Knowles Corporation

What they do

Knowles designs and manufactures custom, high-reliability electronic components such as capacitors, RF filters, microphones, and balanced armature speakers. It operates through two segments: Precision Devices (PD), which serves defense, industrial, medtech, and electrification/energy markets with capacitors and RF solutions, and MedTech & Specialty Audio (MSA), which serves hearing health and specialty audio markets. The company sells directly to OEMs and through distributors worldwide, with approximately 5,200 employees across 11 countries.

Revenue drivers

• Precision Devices (PD) — Generates revenue from high-performance capacitors and RF filtering solutions used in defense, industrial, medtech, and electrification/energy applications. In Q2 2026, PD revenues increased $19.8 million year over year due to higher demand across all end markets and higher average pricing.
• MedTech & Specialty Audio (MSA) — Generates revenue from balanced armature speakers and microphones for hearing health and specialty audio markets. In Q2 2026, MSA revenues increased $1.1 million year over year, driven by higher hearing health volumes partially offset by lower specialty audio volumes.

Recent performance

In Q2 2026, Knowles reported revenues of $166.8 million, up 14.3% from $145.9 million in Q2 2025. GAAP diluted EPS from continuing operations was $0.21, compared with $0.09 a year earlier, while non-GAAP diluted EPS rose 38% to $0.33. Gross profit was $74.6 million (44.7% of revenues), and net cash from operations was $28.2 million. Management noted this was the seventh consecutive quarter with book-to-bill greater than one.

Strategy

Knowles is focused on leveraging its unique technologies to design custom engineered solutions and deliver them at scale in high-growth markets. The company has shifted investment away from consumer markets toward its PD and MSA segments, emphasizing medtech, defense, industrial, and electrification/energy. It aims to drive sales growth and improved margins through organic initiatives and acquisitions, and highlights its domestic manufacturing footprint and customer application intimacy.

Risks

• Tariff and Trade Policy Uncertainty — The tariff environment remains dynamic; Knowles monitors policy changes that could affect its costs and pricing, though IEEPA tariff refunds received to date were not material.
• Supply Chain and Production Transfer Costs — Increased production transfer costs in the ceramic capacitor business contributed to higher cost of goods sold in Q2 2026, impacting gross margin.
• End Market Demand Concentration — PD revenues depend on demand in defense, industrial, medtech, and electrification markets, which can be cyclical and subject to geopolitical and economic shifts.
• Foreign Exchange and Global Operations — With facilities in 11 countries and sales worldwide, Knowles is exposed to currency fluctuations and international operational risks.

Outlook

For Q3 2026, Knowles guides revenues from continuing operations of $167 to $177 million and GAAP diluted EPS of $0.22 to $0.26, with non-GAAP diluted EPS of $0.34 to $0.38. Management expects full-year 2026 revenue growth of 10-12% and adjusted EBITDA growth of more than 20%. For 2027, CEO Jeffrey Niew stated he expects the company to exceed organic growth targets presented at the May 2025 Investor Day, citing strong bookings and long-term secular trends.