Knowles delivered a third quarter that surpassed Wall Street’s expectations, with management highlighting strong design win momentum and execution in both core segments. CEO Jeffrey Niew attributed the company’s performance to robust growth in the Precision Devices segment, particularly accelerated demand from defense, industrial, and electric vehicle markets. He emphasized that increased customer engagement around new applications—especially in areas requiring high-performance capacitors and RF microwave solutions—boosted revenue and supported improved operating margins. Management pointed to normalized channel inventories and sustained operational discipline as additional factors strengthening the quarter’s results.
Is now the time to buy KN? Find out in our full research report (it’s free for active Edge members).
Knowles (KN) Q3 CY2025 Highlights:
- Revenue: $152.9 million vs analyst estimates of $149.1 million (7.3% year-on-year growth, 2.6% beat)
- Adjusted EPS: $0.33 vs analyst estimates of $0.31 (7.3% beat)
- Adjusted EBITDA: $39.5 million vs analyst estimates of $40 million (25.8% margin, 1.3% miss)
- Revenue Guidance for Q4 CY2025 is $156 million at the midpoint, above analyst estimates of $154.3 million
- Adjusted EPS guidance for Q4 CY2025 is $0.35 at the midpoint, above analyst estimates of $0.34
- Operating Margin: 17%, up from 14.2% in the same quarter last year
- Market Capitalization: $2.00 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Knowles’s Q3 Earnings Call
- Christopher Rolland (Susquehanna): asked about specialty film capacity and demand outlook. CEO Jeffrey Niew detailed that capacity is expanding to support both a large energy contract and additional backlog, projecting substantial growth for the specialty film line in the coming year.
- Bob Labick (CJS Securities): inquired about product diversification within specialty film. Niew explained that pulse power applications in medical and defense are a focus, and highlighted emerging opportunities in downhole drilling and new industrial uses.
- Anthony Stoss (Craig-Hallum): questioned the impact of rising palladium prices on margins. CFO John Anderson reassured that pre-buys secure pricing through mid-next year, and that any persistent cost increases would be managed through customer discussions and potential price adjustments.
- Anthony Stoss (Craig-Hallum): also asked about specialty film margin trajectory. Anderson indicated sequential improvement is expected, with a larger step-up as major contracts ramp in late Q2 and Q3, due to increased output and better capacity utilization.
- Tristan Gerra (Baird): probed on gross margin leverage from utilization and distribution channel trends. Anderson clarified that average incremental contribution margins are 35-40%, and noted that normalized inventories have led to order activity closely tracking end-market demand.
Catalysts in Upcoming Quarters
Over the next several quarters, our analysts are monitoring (1) the pace of specialty film production ramp and its contribution to overall revenue, (2) the realization of sequential margin improvements as capacity utilization rises, and (3) the conversion of recent design wins into large-scale, recurring orders across defense, medical, and energy markets. We will also watch for further updates on M&A activity and the company’s ability to navigate raw material cost volatility.
Knowles currently trades at $23.59, down from $24.01 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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