AME — Q2 2026 Financial Report Analysis

Overview

AMETEK's second quarter of 2026 (the three months ended June 30, 2026) set records on essentially every line the company tracks: sales of $2,044.4 million, GAAP operating income of $528.2 million, net income of $406.9 million, orders of $2,284.0 million and a backlog of $4,110.2 million. Sales rose 15.0% year over year, which the 10-Q splits as "a 10% increase in organic sales, as well as a 5% increase from acquisitions."

Two things in that sentence deserve unpacking before anything else. Organic growth means growth from businesses AMETEK already owned a year ago — stripping out revenue that arrived by buying a company. Ten percent organic is a genuinely strong number for a diversified industrial manufacturer. And the orders figure — up 28.2% — grew almost twice as fast as sales, which is the single most forward-looking fact in this filing.

AMETEK makes electronic instruments and electromechanical devices: analytical and process measurement equipment, aerospace sensors, precision motion components. It sells into niches rather than mass markets, and reports in two segments — Electronic Instruments Group (EIG) and Electromechanical Group (EMG).

The numbers

Operating margin is the share of each sales dollar left after the costs of making and selling the product, before interest and tax — for an industrial company it is the cleanest single read on whether the core business is getting more or less efficient. "Adjusted" figures here add back non-cash amortization of intangible assets created by past acquisitions plus one-time integration and financing costs; the reconciliation is in the Q2 earnings release (Exhibit 99.1 to the August 4, 2026 Form 8-K).

Where the growth came from — and where it didn't

The 15% sales increase breaks into 10 points organic and 5 points acquired. The acquired portion comes from three deals: FARO Technologies (July 2025), LKC Technologies (January 2026) and First Aviation Services (May 2026). AMETEK paid $424.5 million in cash, net of cash acquired, for the latter two in the first half; First Aviation, a defense and aviation maintenance/repair business folded into EMG, has annual sales of roughly $80 million.

The product-line disclosure in the 10-Q shows the growth was not evenly spread:

Process and analytical instrumentation grew fastest, but that is also where FARO and LKC land, so much of the 17.6% is bought rather than earned. EIG's aerospace line grew 5.7% — the slowest line in the company — even though management called out commercial aerospace as a source of strong orders. That gap between order strength and shipped revenue is the backlog build showing up in the accounts.

International sales were $963.7 million, or 47.1% of the total, up 14.3%. The 10-Q attributes this to "higher demand in Europe and Asia, as well as contributions from recent acquisitions."

Segments: EMG did the heavy lifting on margin

The two segments moved in opposite directions on profitability, and the reason matters.

EMG grew sales 16.9% to a record $723.2 million, with a 15% organic increase and only 2% from acquisitions. Operating income jumped 31.6% to $189.3 million and margin expanded from 23.3% to 26.2% — a 290 basis point move. Excluding $1.2 million of First Aviation integration costs, the 10-Q puts the improvement at 300 basis points, attributing it to "the sales increase discussed above, as well as continued benefits from the Company's Operational Excellence initiatives." This is operating leverage in its most straightforward form: 15% more volume through a largely fixed cost base.

EIG grew sales 13.9% to $1,321.2 million, but the split was 7% organic and 7% acquired, and its GAAP margin fell 170 basis points to 28.0%. That decline is not core deterioration. The 10-Q attributes 110 basis points to $15.0 million of FARO and LKC integration costs and a further 120 basis points to "the dilutive impact of recent acquisitions" — meaning the acquired businesses simply run at lower margins than legacy EIG. Strip both out and EIG's margin rose 60 basis points. (The earnings release uses a slightly different "core" definition that also removes foreign-exchange effects and arrives at 30.1%, up 40 basis points.)

The consolidated picture follows the same logic: GAAP operating margin slipped 20 basis points to 25.8%, adjusted margin rose 60 basis points to 26.6%, and on the release's core basis — excluding both integration costs and acquisition dilution — margin rose 110 basis points. Cost of sales actually improved slightly as a share of revenue, to 64.0% from 64.2%. Selling, general and administrative expense went the other way, to 10.1% of sales from 9.8%, which the filing ties to selling costs at the acquired businesses.

Takeaway: Organic orders grew 25% against 10% organic sales growth, lifting backlog to a record $4,110.2 million — AMETEK is currently booking work far faster than it can ship it, which is why the company can guide the second half to roughly 7% sales growth while its demand signal runs three times that fast.

Orders and backlog: the strongest signal in the filing

Orders of $2,284.0 million against sales of $2,044.4 million is a book-to-bill ratio of 1.12 — for every dollar shipped, $1.12 of new work came in. The 10-Q decomposes the 28.2% order increase as "a 25% increase in organic orders and a 6% increase from acquisitions, partially offset by a 3% unfavorable effect of foreign currency translation." That currency drag is worth noting: measured in local currencies, underlying order intake was stronger still than the reported 28%. Year to date, orders are up 25.7% to $4,501.5 million, a 1.13 book-to-bill.

Backlog reached $4,110.2 million, up 14.8% from December 31, 2025 — roughly two quarters of shipments at the current run rate. CEO David Zapico attributed the order strength to semiconductor and commercial aerospace in EIG, and to "medtech, defense and automation markets" in EMG.

