ADVANCED ENERGY INDUSTRIES INC

Previous wording

We continue to monitor developments related to tariffs and trade policy, including recent court rulings affecting certain U.S. tariffs. While the tariff impact was not material to our results, we remain focused on potential governmental responses and development of potential future recoveries to adjust our mitigation strategies with our customers. In addition, heightened geopolitical instability, including the conflicts in the Middle East, has contributed to volatility in energy markets, disruptions to global shipping, and broader macroeconomic uncertainty. Increased demand relative to supply for AI-related equipment and semiconductors is extending lead times and increasing prices of certain components, impacting both timing of some customer demand and many of our suppliers. We continue to take actions to procure strategic supply of materials and recover increased costs through pricing actions. While these factors were not material to our results in the current quarter, they could become material in future periods and adversely affect our costs such as higher energy and supply chain costs, as well as negatively impact our ability to sell our products and provide services.

Current wording

Our business and results of operations continue to be influenced by a dynamic global trade, geopolitical, and supply chain environment. We continue to monitor developments related to tariffs and trade policy. In addition, heightened geopolitical instability, including the conflicts in the Middle East, has contributed to volatility in energy markets, disruptions to global shipping, and broader macroeconomic uncertainty. Increased demand relative to supply for AI-related equipment and semiconductors is extending lead times and increasing prices of certain components, impacting both timing of some customer demand and many of our suppliers. We continue to take actions to procure strategic supply of materials and endeavor to recover increased costs through pricing actions. While these factors were not material to our results in the current quarter, they could become material in future periods and adversely affect our costs such as higher energy and supply chain costs, as well as negatively impact our ability to sell our products and provide services.

Previous wording

The Semiconductor Equipment market continues to be driven by demand for leading-edge devices in logic and memory used in AI applications, partially offset by lower trailing-edge demand due to capacity underutilization, particularly in China, U.S. export restrictions to China, and the impact of tariffs. However, end market conditions started to improve in the fourth quarter of 2025. We expect these improving conditions to continue in 2026 and to accelerate demand for our products in the remainder of the year.

Current wording

In the first half of 2026, the Semiconductor Equipment market continued to grow due to demand for leading-edge devices in logic and memory used in AI applications, driving growing demand for our products. We expect these market conditions to continue in the remainder of the year.

Previous wording

Due to increased investments in AI applications by leading hyperscale customers, along with adoption of our next-generation high-power solutions, revenue in the Data Center Computing market more than doubled in the first quarter of 2026 compared to the same quarter in the previous year.

Current wording

Due to increased investments in AI applications by leading hyperscale customers, revenue in the Data Center Computing market increased in the first half of 2026 compared to the same period in the previous year.

Previous wording

We believe that the Industrial and Medical market began to recover starting in the second quarter of 2025 following a major industry downturn as a result of macroeconomic conditions and supply chain disruptions from prior years. The recovery continued in the first quarter of 2026 compared to the same quarter in the previous year. In addition, we expect demand to continue to improve in the remainder of 2026, paced by overall economic conditions.

Current wording

In the first half of 2026, we believe demand in the Industrial and Medical market has returned to normalized levels after customers completed their inventory rebalancing as a result of macroeconomic conditions and supply chain disruptions from prior years. The recovery continued in the second quarter of 2026 compared to the same quarter in the previous year. We expect demand to continue to improve in the remainder of 2026.

Previous wording

Demand in the Telecommunication and Networking market is driven by adoption of more advanced mobile standards, such as 5G technologies, networking investments by telecommunication service providers, enterprises upgrading their communication networks, and data centers investing in their networks for AI-driven increased bandwidth.

Current wording

Demand in the Telecom and Networking market is driven by adoption of more advanced mobile standards, such as 5G technologies, networking investments by telecommunication service providers, enterprises upgrading their communication networks, and data centers investing in their networks for AI-driven increased bandwidth.

Previous wording

End demand in the Telecom and Networking market remained stable in 2025. Revenue in the first quarter of 2026 increased primarily due to growth in AI-related applications. We expect this trend to continue for the remainder of the year.

Current wording

End market demand in the Telecom and Networking market remained stable in the first half of 2026, with growth primarily driven by demand in AI-related applications. We expect this trend to continue for the remainder of 2026.

Previous wording

Semiconductor Equipment revenue for the three months ended March 31, 2026 was relatively flat as compared to the same period in the prior year, but increased sequentially from the fourth quarter on strengthening demand.

Current wording

Semiconductor Equipment revenue for the three and six months ended June 30, 2026 increased compared to the same periods in 2025 on strengthening equipment demand driven by investments in AI.

