What Management Said

Read the full Q2 2026 transcript ↗

We grew net sales, we expanded our adjusted operating profit and adjusted operating profit margin, and we increased our adjusted diluted earnings per share. We are managing gross profit margin through the combination of strategic pricing and product and productivity improvements. Now, I want to spend a moment on our growth algorithm, which is designed to ensure that we outgrow the lighting market. Last year, we strengthened our floodlight portfolio with the acquisition of M3 Innovation.

Now, switching to Acuity Intelligent Spaces, which continue to deliver strong sales and margin performance. It is a comprehensive building automation platform that unifies hardware and software into a cohesive ecosystem for intelligent building management. The portfolio includes hardware devices and software used to manage how a building operates, including HVAC control, lighting, and refrigeration. This solution allows newer Eclipse-based control capabilities to be deployed, providing IP-based performance, embedded edge intelligence, and modern user interfaces without the associated cost or disruption of completely rewiring the space.

This gives customers the option to increase their room capabilities using audio, video, and integrated networking, all supported by Q-SYS Reflect. Our focus will continue to be on growth, and we have the opportunity to expand margins over time. We grew net sales, improved adjusted operating profit and adjusted operating profit margin, and increased our adjusted diluted earnings per share. This was driven by growth in AIS, which included an additional month of QSC sales, partially offset by revenue declines at ABL.

What went well
  • Acuity grew total net sales 5% to $1.1 billion and increased adjusted operating profit 8% to $176 million, lifting adjusted operating profit margin 50 basis points to 16.7% and adjusted diluted EPS 11% to $4.14.
  • Acuity Brands Lighting expanded gross profit margin 70 basis points to 45.7% and adjusted operating profit margin 50 basis points to 17.3% despite a 3% sales decline, driven by strategic pricing and product and productivity improvements.
  • Acuity Intelligent Spaces delivered strong growth with sales up $77 million to $248 million, adjusted gross profit margin up 60 basis points to 59.1%, and adjusted operating profit margin up 60 basis points to 19.3% as both Distech and QSC performed well.
  • The company generated $230 million of operating cash flow in the first half, up $38 million year-over-year, repaid another $100 million of term loan (bringing QSC-related debt down to $200 million remaining), raised the quarterly dividend 18% to $0.20 per share, and repurchased 318,000 shares for $106 million.
  • Acuity's products earned broad industry recognition, including several Architecture MasterPrize awards, the Q-SYS RoomSuite Modular System winning Best of Show at ISE 2026, and Distech Controls being named Frost & Sullivan's 2025 Global Company of the Year for integrated smart building solutions.
  • New product launches expanded the addressable market, notably the Eclipse Retrofit Solution that upgrades buildings with legacy wiring without a full rewire and the Q-SYS RoomSuite Modular System extending Q-SYS into smaller and medium-sized collaboration spaces.
What went wrong
  • ABL sales fell $23 million or 3% year-over-year to $817 million, driven by declines in the direct sales channel and several large projects from the prior-year period that did not repeat.
  • Management lowered its full-year ABL sales outlook from up low single digits to flat to down low single digits, reflecting a persistently soft lighting market and tough comparisons against last year's order adds.
  • Project release timing has slowed markedly, with the gap between quoting and release widening as data-center-driven labor crowding out and policy, tariff, and rate uncertainty gum up the marketplace, even though conversion rates remain in line with historical levels.
  • Data-center demand created a memory supply shock, pressuring component availability and cost at AIS, on top of tighter labor availability that is weighing on lighting demand.
  • The company recorded a $6 million special charge tied to targeted labor cost reductions at ABL's manufacturing facilities, and flagged that further manufacturing-network actions will continue over the coming years.
  • The U.S. government shutdown mildly impacted large infrastructure projects as permitting and funding decisions stalled, creating a ripple effect on the timing of future direct-channel work.

Guidance Changes

MetricPeriodCurrent guidance
ABL full-year salesFY2026Flat to down low single digits year-over-year
AIS full-year sales growthFY2026Low- to mid-teens % (no change)
Adjusted diluted EPSFY2026No change to the prior EPS guidance range
Quarterly dividendFY2026Raised 18% to $0.20 per share (approved at the January shareholder meeting)
Term loan / QSC acquisition debtFY2026$200 million repaid year-to-date; $200 million remaining, with continued paydown to avoid negative carry

