The call in brief

Itron delivered a high-quality second quarter of 2026 defined by record profitability on softer revenue. Revenue of $563 million came in within guidance but declined about 7% year-over-year, driven by the timing of Networked Solutions project deployments (that segment down 17%), while adjusted gross margin set a company record at 41.4% (up 460 basis points) on favorable mix, operational efficiency, and a smaller factory footprint. Adjusted EBITDA rose 8% to $97 million and free cash flow was a strong $81 million, though GAAP diluted EPS fell to $1.19 (from $1.47) and non-GAAP EPS slipped $0.03 to $1.59, as lower interest income and a higher effective tax rate more than offset operating gains. The recurring-revenue engine continued to build, with annual recurring revenue up 21% to $417 million, Outcomes revenue up 13%, and licensed apps nearing 28 million; a new ~75%-gross-margin Resiliency Solutions segment (Urbint and Locusview) contributed $16 million. Management highlighted Grid Edge Intelligence winning in the mid-market via Platform-as-a-Service (1789 Lux Partners, LADWP, SMUD), a record and still-growing sales pipeline, and a healthy $4.4 billion backlog that converts without cancellation, while pushing back on the idea that data-center generation crowds out distribution CapEx. On the outlook, Itron narrowed full-year revenue guidance to $2.37-$2.41 billion (up ~1% versus 2025, implying ~8% second-half growth) and raised full-year non-GAAP EPS to $6.30-$6.50, about 7% above the February outlook and ~7% above 2025 when normalized for tax and interest, framing the quarter as proof of a more resilient operating model with durable earnings power.

What went well
  • Itron delivered a record adjusted gross margin of 41.4% (up 460 basis points year-over-year) and earnings well ahead of expectations on in-line revenue, demonstrating structurally better earnings power.
  • Annual recurring revenue grew approximately 21% year-over-year to $417 million and Outcomes revenue rose 13%, evidence of continued adoption of higher-value software, services, and recurring offerings.
  • Grid Edge Intelligence began winning in the mid-market, with named wins including 1789 Lux Partners and several municipalities (platform-as-a-service), LADWP, and SMUD (expanded Riva/Distributed Intelligence), beyond the early-adopter large IOUs.
  • Free cash flow was a strong $81 million and management narrowed full-year revenue guidance while raising the full-year non-GAAP EPS outlook by 7% on operating execution.
  • The sales pipeline remained at record levels and continued to grow, underpinned by durable grid-expansion, resiliency, and efficiency demand, with a healthy $4.4 billion backlog and strong win rates.
  • Adjusted EBITDA of $97 million grew 8% year-over-year, and every segment posted meaningful margin expansion, including a new Resiliency Solutions segment at ~75% gross margin.
What went wrong
  • Revenue of $563 million declined about 7% year-over-year (from $607 million), driven by the timing of Networked Solutions project deployments (that segment down 17%).
  • GAAP net income fell to $53 million ($1.19 diluted EPS) from $68 million ($1.47), and non-GAAP EPS slipped $0.03 to $1.59, hurt by lower interest income (a $0.13 headwind) and a higher effective tax rate (a $0.12 headwind).
  • Free cash flow declined to $81 million from $91 million a year ago on higher tax payments and lower interest income.
  • Full-year non-GAAP EPS guidance ($6.30-$6.50) remains below 2025 on an as-reported basis (only ~7% higher once normalized for tax and interest income), reflecting the revenue softness.
  • Bookings of $550 million were only in line with expectations (the first sequential increase in several quarters), and management stressed regulatory-approval timing will keep quarterly bookings lumpy.

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