Previous wording

The increase in Data Center Computing revenue was due to increased AI investments by leading hyperscale customers and growth associated with design wins secured previously.

Current wording

The increases in Data Center Computing revenue for the three and six months ended June 30, 2026, compared to the same periods in 2025 were due to increased AI investments by leading hyperscale customers and incremental growth associated with design wins secured previously.

Previous wording

The increase in Industrial and Medical revenue was primarily due to recovery in the end markets as a result of ongoing customer inventory rebalancing and an improved demand environment.

Current wording

The increases in Industrial and Medical revenue for the three and six months ended June 30, 2026, compared to the same periods in 2025 were primarily due to recovery in the end markets as a result of the completion of customer inventory rebalancing and an improved demand environment.

Previous wording

The increase in Telecom and Networking revenue was primarily driven by growth in AI-related applications.

Current wording

The increases in Telecom and Networking revenue for the three and six months ended June 30, 2026, compared to the same periods in 2025 were primarily driven by growth in AI-related applications.

Previous wording

The increase in gross profit was largely due to an increase in revenue and manufacturing cost improvements. Gross margin improved mainly due to the impact of higher volume, and approximately 60 basis points resulting from manufacturing cost reduction programs, partially offset by the impact of tariffs during the three months ended March 31, 2026.

Current wording

The increase in gross profit was largely due to the increase in revenue and mix driven by new products. Gross margin grew mainly due to improved mix, the impact of tariff refunds for 120 basis points, and higher volume.

Previous wording

The increase in research and development expense was driven by higher compensation costs related to stock-based compensation and annual merit increases, and higher engineering program and materials costs compared to the same period in the prior year.

Current wording

The increase in research and development expense was driven by higher compensation costs related to stock-based compensation and annual merit increases, and higher engineering program and materials costs compared to the same periods in the prior year.

Previous wording

The increase in restructuring, asset impairments, and other charges is primarily driven by the timing of our restructuring plan decisions.

Current wording

The decrease in restructuring, asset impairments, and other charges is primarily driven by the timing of our restructuring plan decisions.

Previous wording

Other expense, net consists primarily of foreign exchange gains and losses and other miscellaneous items. For the three months ended March 31, 2026, we had a $3.4 million improvement in other expense, net compared to the same period in the prior year primarily as a result of foreign exchange gains.

Current wording

Other expense, net consists primarily of foreign exchange gains and losses and other miscellaneous items. For the three and six months ended June 30, 2026, we had a $3.1 million and $6.5 million improvement, respectively, in other expense, net compared to the same periods in the prior year primarily as a result of foreign exchange gains.

Previous wording

Interest expense remained relatively flat compared to the same period in prior year. SeeNote 6. Long-Term Debt in Part I, Item 1 “Unaudited Consolidated Financial Statements” for information regarding our debt.

Current wording

Interest expense remained relatively flat compared to the same period in the prior year. SeeNote 6. Long-Term Debt in Part I, Item 1 “Unaudited Consolidated Financial Statements” for information regarding our debt.

Previous wording

Our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the benefit of earnings in foreign jurisdictions which are subject to lower tax rates, as well as tax credits, partially offset by net U.S. tax on foreign operations. The effective tax rate as of March 31, 2026 is lower than the same period in 2025 primarily due to excess tax benefits recognized from stock-based compensation.

Current wording

Our effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the benefit of earnings in foreign jurisdictions that are subject to lower tax rates, as well as tax credits, partially offset by net U.S. tax on foreign operations. The effective tax rate for the three months ended June 30, 2026, was higher than the effective tax rate for the same period in 2025 primarily due to the tax effect of the convertible note inducement charge incurred in the second quarter of 2026 being treated as a discrete event and disallowed as an expense for tax purposes, partially offset by the release of tax reserves based on statute of limitation expirations and the settlement of an audit in the same period. The effective tax rate for the six months ended June 30, 2026, was lower than the effective tax rate for the same period in 2025 primarily due to excess tax benefits recognized in 2026 from share-based compensation and the release of tax reserves based on statute of limitation expirations and the settlement of an audit in the same period.

Previous wording

As of March 31, 2026, certain countries in which the Company operates have implemented or are in the process of implementing the Pillar II minimum global effective tax rate regime as put forth by the Organization for Economic Cooperation and Development (“OECD”). Specifically, the OECD released prospective “Side-by-Side” guidance in early 2026 which is generally beneficial to U.S. parented organizations, but will require adoption by member countries to implement. As countries continue to make revisions to legislation and release additional guidance with respect to the global minimum tax, we continue to monitor and evaluate potential cash tax expense and associated impacts to the effective tax rate in the jurisdictions in which the Company operates.

