Advanced Energy Industries, Inc. (AEIS): what the price assumes

In the published model solve dated 2026-Q2, anchored at $280.90, Advanced Energy Industries, Inc. (AEIS) is priced for today's economics sustained for ~13.3 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/AEIS

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 11.6% cost of capital; growth searched up to the 25% self-funding ceiling.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.2%); the inversion above states its own rate.

Per-Model Detail (n=17)

Solvency

Bullet Takeaways

• The 2025 annual report shows Data Center Computing revenue of $587.3 million against $284.2 million the year before, which is the whole story here: a supplier of power systems to chip-tool makers acquired a second engine of comparable size in a single year.
• The market pays about 67 times operating income for a company whose trailing operating margin is 9.9%, and its own filing is candid that this is contested ground: We face a wide variety of competitors, and no single company dominates any of our markets.
• Second-quarter results arrive after the close on August 3, 2026, against management guidance of $540 million in revenue give or take $20 million and a full-year revenue growth target raised to the low-to-mid 20% range.

Bull Case

The obvious objection comes first, because it is the right one to start with. This is a components supplier to the semiconductor capital equipment industry, an industry that has spent four decades going up and down in violent waves, and the shares are being valued as though the wave has been repealed. Anyone who has watched a semicap cycle turn knows how that story usually finishes. So the question is not whether the objection is reasonable. It is whether the business underneath it has actually changed shape.

The 2025 numbers say it has. Data Center Computing revenue was $587.3 million in 2025 against $284.2 million in 2024, while Semiconductor Equipment revenue grew from $792.5 million to $839.9 million. In one year a business that was roughly three-quarters chip-tool exposure became one where a second, differently-cycled end market supplies a third of revenue. Industrial and Medical went the other way, falling from $316.2 million to $282.3 million, so this is not a rising tide lifting everything. It is one market inflecting hard while the others do ordinary things.

What makes the data-center line credible rather than opportunistic is that it is the same engineering problem. Advanced Energy converts raw utility power into precisely controlled power, and whether the load is a plasma etch chamber or a rack of accelerators, the hard parts are efficiency, density and heat. The company's framing is straightforward: We believe our capabilities in advancing new power solutions for next-generation AI-based server racks position us to participate in the continued growth in this market. Power delivery has become the limiting constraint in AI server design in a way it was not five years ago, which pulls a supplier that used to sell on price toward selling on capability.

The core semiconductor business is not the sleepy half either. Management's view is that the plasma power market will grow faster than WFE due to increasing number of plasma process steps and growing demand for more complex power content, which in plain terms means each new chip generation needs more plasma steps, and each plasma step needs more sophisticated power to control it. Content per tool rises even when tool unit volumes do not. And once designed in, the position tends to stick: the annual report notes that New products designed for capital equipment manufacturers typically have a lifespan of many years. A design win in this business is a decade of shipments, not a purchase order.

The economics are already responding. Operating income covers the interest bill about 10.8 times over, net debt sits near 2.4 times operating profit, and the company reported that we generated $234.7 million of cash flow from continuing operations in 2025. Against $575.0 million of convertible notes due 2028 carrying a 2.5% coupon, that is a comfortable structure rather than a constraint on what management can do next.

Comparison with the cohort is where the durability argument gets its edge. Among the power-semiconductor names in the group, most are still working through the analog downturn: Power Integrations (POWI) at a 1.1% operating margin, Semtech (SMTC) at 2.1%, Allegro (ALGM) at 2.1%, and Diodes (DIOD) at 3.5%. Only Monolithic Power (MPWR) at a 27.1% operating margin and MACOM (MTSI) at 16.0% are running well, and both did it the same way Advanced Energy is trying to: by moving up the value stack into problems where the customer cares more about performance than unit cost. The 9.9% trailing operating margin is the middle of that distribution, which is the point. The bull case does not need a new business. It needs the mix that already shifted to carry margin toward the top of a range its own peer set demonstrably reaches.

Bear Case

Nobody buys an Advanced Energy product. They buy an etch tool, or a server rack, and somewhere inside it is a power supply the buyer never specified and cannot name. That is the structural fact the valuation has to survive. A component supplier two levels below the end customer captures the value of its content only for as long as the customer above it cannot source the same function elsewhere or bring it in-house, and the company describes its own position without much comfort: The markets we serve are highly competitive and characterized by rapid technological development and changing customer requirements. We face a wide variety of competitors, and no single company dominates any of our markets. A market nobody dominates is a market where pricing gets tested every design cycle.

Now the arithmetic. At about 67 times operating income, the price requires today's economics to be sustained for roughly 18 years. Not improved on. Sustained. Every year of that horizon is another year in which no customer qualifies a second source, no competitor closes the efficiency gap, and the AI capital cycle does not pause. Only about 15% of companies that reached this kind of pace held it for a decade, and the multiple already sits above roughly 92% of its peer distribution. Each percentage point of extra growth buys back only about 2.6 years of that horizon, so the assumption is not fragile at the edges. It is fragile in the middle.

