Snapshot
Itron, Inc. reported $587M of revenue in Q1 2026, up -3.3% year over year, with diluted EPS of $1.18 and an operating margin of 11.5%.
- Revenue
- $587M
- YoY growth
- +-3.3%
- Diluted EPS
- $1.18
- Operating margin
- 11.5%
What management said
- •Tom Deitrich, Itron's President and Chief Executive Officer, and Joan Hooper, Senior Vice President and Chief Financial Officer, will review Itron's first quarter results and provide a general business update and outlook.
- •Before Tom begins, a reminder that our earnings release and financial presentation include non-GAAP financial information that we believe enhances the overall understanding of our current and future performance.
- •Reconciliations of differences between GAAP and non-GAAP financial measures are available in our earnings release and on our investor relations website.
- •While project timing provided a modest tailwind in Q1 revenue, we anticipate the first half to be consistent with our initial guidance.
- •The adoption of flexible and intelligent solutions is accelerating, and that is translating into durable compounding growth over time.
- •Total company annual recurring revenue at quarter end was $414 million, up 28% due to strong organic growth, plus our recently acquired Resiliency Solutions segment.
- •Our customers continue to work in a complex environment balancing global uncertainty, affordability concerns, resiliency imperatives, and growing demand variability.
- •Our first quarter bookings were $476 million, bringing the total backlog to $4.4 billion at quarter end, in line with our expectations.
- •This engagement reflects the growing demand for distributed intelligence and grid edge computing as utilities modernize their networks to improve reliability, resilience, and operational efficiency.
- •Importantly, this program highlights Itron's ability to deliver an integrated, first of its kind solution that brings together smart devices, software, and communication to support next-generation grid operations.
- •The integration of Resiliency Solutions segment is on track, and the team is already contributing meaningfully.
- •The digital construction management team extended a contract with a large natural gas pipeline customer, a strong signal of the customer value of deploying our platform.
What went well
- •First quarter results came in ahead of expectations on strong execution, with revenue of $587 million, adjusted EBITDA of $92 million, non-GAAP EPS of $1.49, and free cash flow of $79 million.
- •Total company annual recurring revenue reached $414 million at quarter end, up 28% year-over-year, driven by strong organic growth plus the newly acquired Resiliency Solutions segment.
- •The Outcomes segment grew 22% year-over-year, reflecting strong recurring and services revenue.
- •Adjusted gross margin of 40.7% expanded 490 basis points versus the prior-year quarter on favorable mix and operational efficiencies, with Device Solutions setting segment-level quarterly records for both adjusted gross margin and operating margin.
- •First quarter bookings of $476 million brought total backlog to $4.4 billion, including notable wins such as a strategic grid visibility program with Duquesne Light Company and an expanded Intelis static gas endpoint deployment.
- •Outcomes and Resiliency Solutions combined now represent 25% of total backlog, and that higher-quality, recurring-revenue share is growing.
What went wrong
- •Total revenue declined year-over-year, primarily due to the timing of large Networked Solutions projects.
- •GAAP net income fell to $53 million ($1.18 per diluted share) from $65 million ($1.42) a year ago, hurt by higher operating expenses from the two recent acquisitions and lower interest income.
- •Networked Solutions revenue decreased 14% on a constant-currency basis and Device Solutions decreased 9%, reflecting deployment timing and the expected decline in legacy electricity products in EMEA.
- •Non-GAAP EPS of $1.49 was down $0.03 year-over-year as a $0.13 per share drag from lower interest income outweighed operating income gains.