Performance Breakdown

MetricYoYNote
Total net sales +5% to $1.1B (+$49M) Growth in AIS, including an additional month of QSC sales, partially offset by revenue declines at ABL.
Adjusted operating profit +8% to $176M (+$13M) Margin improvements at both ABL and AIS lifted total adjusted operating profit margin 50 bps to 16.7%.
Adjusted diluted EPS +11% to $4.14 (+$0.41) Primarily higher profitability and, to a lesser extent, lower diluted shares outstanding from buybacks.
ABL sales -3% to $817M (-$23M) Declines in the direct sales channel, due in part to several large prior-year projects that did not repeat.
ABL gross profit margin +70 bps to 45.7% Strategic pricing and product and productivity improvements more than offset volume declines and tariff pressure; adjusted operating profit margin up 50 bps to 17.3%.
AIS sales +$77M to $248M Strong growth in Distech and QSC plus the inclusion of an additional month of QSC compared with last year.
AIS adjusted operating profit margin +60 bps to 19.3% Strong sales growth and a 60 bps improvement in adjusted gross profit margin to 59.1%; adjusted operating profit of $48 million.
Operating cash flow (first half) +$38M to $230M Primarily higher profitability, supporting $100 million of additional term-loan repayment and capital returns.

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
AI and the technology-industrials intersectionTechnology used to differentiate products and improve operationsManagement is 'AI maximalist,' framing AI as spread across everyone but with outsized benefit for scaled players able to change their business; AI is being inserted into AIS products (Atrius/Distech/QSC data integration) and used to re-engineer ABL's core operating processes, with defensibility because customers won't devote resources to dimming lights or wiring conference rooms.—
Data-center crowding out of the broader marketEmerging impact flagged in prior quartersData centers are crowding out labor and capacity, slowing project releases across the independent and direct sales networks; one mechanical contractor cited twice the margin on data-center work but deliberately limits it to protect existing customers, while ripping out legacy controls in favor of Distech (e.g., Atlanta Hartsfield concourse).—
Memory / component supply shockNot previously a focusData-center demand has tightened memory availability, mostly affecting AIS; Acuity is running its tariff-style playbook — secure availability first, cover the dollar cost via productivity and price, then regain margin over time — and has extended purchasing and funding in advance while riding out a fluid, bumpy 6-12 month outlook.—
Tariffs and supply-chain managementManaging tariff impact via supplier qualification and re-engineeringMost steel/aluminum 232 exposure flows through USMCA and much of the portfolio sits below relevant content thresholds; management touts the industry's most dynamic supply chain and its proven ability to adapt quickly to new orders, though it had not yet seen the rumored finished-goods proclamation.—
QSC integration and AIS cross-sellQSC recently acquired and being integratedQSC is now fully integrated after anniversarying the deal, positioned as the world's leading full-stack AV provider; cross-sell is the 'cherry on top' (e.g., Resense Move integrated with Q-SYS for an India office solution), driven by overlapping high-end customer bases and expected to be end-user-led, with early AIS-ABL cross-sell traction also emerging.—
Capital allocationInvest to grow, dividend, opportunistic buybacks and M&APriorities unchanged — organic investment (CapEx/OpEx), an 18% dividend increase, a strong acquisition pipeline focused on expanding AIS, and opportunistic buybacks stepped up as the multiple compressed; term-loan paydown reflects excess cash rather than a deleveraging mandate, and the company is comfortable using leverage for the right opportunity.—