The customer-concentration problem sits directly under the fastest-growing line. Data Center Computing more than doubled in 2025, and hyperscale power business is won in large blocks from a very small number of buyers. Those buyers design their own racks and run engineering organizations large enough to take more of the power chain in-house if the economics justify it. A doubling driven by a handful of programs is a doubling that can halve. The annual report's own framing of segment risk is that end-market conditions swing on capacity utilization and export policy, and it names both: lower trailing-edge logic demand due to capacity underutilization, particularly in China, U.S. export restrictions to China, and the impact of tariffs.

Then there is what the trailing profitability actually looks like once you stop annualizing the good quarters. The company earned a 9.9% operating margin over the trailing twelve months. That is a respectable number for a components business and a strange one to pay 67 times for. Book value is about $32.81 a share and trailing earnings about $4.77, and the methods built on those figures land five to six times below where the shares change hands. The peer-multiple methods land about 1.8 times below. Only the forward cash-flow methods reach, and the way they reach is worth understanding: they project growth in the low twenties across a seven-year forecast and then exit at roughly sixty times EBITDA, held flat at the multiple in place now. Remove that assumption and the growth family stops reaching too. The single lens that defends the price does so by assuming the price is right.

The balance sheet is sound but it is not a shock absorber. Net debt of $435.5 million against operating income covering interest about 10.8 times over is comfortable in an expansion and merely adequate in a downturn, because the ratio moves with the numerator. And the share count has risen 2.8% a year over the four years to March 2026 while the company repurchased $30.2 million of stock during 2025, so holders have been diluted on net through a period of rising profits. In a business where the bull case is compounding, a share count moving the wrong way is a slow leak in the compounding.

Valuation

Duration is the variable doing the work here, not growth. At $304.12 on July 25, 2026, the market pays about 67 times operating income, and reversing that arithmetic gives a single clean statement: today's economics have to persist for roughly 18 years. Not accelerate. Persist. That is a different and in some ways harder demand than a high growth rate, because growth rates are testable every quarter and durability is only testable in hindsight. The sensitivity is worth knowing too. Each additional percentage point of growth shortens the required horizon by only about 2.6 years, so the assumption does not unwind gently if execution slips.

Where the various approaches land makes the shape of the bet unusually legible. The asset-based and earnings-power methods sit five to six times under the current quote, which is what happens when you value $32.81 of book equity and $4.77 of trailing earnings per share without crediting any future. The peer-multiple methods land about 1.8 times under. Only the forward cash-flow methods reach the price, and they overshoot it slightly. That specific pattern, three families far below and one above, is the signature of a business being priced for durable compounding rather than for what it currently produces.

It is worth being concrete about how the reaching method gets there, because the mechanism is the whole argument. It carries revenue growth in the low twenties across a seven-year forecast and then applies an exit multiple near sixty times EBITDA, held flat at the level in place today. That is not a conservative construction. It is the arithmetic restatement of the same durability assumption, arriving from the other direction.

The cohort context sharpens it. This multiple sits above roughly 92% of the peer distribution, and the peers are not obviously worse businesses. Monolithic Power (MPWR) runs a 27.1% operating margin on $2.96 billion of revenue with 23.9% growth, and MACOM (MTSI) a 16.0% operating margin with 27.0% growth, both well ahead of Advanced Energy's 9.9% trailing operating margin. The premium here is not being paid for demonstrated profitability relative to the group. It is being paid for the direction the mix is moving, which the 2025 segment disclosure supports: Data Center Computing revenue of $587.3 million against $284.2 million a year earlier, alongside Semiconductor Equipment revenue of $839.9 million.

Liquidity is the least contested part of the picture. The annual report states that As of December 31, 2025, our cash and cash equivalents totaled $791.2 million, and our available funding under our undrawn Revolving Facility is $600.0 million. Net debt of $435.5 million sits at about 2.4 times operating profit, interest is covered roughly 10.8 times over, and the company is generating cash rather than consuming it. So the balance sheet does not constrain the outcome and it does not rescue it either. The one line on it that touches the equity holder directly is the share count, which has risen 2.8% a year over the four years to March 2026. In a price built almost entirely on compounding for two decades, that drift is not a rounding error.

Catalysts

The first quarter of 2026 was the print that established the current setup. Revenue came in at $511 million, up 26% on the year and ahead of the company's own guidance, with Data Center Computing revenue setting a record and more than doubling year over year. Gross profit was $200.9 million against $150.5 million in the same quarter of 2025, which is the margin expansion the mix shift was supposed to deliver showing up in the actual statement.

The market's reaction was the interesting part. Management guided second-quarter revenue to $540 million plus or minus $20 million and raised the full-year revenue growth target to the low-to-mid 20% range, with the data-center outlook lifted to mid-30% growth, and the shares fell more than 8% on the day because the earnings guidance came in below what the street had modeled. A company priced for two decades of durability is being marked on a single quarter's guidance, which tells you how thin the tolerance for disappointment is at this level.

