Custom-engineered solutions manufacturer Methode Electronics (NYSE:MEI) reported revenue ahead of Wall Street’s expectations in Q2 CY2026, with sales up 10.4% year on year to $265.4 million. The company expects the full year’s revenue to be around $1.05 billion, close to analysts’ estimates. Its non-GAAP loss of $0.22 per share was 10% below analysts’ consensus estimates.
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Methode Electronics (MEI) Q2 CY2026 Highlights:
- Revenue: $265.4 million vs analyst estimates of $238.3 million (10.4% year-on-year growth, 11.4% beat)
- Adjusted EPS: -$0.22 vs analyst expectations of -$0.20 (10% miss)
- Adjusted EBITDA: $13.7 million vs analyst estimates of $14.16 million (5.2% margin, 3.3% miss)
- The company reconfirmed its revenue guidance for the full year of $1.05 billion at the midpoint
- EBITDA guidance for the full year is $77 million at the midpoint, in line with analyst expectations
- Operating Margin: -1.5%, down from 0.8% in the same quarter last year
- Market Capitalization: $645.2 million
StockStory’s Take
Methode Electronics’ second quarter was marked by strong year-on-year revenue growth fueled primarily by increased demand in its industrial segment, especially from data center power distribution and off-road lighting applications. However, the market reacted negatively as profitability metrics lagged, with operating margin turning negative and adjusted earnings missing analyst expectations. CEO Jonathan DeGaynor acknowledged that while higher volumes and operational improvements contributed positively, these gains were offset by one-time costs related to portfolio refinements and investments in talent and capabilities. CFO Laura Kowalchik cited $6.7 million in non-recurring headwinds from operational changes and freight expenses, indicating these were transitional in nature.
Looking forward, Methode Electronics’ management is emphasizing continued investment in high-growth opportunities like data centers, as well as ongoing operational improvements in key regions such as Mexico, Egypt, and Malta. DeGaynor highlighted commercial wins in automotive hybridization and commercial vehicles, but cautioned that most new business will not meaningfully impact results until late next year. The company is also investing in engineering for next-generation data center architectures, particularly 800-volt solutions, though these are not yet contributing to revenue. Management reaffirmed its annual outlook, underpinned by expectations of improved margin performance as operational changes take hold and premium freight costs subside.
Key Insights from Management’s Remarks
Management attributed this quarter’s results to strong industrial demand and operational gains, but profitability was weighed down by nonrecurring costs and strategic investments.
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Industrial Segment Momentum: The industrial division, especially data center power products and off-road lighting, drove most of the company’s revenue growth. Management noted that a portion of data center sales were pulled ahead into the quarter, while off-road lighting benefited from the successful integration and expansion of the Nordic Lights acquisition.
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Operational Transformation: Methode continued its shift from a decentralized to a global operating model, improving efficiency through new leadership and process upgrades across Egypt, Malta, Mexico, and China. Mexico, in particular, saw a 500 basis point margin improvement driven by cost reductions and production transfers from Asia, supporting expanded capacity for automotive and data center customers.
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Portfolio Optimization: The Interface segment saw a steep decline in sales due to the divestiture of the dataMate business and the planned roll-off of an appliance program, consistent with ongoing portfolio streamlining. Management indicated that these changes, while costly in the short term, are aimed at focusing resources on higher-return areas.
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Investments in Talent and Capabilities: The company increased spending on leadership and engineering, particularly in data center and aerospace (MilAero) divisions. While this raised selling and administrative expenses, management views these investments as essential for sustaining future growth and margin improvement.
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Commercial Wins and Market Shifts: Methode booked $75 million in annualized peak new business awards (approximately $400 million lifetime), mainly in automotive hybridization and commercial vehicle power products. Management highlighted that these awards stem from customer demand for USMCA-compliant, localized manufacturing amid tariff and supply chain concerns.
Drivers of Future Performance
Methode Electronics expects its forward performance to hinge on execution in operational transformation, targeted investments, and capturing growth in priority markets.
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Data Center and Power Solutions Expansion: Management is prioritizing growth in the data center market, including engineering for advanced high-voltage architectures like 800-volt racks. While these projects require upfront investment and are not expected to generate immediate revenue, the company views them as critical for longer-term positioning as data center power density needs rise.
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Operational Improvements in Key Regions: The company is counting on continued margin recovery, especially in Mexico, Egypt, and Malta, as operational changes and cost containment measures gain traction. CFO Laura Kowalchik noted that premium freight costs linked to production shifts should dissipate, supporting gradual margin improvement throughout the year.
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Automotive and Commercial Vehicle Award Ramps: Significant new business in automotive hybridization and commercial vehicles is expected to ramp up late next year, with current-year impact limited to early engineering and program development. Management sees these awards, tied to localized manufacturing strategies, as essential for diversifying revenue beyond data centers and supporting future profitability.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will closely watch (1) the pace and consistency of margin recovery in Mexico, Egypt, and Malta as operational changes are implemented, (2) the timing and success of new automotive and commercial vehicle program launches tied to recent business awards, and (3) further progress in data center product development and customer adoption, particularly around next-generation 800-volt architectures. Monitoring the phasing out of non-recurring costs will also be important to track underlying profitability improvements.
Methode Electronics currently trades at $17.06, down from $18.10 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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