Current wording

As of June 30, 2026, certain countries in which the Company operates have implemented or are in the process of implementing the Pillar II minimum global effective tax rate regime as put forth by the Organization for Economic Cooperation and Development (“OECD”). Specifically, the OECD released prospective “Side-by-Side” guidance in early 2026 which is generally beneficial to U.S. parented organizations but will require adoption by member countries to implement. As countries continue to make revisions to their legislation and release additional guidance with respect to the global minimum tax, we continue to monitor and evaluate any potential cash tax expenses and tax rate impacts in the countries in which we operate.

Previous wording

On July 4, 2025, the One Big Beautiful Bill (“OBBB”) Act, which includes a broad range of elective tax law items available in 2025 and prescribed tax law changes in 2026, was signed into law in the United States. The Company has reflected the impact of the OBBB’s elective tax law items in its financial statements for the period ending March 31, 2026. The OBBB is expected to have an overall positive effect on the GAAP and non-GAAP effective tax rate of the Company, benefiting from revisions to foreign-derived intangible income (FDII) and the foreign tax credit rules.

Current wording

On July 4, 2025, the One Big Beautiful Bill (“OBBB”) Act, which includes a broad range of elective tax law items available in 2025 and prescribed tax law changes in 2026, was signed into law in the United States. The Company has reflected the impact of the OBBB’s elective tax law items in its financial statements for the period ending June 30, 2026. OBBB is expected to have an overall positive effect on the GAAP and non-GAAP effective tax rate of the Company, benefiting from revisions to foreign-derived intangible income (FDII) and the foreign tax credit rules.

Previous wording

The non-GAAP results presented below exclude the impact of non-cash related charges, such as stock-based compensation, amortization of intangible assets, and long-term unrealized foreign exchange gains and losses. In addition, we exclude discontinued operations and other items such as acquisition-related costs, facility, infrastructure, and other transition costs, and restructuring expenses, as they are not indicative of future performance. The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments. Non-GAAP results also exclude non-recurring discrete tax expenses or benefits. Finally, non-GAAP diluted weighted-average common shares are adjusted to reflect the dilutive impact of our convertible notes based on the higher note hedge strike price instead of the initial conversion price.

Current wording

The non-GAAP results presented below exclude the impact of non-cash related charges, such as stock-based compensation, amortization of intangible assets, and long-term unrealized foreign exchange gains and losses. In addition, we exclude discontinued operations and other items such as acquisition-related costs, facility, infrastructure, and other transition costs, and restructuring expenses, as they are not indicative of future performance. The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments. Non-GAAP results also exclude certain non-recurring discrete tax expenses or benefits. Finally, non-GAAP diluted weighted-average common shares are adjusted to reflect the dilutive impact of our convertible notes based on the higher note hedge strike price instead of the initial conversion price.

Previous wording

Adequate liquidity and cash generation are important to the execution of our strategic initiatives. Our ability to fund our operations, acquisitions, capital expenditures, and product development efforts may depend on our ability to generate cash from operating activities, which is subject to future operating performance, as well as general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control. Our primary sources of liquidity continue to be our available cash, cash generated from operations, and available borrowing capacity under the Revolving Facility (defined inNote 6. Long-Term Debt in Part I, Item 1 “Unaudited Consolidated Financial Statements”).

Current wording

Adequate liquidity and cash generation are important to the execution of our strategic initiatives. Our ability to fund our operations, acquisitions, capital expenditures, and product development efforts may depend on our ability to generate cash from operating activities, which is subject to future operating performance, as well as general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control. Our primary sources of liquidity continue to be our available cash, proceeds from the issuance of convertible notes, cash generated from operations, and available borrowing capacity under the Revolving Facility (defined inNote 6. Long-Term Debt in Part I, Item 1 “Unaudited Consolidated Financial Statements”).

Previous wording

As of March 31, 2026, our cash and cash equivalents totaled $699.5 million, while our available funding under our undrawn Revolving Facility was $600.0 million. We believe our sources of liquidity will be adequate to meet operational needs, including capital expenditures, as well as anticipated debt service, share repurchase programs, dividends, and strategic investments.

Current wording

As of June 30,2026, our cash and cash equivalents totaled $1,396.5 million, while our available funding under our undrawn Revolving Facility was $600.0 million. We believe our sources of liquidity will be adequate to meet operational needs, including capital expenditures, as well as anticipated debt service, share repurchase programs, dividends, and strategic investments. We have suspended activity under our share repurchase plan in connection with the issuance of the redemption notice for the remaining 2028 Notes. The share repurchase program has no expiration date, has not been terminated, and remains authorized.

