Battery manufacturer EnerSys (NYSE: ENS) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 7.6% year on year to $951.3 million. Guidance for next quarter’s revenue was better than expected at $940 million at the midpoint, 1.4% above analysts’ estimates. Its non-GAAP profit of $2.56 per share was 8.8% above analysts’ consensus estimates.
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EnerSys (ENS) Q3 CY2025 Highlights:
- Revenue: $951.3 million vs analyst estimates of $890.3 million (7.6% year-on-year growth, 6.9% beat)
- Adjusted EPS: $2.56 vs analyst estimates of $2.35 (8.8% beat)
- Adjusted EBITDA: $146 million vs analyst estimates of $132.3 million (15.3% margin, 10.3% beat)
- Revenue Guidance for Q4 CY2025 is $940 million at the midpoint, above analyst estimates of $927.1 million
- Adjusted EPS guidance for Q4 CY2025 is $2.76 at the midpoint, above analyst estimates of $2.55
- Operating Margin: 9.7%, down from 11.2% in the same quarter last year
- Sales Volumes rose 3% year on year (-3% in the same quarter last year)
- Market Capitalization: $4.77 billion
StockStory’s Take
EnerSys delivered a positive third quarter, with results that outpaced Wall Street’s expectations and a share price increase following the announcement. Management attributed the performance to robust growth in data center and aerospace and defense markets, as well as continued strength in its Energy Systems segment. CEO Shawn O’Connell highlighted operational improvements from the company’s EnerGize strategic framework, noting, “We are reallocating resources to higher impact projects, and we are focusing on where we have a right to win.” The company also benefited from cost initiatives and new Centers of Excellence, which improved manufacturing agility and reduced validation times for new components.
Looking ahead, EnerSys’ raised guidance reflects anticipated benefits from ongoing cost reductions, expanding data center demand, and further traction in aerospace and defense. The company’s leadership points to continued margin improvement in Energy Systems and a targeted ramp-up in lithium battery production. CFO Andrea Funk explained that, while lithium-related costs will temporarily pressure margins, “there’s no reason not to expect ongoing continuous improvement in gross margin similar to what we’ve been seeing.” Management expects restructuring benefits and new product introductions to drive operating leverage, even as end market conditions remain mixed.
Key Insights from Management’s Remarks
EnerSys’ latest quarter was driven by a combination of targeted operational changes, end-market demand shifts, and the initial impact of cost-saving programs, with segment performance diverging based on underlying industry trends.
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Data center momentum: Management reported data center revenue growth of 29% year-over-year, describing the segment as a key growth vector due to rising demand for artificial intelligence (AI) and energy resilience. The company’s lead-acid battery products, particularly the HX line, have been central to these gains, with new product introductions expected to expand share.
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Operational efficiency gains: The rollout of three Centers of Excellence (lead-acid, power electronics, and lithium) enabled faster product validation and defect detection, reducing component validation times from weeks to days. These initiatives supported quick-turn solutions for major communications customers and improved factory productivity.
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Cost-saving initiatives underway: EnerSys began realizing benefits from an $80 million annual cost-saving program, including workforce reductions and reallocation of resources. Management expects these savings to ramp further in the coming quarters, supporting operating margin improvement.
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Aerospace & defense growth: Specialty segment performance improved, with strong aerospace and defense (A&D) demand and a successful integration of the Bren-Tronics acquisition. The company’s advanced thermal battery technology is seeing demand across 12 government programs, underpinning growth in this area.
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Tariff mitigation and supply chain adaptation: The company offset $70 million in direct tariff exposure through supply chain actions and pricing strategies. Management continues to proactively address both direct and indirect tariff effects, maintaining confidence in their ability to manage future policy shifts.
Drivers of Future Performance
Management’s outlook for the coming quarters centers on cost discipline, ongoing demand in data centers and aerospace, and a gradual recovery in Motive Power volumes, tempered by near-term margin headwinds from lithium ramp-up and tariffs.
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Cost reductions and efficiency: The company expects restructuring and cost-saving programs to drive operating leverage, with $30–$35 million in net savings for the year. Further benefits are anticipated from automation and factory optimization, especially as Centers of Excellence mature.
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Growth in data centers and aerospace: Management is optimistic about continued strength in data centers due to AI-driven demand and in aerospace and defense as government spending rises. New product introductions and expanding applications are expected to support higher segment margins.
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Lithium ramp-up pressures margins: While lithium battery sales are projected to grow, initial volumes bring elevated costs due to China sourcing and suboptimal plant utilization. Management anticipates margin pressure in Motive Power until lithium sales reach scale, after which profitability should improve.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will be focused on (1) evidence that cost-saving measures and Centers of Excellence deliver sustained margin improvement, (2) ongoing momentum in data centers and aerospace and defense as secular tailwinds persist, and (3) signs of Motive Power volume recovery alongside successful mitigation of lithium cost pressures. Updates on the lithium cell factory and further product introductions will also be closely watched.
EnerSys currently trades at $132, up from $126.85 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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