Second-quarter results are scheduled for release after the close on Monday, August 3, 2026. Two things in that report carry more weight than the headline. The first is whether Data Center Computing holds its new run rate or reveals itself as a pull-forward, since the 2025 step from $284.2 million to $587.3 million came off a small base and concentrated programs. The second is Semiconductor Equipment, where the annual report described 2025 demand as driven by leading-edge logic and memory for AI while lower trailing-edge logic demand due to capacity underutilization, particularly in China, U.S. export restrictions to China, and the impact of tariffs pulled the other way. Whether that trailing-edge drag has finished working through is the difference between a cyclical recovery and a single-end-market story.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• MPWR (MONOLITHIC POWER SYSTEMS INC)
• FY2025 10-K: …partners utilize prior to shipping to our customers. The manufacturing facilities we utilize in Asia enable us to benefit from shorter manufacturing cycle times and lower labor and overhead costs. We have expanded our product testing capabilities in these facilities and are able to take advantage of the rich pool of…
• FY2025 10-K: …of such products. We consider our primary competitors to include Analog Devices, Infineon Technologies, NXP Semiconductors, ON Semiconductor, Power Integrations, Renesas Electronics, ROHM Semiconductor, Semtech, STMicroelectronics and Texas Instruments. 9 Table of Contents We expect continued competition from…
• POWI (POWER INTEGRATIONS, INC.)
• FY2025 10-K: …with alternatives from such companies as Infineon, Mitsubishi Electric, Fuji Electric, Semikron and Hangzhou Firstack Technology Co., as well as driver circuits made up of discrete devices. Our motor-driver ICs compete with power modules from such companies as ON Semiconductor, Infineon, STMicroelectronics,…
• FY2025 10-K: …is subject to change based on the relative pricing of solutions that compete with ours. Variations in product mix, end-market mix and customer mix can also cause our gross margin to fluctuate. Also, because we purchase a large percentage of our silicon wafers from foundries located in Japan, our gross margin is…
• VICR (VICOR CORPORATION)
• FY2025 10-K: …2023 total net revenues. Competition and Market Characteristics The competitive characteristics of the markets we serve with Advanced Products and Brick Products can differ significantly. For example, in the higher-performance segments of computing we serve, our Advanced Products most often compete with solutions…
• FY2025 10-K: Our quarterly consolidated operating results can be difficult to forecast and have been subject to significant fluctuations. We plan our production and inventory levels based on management's estimates of customer demand, customer forecasts, and other information sources. Customer forecasts, particularly those of OEM,…
• DIOD (DIODES INC /DEL/)
• FY2025 10-K: …of Financial Condition and Results of Operations - Business Outlook" in Part II, Item 7 and "Risk Factors - The success of our business depends on the strength of the global economy and the stability of the financial markets, and any weaknesses in these areas may have a material adverse effect on our net sales,…
• FY2025 10-K: …and does not, imply a relationship with, or endorsement or sponsorship of us by, the trade name or trademark owners. All trademarks appearing in this Annual Report not owned by us are the property of their holders. COMPETITION Numerous s emiconductor manufacturers and distributors serve the discrete, logic, analog,…
• SMTC (SEMTECH CORP)
• FY2025 10-K: …and, in certain cases, our ability to persuade customers to design these new products into their applications. Semiconductor Industry The semiconductor industry is characterized by decreasing average unit selling prices over the life of a product and as volumes increase. However, price decreases can sometimes be…
• FY2025 10-K: …cycles that characterize the industry. The timing, length and volatility of these cycles are difficult to predict. The semiconductor industry has historically been cyclical due to sudden changes in demand, the amount of manufacturing capacity and changes in the technology employed in semiconductors. The rate of…
• ALGM (ALLEGRO MICROSYSTEMS, INC.)
• FY2025 10-K: …and profitability. We participate in intensely competitive end markets in the global semiconductor industry. Our competitive landscape includes rapid technological change in product design and manufacturing, continuous declines in ASPs, and customers who make purchase decisions based on a mix of factors of varying…
• FY2025 10-K: …semiconductor wafer suppliers, or estimate our customers' demand could have a material adverse effect on our net sales, business, financial condition and results of operations. Shifts in our product mix, customer mix or channel mix may result in declines in gross margin. Gross margins on individual products typically…
• MTSI (MACOM Technology Solutions Holdings, Inc.)
• FY2025 10-K: …and Personnel We face intense competition in our industry, and our inability to compete successfully could negatively affect our operating results. The semiconductor industry is highly competitive. While we compete with a wide variety of companies, our significant competitors include, among others , ADI, Broadcom,…
• FY2025 10-K: …our distributors. We believe the primary drivers of our future revenue growth will include: • continued growth in the demand for high-performance analog, digital and optical semiconductors in our three primary markets; • introducing new products using advanced technologies, added features, higher levels of…
• MCHP (MICROCHIP TECHNOLOGY INCORPORATED)
• FY2025 10-K: …balances of the Company's receivables. Note 3 . Geographic and Segment Information The Company's business is made up of two operating segments, semiconductor products and technology licensing. These segments represent management's view of the business for which separate financial information is available and…
• FY2025 10-K: …the Company's manufacturing capabilities to help ensure the efficiency of the Company's operations and fulfillment of customer requirements. The technology licensing segment includes sales and licensing of the Company's intellectual property. The CODM uses segment gross profit for evaluating each segment's…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.