One caution against reading the backlog as purely near-term revenue: remaining performance obligations not expected to be completed within one year rose to $747.7 million from $627.4 million at year-end, and the filing says these "will be substantially satisfied within two to three years." Roughly a fifth of the backlog is multi-year work, not next-quarter shipments, and that share is growing. Longer-dated orders are good for visibility but they do not convert to revenue quickly.

Below the operating line: a one-off interest charge and a lower tax rate

Pretax income rose 11.4% to $492.4 million — slower than the 14.4% operating income growth. The gap is interest expense, which jumped 78.6% to $30.1 million, driven by "$10.0 million of fees associated with the bridge loan financing entered into in connection with the definitive agreement to acquire Indicor Instrumentation." That bridge loan was terminated in June 2026 once permanent facilities were in place, so the charge does not repeat.

Net income then grew 13.5%, faster than pretax income, because the effective tax rate fell to 17.4% from 19.0% — the 10-Q credits "favorable international tax planning initiatives and favorable return to provision adjustments." Holding last year's 19.0% rate constant, net income would have been about $8.1 million lower, roughly 3.5 cents of the 22-cent GAAP EPS increase. A further boost came from a 0.7% smaller diluted share count (229.9 million versus 231.5 million). Neither is a bad thing, but neither is operating performance, and a tax rate is not a repeatable source of earnings growth.

Cash and the Indicor acquisition

Cash generation was the standout. Operating cash flow rose 34.7% to $483.7 million against 13.5% net income growth, and free cash flow of $451.7 million equalled 111% of net income, versus 92% a year earlier — AMETEK converted more than every dollar of accounting profit into actual cash, which the six-month discussion attributes to higher net income plus "reduced investments in working capital." Year to date, operating cash flow is $935.2 million and free cash flow $877.7 million.

That matters because of what is coming. On May 5, 2026, AMETEK agreed to acquire a portfolio of instrumentation businesses from Indicor, LLC for approximately $5.0 billion in cash — a business with roughly $1.1 billion of annual sales, so about 4.5 times revenue. Closing is expected in the second half of 2026, subject to regulatory approval.

The financing is already arranged: a term loan facility of up to $4.0 billion in three tranches (three, four and five years), which can only be drawn on the closing date and only to fund this deal, plus an expanded revolving credit facility raised from $2.3 billion to $3.5 billion, of which up to $1.0 billion may go toward Indicor.

Today the balance sheet is unusually clean for a company about to do this: total debt, net of $2,036.2 million against $11,260.8 million of equity, net debt of $1,540.8 million, and a net-debt-to-capital ratio of 12.0% (down from 14.7% at year-end). On my own arithmetic, adding roughly $5 billion of debt takes debt-to-capital to somewhere near 38% from 15.3%, and net debt to about $6.5 billion — on the order of 2.5 times annualized first-half EBITDA of $1,245.7 million, before counting whatever EBITDA Indicor itself contributes, which the filing does not disclose. That is a real step up in leverage but not a stressed one, and the 111% cash conversion is what makes it financeable.

Guidance and trajectory

Management raised full-year 2026 guidance alongside the quarter:

The guidance is more conservative than the quarter reads. FY2025 sales were $7,401.1 million; about 10% growth implies roughly $8.14 billion for 2026. With $3,972.8 million already booked in the first half, that leaves roughly $4.17 billion for the second half against $3,891.1 million a year ago — about 7% growth, versus the 13.2% delivered in the first half. The Q3 guide of "high single digits" is consistent with that.

The same conservatism shows in earnings. Full-year GAAP EPS of $7.19–$7.29, minus the $3.51 already earned and the $1.85–$1.87 guided for Q3, implies a fourth quarter of roughly $1.81–$1.93 — essentially flat to modestly above Q3, despite a backlog that is up 14.8% since December.

My read. The demand picture is considerably better than the guidance implies, and the two are reconcilable in only a few ways: management is being deliberately cautious, the newer orders are weighted toward the multi-year delivery bucket that grew 19% this half, or some of the order surge reflects customers ordering earlier than usual — a risk the filing itself gestures at when it describes tariff-driven "strategic adjustments to our global supply chains" and "changing demand patterns," while stating tariffs had no material effect on first-half results. Pull-forward ordering is a genuine possibility in an environment where customers are managing trade risk, and a 25% organic order rate is not a level that sustains indefinitely.

On margin, the mechanics are favorable into 2027. EIG's reported margin is currently being held down by integration costs and by acquired businesses that earn less than the legacy portfolio; both effects fade as FARO and LKC are absorbed, and the underlying 60 basis point core improvement is what persists. EMG's 290 basis point expansion is harder to repeat — it came from 15% organic volume, and the comparison gets tougher from here.

The main uncertainty is execution on Indicor, not demand. A $5.0 billion purchase at roughly 4.5 times sales is by a wide margin the largest thing AMETEK has attempted, it triples the debt load, and the same acquisition dilution now visible in EIG's reported margin will repeat on a much bigger scale in 2027 — reported margins will look worse before the integration playbook makes them look better. The record backlog, 111% cash conversion and 12% net-debt-to-capital going in are what give the company room to do it.

---

Sources: AMETEK, Inc. Form 10-Q for the quarterly period ended June 30, 2026 (filed August 4, 2026, accession 0001037868-26-000175) and Exhibit 99.1 to the Form 8-K filed August 4, 2026 (accession 0001037868-26-000173). Full-year 2025 sales from the Form 10-K for the year ended December 31, 2025.