Materion reported record Q2 value-added sales of $308.2M and raised its 2026 EPS outlook to $6.80–$7.20, a roughly 30% year-over-year gain at the midpoint. Semiconductor sales rose 23% and space orders doubled.
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Materion (NYSE:MTRN) reported a record second quarter, with adjusted EPS rising 39% to $1.90 and value-added sales hitting $308.2 million, up 15% from a year earlier. The company raised its full-year outlook for the second consecutive quarter, now projecting adjusted EPS of $6.80 to $7.20, up from the prior $6.00 to $6.50 range.
The gains were broad-based. Semiconductor sales climbed 23% year over year. Telecom and data-center sales jumped nearly 50%. Energy shipments rose more than 20%. Backlog entered the quarter up roughly 30% from a year earlier and 20% from the start of 2026. Incoming orders during the first half rose nearly 30% to a new high, CEO Jugal Vijayvargiya said on the earnings call.
Defense incoming orders totaled $90 million in the first half. Open requests for quotations exceeded $500 million. Space orders doubled from the prior year. Commercial aerospace backlog continued to build. Management said it believes the order activity reflects current customer production needs rather than inventory accumulation, pointing to defense spending, commercial-aircraft build rates, data-center construction and energy applications.
Adjusted EBITDA reached $71.8 million, up 29% year over year. Adjusted EBITDA margin expanded 250 basis points to 23.3% of value-added sales. CFO Shelly Chadwick attributed the improvement to higher volumes, favorable price mix and operational execution, plus $2 million to $3 million of positive one-time items including a refund, settlement and royalty income.
Segment results
Performance Materials, the largest segment, posted value-added sales of $190 million, up 13% year over year and 36% sequentially. Adjusted EBITDA rose 16% to $48.3 million, a 25.4% margin. Growth came from aerospace and defense, telecom and data center, energy and semiconductor demand, plus a return to normalized clad-strip sales.
Electronic Materials generated value-added sales of $87.4 million, up 15% year over year. Adjusted EBITDA jumped 57% to a record $28 million. Adjusted EBITDA margin expanded nearly 900 basis points to 32%. Chadwick said the second-quarter mix was richer than the segment will likely see across the full year. She added that margins should remain structurally ahead of last year.
Precision Optics delivered value-added sales of $30.8 million, a 26% increase and the segment's strongest quarter since 2021. Adjusted EBITDA rose 206% to $6.6 million, a 21.4% margin. Vijayvargiya cited new business, operational improvements, productivity gains and yield improvements. Semiconductor, defense, space, life sciences and industrial markets contributed.
Space growth
Management described space as an expanding growth market. Materion's space business has increased about sixfold over the past three to four years. Launch systems and satellites are the two largest space-related areas. In-space propulsion, surface power and ground-to-space systems represent additional opportunities, Vijayvargiya said.
During the quarter, the company secured a $15 million program with a major commercial-space customer for advanced materials used in engine performance. Management expects the program to run for roughly one to one-and-a-half years, with sales substantially completed by the end of 2027.
Balance sheet and cash flow
Materion generated $59 million in free cash flow during the quarter, supported by earnings and working-capital improvements. Cash conversion was approximately 150%. The company ended the quarter with net debt of about $421 million, available credit-facility capacity of $233 million and leverage of 1.8 times.
Chadwick noted that a previously awarded $65 million investment from a prime contractor to expand beryllium capacity will flow through capital expenditures as funds are spent and reimbursed. It is not included in the company's stated capex forecast. Materion said it has sufficient capacity to support expected growth while remaining selective with capital spending.
Outlook
The company now expects mid-teens year-over-year sales growth and adjusted EPS of $6.80 to $7.20. At the midpoint, that represents roughly 30% year-over-year growth, according to management. The revised guidance follows a similar upgrade in the first quarter.
Materion develops and manufactures high-performance alloys, engineered clad and composite materials, precision thin film products, and advanced optical and electronic materials. Core businesses include beryllium and beryllium composites for aerospace and defense, nickel- and copper-based specialty alloys for industrial and medical applications, optical coatings and substrates for scientific instrumentation, and electronic materials used in semiconductor production.
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