Industrial components supplier NN (NASDAQ:NNBR) beat Wall Street’s revenue expectations in Q2 CY2026, with sales up 19.3% year on year to $128.7 million. The company expects the full year’s revenue to be around $465 million, close to analysts’ estimates. Its non-GAAP profit of $0.05 per share was significantly above analysts’ consensus estimates.
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NN (NNBR) Q2 CY2026 Highlights:
- Revenue: $128.7 million vs analyst estimates of $116.1 million (19.3% year-on-year growth, 10.9% beat)
- Adjusted EPS: $0.05 vs analyst estimates of $0.01 (significant beat)
- Adjusted EBITDA: $17.94 million vs analyst estimates of $13.91 million (13.9% margin, 29% beat)
- The company lifted its revenue guidance for the full year to $465 million at the midpoint from $460 million, a 1.1% increase
- EBITDA guidance for the full year is $60 million at the midpoint, above analyst estimates of $56.5 million
- Operating Margin: 0.8%, up from -1.4% in the same quarter last year
- Market Capitalization: $205.8 million
StockStory’s Take
NN’s second quarter was marked by strong year-over-year revenue growth and significant outperformance on adjusted profitability versus Wall Street expectations. Despite the negative market reaction, management attributed the quarter’s results to robust new business wins across its targeted verticals, including data center electric grid, defense electronics, and medical products. CEO Harold Bevis emphasized that the company’s diversification strategy is taking hold, with non-automotive end markets now representing roughly a third of total sales. The quarter also featured meaningful improvements in gross margins, driven by favorable product mix and efficiency gains from earlier cost initiatives.
Looking ahead, NN’s raised full-year guidance is underpinned by a ramp-up in new business awards and further penetration into high-growth segments such as data center components and defense systems. Management highlighted capacity expansion plans, particularly in China, to meet accelerating demand, and noted that most of the wins from the first half will begin contributing meaningfully in the second half of the year. CFO Chris Bohnert acknowledged ongoing volatility in raw material costs but expects continued margin improvement as new verticals scale, stating, "We have some tailwinds with these new verticals."
Key Insights from Management’s Remarks
Management attributed the quarter’s outperformance to the rapid scaling of its targeted growth markets and successful refinancing efforts, which have improved capital flexibility for future expansion.
- Strategic refinancing completed: NN finalized a multi-leg refinancing, retiring $89 million of preferred stock and reducing annual interest expenses by $13 million, which management views as a transformative step for capital structure and future growth.
- Data center and electric grid surge: The company reported major customer wins in data center and electric grid markets, highlighting new product launches and ramp-ups that are expected to make this NN’s largest segment.
- Defense electronics momentum: NN secured a multiyear weapons components contract, with management citing advanced titanium machining capabilities and a growing $75 million pipeline in defense, supporting near-term targets.
- Medical segment gaining traction: Recent certifications and initial orders in surgical device components are expected to double the medical business, with expansion in China planned as the company gains regulatory approvals.
- Automotive exposure declines: Automotive now represents about 40% of revenues, down from previous years, as NN’s diversification strategy shifts focus to higher-value, faster-growing industrial markets.
Drivers of Future Performance
Management expects NN’s growth to be driven by new program ramp-ups in data center, defense, and medical verticals, while closely monitoring margin improvements and capital deployment efficiency.
- Ramp-up of new business awards: The majority of recent wins in data center, defense, and medical are set to ramp in the second half and into 2027, supporting higher sales and margin expansion as volumes scale.
- Capacity and capital investment: NN is expanding manufacturing capacity in China, with plans to add space for over 200 machines in Wuxi to meet growing demand in data center products. Management is targeting gross margins and returns on invested capital of at least 25% for new programs.
- Raw material and pricing volatility: Precious metals and steel remain volatile, but NN is able to pass through most cost increases to customers. However, any lag or sharp swings could impact working capital and reported margins.
Catalysts in Upcoming Quarters
Over the next few quarters, the StockStory team will be monitoring (1) the pace and scale of new business ramp-ups in data center, defense, and medical verticals; (2) execution of capacity expansion, especially in China, to ensure NN can meet rising demand; and (3) progress on further balance sheet optimization, particularly refinancing of term loans to support growth. The ability to sustain margin improvements amid material cost volatility will also be a key area of focus.
NN currently trades at $3.89, in line with $3.90 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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