digit organic growth on a constant currency basis and mid-single-digit growth including acquisitions, while initiating Q3 revenue guidance of $580M-$600M excluding the pending VELCRO Meltan acquisition. They cited improving order trends (6-week bookings up 14% YoY), strong backlog, and easier comps in the powder business as drivers for a stronger second half. Semiconductor demand is expected to remain strong through 2026 and into 2027, while contractor is seeing early signs of recovery. Currency is expected to provide a ~1% favorable impact on full-year sales and earnings. They also updated full-year guidance for unallocated corporate expenses ($39M-$42M), capex ($90M-$100M), and adjusted tax rate (20%-21%).
“We delivered record second quarter sales of $591 million and record second quarter earnings reflecting growth across all 3 segments. And margin expansion supported by disciplined expense management and operational execution.”
on Q2 performance
“I think that we feel comfortable I think that, as you said, backlogs are strong. I think this is a change that we are committing to make going forward. So it is not just a 1 quarter thing that we are gonna do.”
on Quarterly guidance decision
“We have good visibility over a 13-week period, and we want to provide more insight to analysts given the volatility between first and second half. This is a commitment going forward, not a one-quarter thing.”
on Quarterly guidance decision
Can we start with the decision to give quarterly sales guidance? Why now, and should we expect this on a go-forward basis?
We have good visibility over a 13-week period, and we want to provide more insight to analysts given the volatility between first and second half. This is a commitment going forward, not a one-quarter thing.
How do bookings and backlog translate into second-half revenue? What is the correlation and lag?
We built backlog in Q1 and Q2 that gives momentum. Powder comps ease in the back half, ColorService is performing ahead of plan, and contractor momentum is broad-based. We are confident in hitting the full-year guide, but it will be more back-half loaded.
What is the run-rate gross margin for VELCRO Meltan, and what is the breakdown of the 27 facility footprint?
Gross margins are 50% or more, with more than half of the business in parts and accessories. There are about 5 manufacturing locations, with the rest being sales and service offices.