Q&A Summary

Joe O'Dea (Wells Fargo) asked for color on ABL demand trends behind the lowered flat-to-down outlook, including softness in the independent sales network, the non-recurring direct-channel projects, and whether pricing is affecting demand or market share.
Ashe pointed to two dynamics: a market waiting for consistent policy/tariff/rate direction, and data centers crowding out labor and capacity, so projects are releasing more slowly even though conversion rates are unchanged. He said the non-recurring large direct-channel (infrastructure) projects were expected and mildly hit by the government shutdown, and stressed there is no indication of market-share loss — strategic pricing means pricing to value and being competitive selectively while balancing top line against profitability.
Joe O'Dea (Wells Fargo) followed up on a potential presidential proclamation lowering tariffs on finished goods made with imported steel and aluminum, and whether most Acuity products fall below a 15% content threshold.
Ashe declined to speculate on an unseen order but framed tariffs broadly, crediting Acuity's dynamic supply chain, supplier qualification, and product re-engineering for managing through. He noted most steel and aluminum 232 exposure flows through USMCA and a large portion of products are unaffected due to the thresholds, while cautioning the details could change once the order is published.
Chris Snyder (Morgan Stanley) asked how ABL gross margin rose 70 basis points despite volume declines and tariff pressure, and what supports continued gross-margin growth after three years of expansion.
Ashe said the improvement reflects working through the productivity needed to catch up on last year's tariff impact — redesigning products and the manufacturing footprint, adding automation, and technology investments in SD&A. He expressed confidence the combination of product changes, facility productivity, and material productivity will keep driving gross margin higher, calling it hard work rather than magic.
Chris Snyder (Morgan Stanley) asked what the intersection of AI and building controls means for Acuity and why the company is positioned to win.
Ashe, describing himself and the company as AI maximalists, said AI's benefits will be broad but outsized for scaled players able to change their business — Acuity's core strength. He said AI manifests in products (data integration across Atrius, Distech, and QSC) and in operations (re-engineering ABL's core processes), and argued the negative cases assume AI can do everything, whereas customers won't spend resources figuring out how to dim lights or wire stadiums, underpinning defensibility.
Ryan Merkel (William Blair) asked whether Acuity is seeing cost pressures and considering price increases in the second half.
Holcom said data centers are creating a memory-availability supply shock, and Acuity is applying its familiar playbook — first ensure component availability for customers, then cover the dollar impact of increases, and finally address any margin impact over time, just as it did with tariffs.
Ryan Merkel (William Blair) asked whether the AIS outlook or demand signals have changed.
Ashe said no — the business is coming together well, QSC is now fully integrated after its first year, and Acuity is realizing the benefits of combining Atrius, Distech, and QSC. First-half results were spot-on to plan on the top line, and the long-term opportunity across building, integrated AV, and consolidated spaces is unchanged.
Christopher Glynn (Oppenheimer) asked for qualitative context on the ABL outlook implying second-half year-over-year resilience versus a possibly intensifying data-center draw.
Ashe said ABL is down about 1% in the first half against very tough comps as it anniversaries last year's order adds, and that early-year hopes for the market normalizing are no longer being counted on. He shared an anecdote of a Distech-supplier mechanical contractor who could devote all capacity to double-margin data-center work but deliberately won't, and whose crews are ripping out legacy controls for Distech, including the Atlanta Hartsfield concourse.
Christopher Glynn (Oppenheimer) followed up on capital allocation, asking why Acuity is prioritizing eliminating Distech debt over larger buybacks given negligible leverage.
Ashe said the company repurchases opportunistically when the stock is attractive and has blown through original expectations, while the debt paydown simply reflects having ample cash and no reason to carry negative carry. He reaffirmed the priority order — invest to grow, the increased dividend, a strong acquisition pipeline focused on expanding AIS, and opportunistic buybacks — and said Acuity would comfortably use leverage for the right opportunity.
Tyler Bisset (Goldman Sachs, on for Brian) asked about the QSC cross-selling opportunity and early customer feedback.
Ashe said QSC's foundational strength as the world's leading full-stack AV provider (underscored by the ISE Best of Show award) is the primary growth driver, with cross-sell as the 'cherry on top,' citing the Resense Move integrated with Q-SYS for an India office solution. He noted a large overlap of high-end customers, said cross-sell will ultimately be end-user-driven at a more senior decision level, and flagged emerging AIS-ABL cross-sell traction.
Jeffrey Sprague (Vertical Research Partners) asked about the nature of the memory Acuity itself needs and whether it has secure supply as the market tightens.
Ashe reiterated the supply-shock playbook — ensure availability, cover the dollar cost through productivity and price, then regain margin — and said Acuity is generally well positioned for availability in a market changing monthly. He expected conditions to stay tight but fluid and bumpy over the next six to twelve months, noting the company has extended some purchasing and funding in advance.
Jeffrey Sprague (Vertical Research Partners) also asked whether the lowered top-line forecast was tied to memory shortages, and for detail on the restructuring actions and payback.
Ashe said there was no memory impact on the forecast since most memory sits at AIS, not ABL. On restructuring, he said the ABL-related actions — primarily reducing manufacturing labor enabled by six years of productivity gains, plus minor go-to-market changes — were not isolated, and that Acuity will continue reassessing its manufacturing network and supply chain over years, not quarters.
Robert Schultz (Baird, on for Tim) asked what is needed to close the gap between quoting activity and releases, and about independent sales network sentiment, plus any change to second-half SD&A.
Ashe said conversion rates are steady on a 15-year view but the quote-to-release interval has lengthened due to labor, crowding out, and policy uncertainty, with agents still generally positive and hiring, expecting improvement over time. Holcom and Ashe added that the ABL charges will affect SD&A somewhat, that SD&A is being managed aggressively, but that technology investment will continue.

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Q2 2026 call
Reported 2026-04-02 · figures from the Acuity Inc. (De) Q2 2026 earnings call.

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