- •The recent acquisitions are dilutive to 2026 EPS due to less interest income, and Resiliency Solutions remains a drag on operating margin given its higher OpEx structure.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Revenue | Q2 2026 | — | $560 million-$570 million (down ~7% YoY at midpoint) | New Q2 outlook; first half consistent with February annual outlook |
| Non-GAAP EPS | Q2 2026 | — | $1.25-$1.35 per diluted share (down ~8% YoY at midpoint after normalizing for tax rate and interest income) | New Q2 outlook |
| Full-year revenue vs 2027 targets | 2026 / 2027 targets | Toward low end of range | Toward low end of range; ahead on gross margin, EBITDA, cash flow and EPS | Unchanged from prior call; second half expected to be back-half loaded |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Outcomes revenue | +20% constant currency (+22% as cited by CEO) | Higher recurring and services revenue |
| Networked Solutions revenue | -14% constant currency | Timing of large project deployments |
| Device Solutions revenue | -9% constant currency | Expected decline in legacy electricity products in EMEA and timing of North America projects |
| Adjusted gross margin | +490 bps to 40.7% | Favorable mix and operational efficiencies, including roll-off of pre-inflation-priced backlog |
| Adjusted EBITDA | +5% to $92 million | Higher operating income on favorable mix and efficiencies |
| Free cash flow | $79 million vs $67 million prior year | Lower tax payments |
| Annual recurring revenue | +28% to $414 million | Strong organic growth plus the acquired Resiliency Solutions segment |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Grid modernization as a durable multi-year structural trend | — | Management views grid modernization as inevitable, citing aging infrastructure, distributed energy resources, and AI-driven demand; expects utility distribution spending to grow at least through end of the decade | rising |
| Shift to recurring revenue (Outcomes and Resiliency Solutions) | — | Combined 25% of backlog and growing; Outcomes runs two-thirds to three-quarters recurring, Resiliency mostly recurring; ARR up 28% | rising |
| Networks deployment timing and back-half loading | Discussed on prior call; year expected to be back-half loaded | Q1 benefited from accelerated first-half project deployments; second-half uptick depends on Networks deployment conversion | steady |
| Integration of Urbint and Locusview (Resiliency Solutions) | Outlined in February call as accretive to revenue growth, gross margin and EBITDA but dilutive to 2026 EPS | Integration on track and the top 2026 priority; segment contributed $16 million revenue at 73% gross margin; no synergies booked yet | steady |
| Government grid funding (GRIP to DOE SPARK program) | — | Some GRIP projects were put on hold or canceled, now largely being replaced by the new DOE SPARK program; no project cancellations seen at Itron | rising |
Q&A summary
What drove the acceleration of project timing in Q1, and what could account for the implied step-down in Q2 and pickup in the back half?
The Q1 beat came mainly from accelerated Networked Solutions deployments, with a little from Device Solutions. Combining Q1 actuals with the Q2 guidance midpoint is slightly higher than the February view on revenue and higher on gross margin, EBITDA and EPS. The first half is shaping up as expected; the back-half uptick must come from Networks deployments, since Devices is roughly flat while Outcomes and Resiliency keep growing. Management saw no supply chain or labor constraints in Q1.
Can you give more color on customer behavior and the potential impact of reinstated grid projects under the DOE SPARK program?
Water in Europe is strong above historical levels and U.S. water is slower; North America gas is particularly strong with more than 5x the endpoints in flight versus historical levels; electricity is strong in Asia Pacific and in line with expectations in North America. Some GRIP projects that were paused or canceled are largely being replaced by SPARK. Itron has seen no cancellations because the work is non-discretionary, and management remains confident in grid intelligence demand.
How does this year compare with the Analyst Day 2027 targets, and has anything changed?
No change from the prior call. Itron is well ahead of its 2027 targets on gross margin, EBITDA, cash flow and EPS, with revenue likely toward the low end of the range. Nothing in the market has changed that view, and the grid build-out is seen as structural and inevitable.
How much of the 25% Outcomes and Resiliency backlog is actual recurring revenue?
Outcomes generally runs about two-thirds to three-quarters recurring revenue, likely drifting higher over time, and Resiliency Solutions is mostly recurring. The quoted backlog is multi-year, typically playing out over three to four years. ARR was $414 million at quarter end, up 28% year-over-year. CFO clarified recurring revenue can include services, not just software.
Given lower software multiples, how do you think about capital allocation and being acquisitive?
The first 2026 priority is successfully integrating Urbint and Locusview, including systems integration. Itron will opportunistically consider other deals but is not actively seeking acquisitions in 2026, while feeling good about its balance sheet and ability to act if something arises.
How should we think about the customer-mix gross margin benefit versus the ongoing recurring margin of the business?
The last of the pre-inflation-priced backlog has now rolled out, helping the margin profile as expected, alongside self-help from factory consolidation and portfolio pruning. Versus the 2027 targets, Device Solutions will be materially ahead and stay near current levels, Networked Solutions toward the upper end of its range, Outcomes mix-dependent as it scales, and Resiliency's strong gross margin will pull the company average upward as it grows.