Previous wording

During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust our expenditures to reflect the current market conditions and our projected revenue and demand. Our capital expenditures are primarily directed towards manufacturing and operations and can materially influence our available cash for other initiatives. In the past year and through the first quarter, our capital expenditures increased as we are investing in our factories to expand capacity and in our new ERP system. In addition, we may seek additional debt or equity financing from time to time; however, such additional financing may not be available on acceptable terms, if at all.

Current wording

During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust our expenditures to reflect the current market conditions and our projected revenue and demand. Our capital expenditures are primarily directed towards manufacturing and operations and can materially influence our available cash for other initiatives. In the past year and through the second quarter, our capital expenditures increased as we are investing in our factories to expand capacity and in our new ERP system. In addition, we may seek additional debt or equity financing from time to time; however, such additional financing may not be available on acceptable terms, if at all.

Previous wording

As of March 31, 2026, our only outstanding debt is the $575.0 million Convertible Notes, which mature on September 15, 2028 and carry a 2.5% interest rate. Should we have future borrowings under our Term Loan Facility or Revolving Facility, those borrowings would be subject to a variable rate.

Current wording

As of June 30, 2026, our outstanding debt includes $136.7 million principal amount of the 2028 Notes and $1.15 billion principal amount of the 2031 Notes. As of June 30, 2026, we had no borrowings under our Credit Agreement. Should we have future borrowings under our Term Loan Facility or Revolving Facility of our Credit Agreement, those borrowings would be subject to a variable rate.

Previous wording

During the three months ended March 31, 2026, we paid quarterly cash dividends of $0.10 per share, totaling $3.8 million. We currently anticipate that a cash dividend of $0.10 per share will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, business conditions, and other factors.

Current wording

During the six months ended June 30, 2026, we paid quarterly cash dividends of $0.10 per share, totaling $7.9 million. We currently anticipate that a cash dividend of $0.10 per share will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, business conditions, and other factors.

Previous wording

Net cash used in continuing operations for the three months ended March 31, 2026 was $5.6 million, as compared to cash from continuing operations of $29.2 million for the same period in the prior year. The $34.8 million decrease was primarily driven by increases in accounts receivable as a result of higher revenue and increased inventories to support anticipated future demand partially offset by increased accounts payable. In addition, accrued expenses decreased primarily due to the timing of incentive compensation payments.

Current wording

Net cash from continuing operations for the six months ended June 30, 2026, was $80.0 million, as compared to $75.7 million for the same period in the prior year. The $4.3 million increase was primarily due to higher net income from continuing operations offset by a net increase in working capital driven by increases in accounts receivable on higher revenue and inventory to support anticipated future demand partially offset by an increase in accounts payable.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2026 was $38.0 million primarily due to $36.6 million in purchases of property and equipment, which was largely driven by continued investments in our manufacturing footprint and capacity, our new ERP system, and investments in other capabilities across multiple sites.

Current wording

Net cash used in investing activities for the six months ended June 30, 2026, was $87.5 million primarily due to $86.1 million in purchases of property and equipment, which was largely driven by continued investments in our manufacturing footprint and capacity, our new ERP system, and investments in other capabilities across multiple sites.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2025 was $15.1 million primarily due to $13.9 million in purchases of property and equipment, which was largely driven by investments in our manufacturing footprint and capacity, and $1.2 million in purchases of investments.

Current wording

Net cash used in investing activities for the six months ended June 30, 2025, was $43.6 million primarily due to $42.0 million in purchases of property and equipment, which was largely driven by investments in our manufacturing footprint and capacity, and $1.6 million in purchases of investments.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2026 was $44.9 million and included $0.5 million for repurchase of common stock, $40.6 million in net payments related to stock-based award activities, and $3.8 million for dividend payments.

Current wording

Net cash used in financing activities for the six months ended June 30, 2025, was $42.8 million and included $23.7 million for repurchase of common stock, $8.0 million in net payments related to stock-based award activities, and $7.7 million for dividend payments. In addition, we paid $1.9 million in fees related to entering the Credit Agreement and $1.5 million for the release of the holdback associated with the Airity Acquisition.

Previous wording

During the three months ended March 31, 2026, foreign currency translation had a minimal impact on cash. See “Foreign Currency Exchange Rate Risk” in Part I, Item 3 for more information**.**

Current wording

During the six months ended June 30, 2026, foreign currency translation had a minimal impact on cash. See “Foreign Currency Exchange Rate Risk” in Part I, Item 3 for more information**.**