OSI Systems reported Q2 results that exceeded Wall Street expectations, but the market response was negative, reflecting investor concerns about future growth drivers. Management highlighted double-digit service revenue growth in the Security division and robust demand across aviation and international border markets as central to the quarter’s outcome. CEO Ajay Mehra noted, “Our Security division maintained strong momentum in core markets like ports, orders, aviation and critical infrastructure, with Optoelectronics achieved double-digit revenue growth.” The company also faced a decline in Healthcare segment performance, which management acknowledged as a drag on consolidated growth.

Is now the time to buy OSIS? Find out in our full research report (it’s free).

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 OSI Systems’s Q2 Earnings Call

• Michael Joshua Nichols (B. Riley): Asked if Security division service outperformance would persist and boost margins. CFO Alan Edrick confirmed recurring service revenue should continue to grow faster than product revenue, supporting margin expansion.
• Lawrence Scott Solow (CJS Securities): Inquired about flat Security division growth in the back half and the impact of Mexico contract wind-downs. Edrick explained that core Security revenue, excluding Mexico, grew over 50%, reflecting strong global diversification.
• Lawrence Scott Solow (CJS Securities): Sought clarification on the backlog composition and the current role of Mexico contracts. Edrick disclosed that about $1.5 billion of the $1.8 billion backlog is Security-related, with minimal contribution from Mexico, showing customer base broadening.
• Mariana Perez Mora (Bank of America): Requested updates on receivables collection and audit progress, especially in Mexico. Edrick reported collections have resumed, audit bottlenecks are easing, and unbilled receivables have declined, improving cash outlook.
• Jeffrey Michael Martin (ROTH Capital Partners): Asked about growth prospects for the RF detection business and the potential impact of the Golden Dome project. Management emphasized the business’s strong performance and significant future opportunities from government-funded defense initiatives.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will monitor (1) the pace of Security service revenue growth and margin improvement, (2) conversion of U.S. and international government funding into new contracts, and (3) cash flow normalization from timely customer payments—especially in Mexico. Progress in the Healthcare segment and updates on large turnkey and Golden Dome opportunities will also be watched closely.

OSI Systems currently trades at $230.38, up from $223.25 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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