Cognex Q2 2026 Earnings Report

Cognex EPS Results

• Actual EPS: $0.45
• Consensus EPS: $0.42
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: $0.25

Cognex Revenue Results

• Actual Revenue: $291.26 million
• Expected Revenue: $292.10 million
• Beat/Miss: Missed by -$834.00 thousand
• YoY Revenue Growth: +16.90%

Cognex Announcement Details

• Quarter: Q2 2026
• Date: 8/5/2026
• Time: After Market Closes
• Conference Call Date: Thursday, August 6, 2026
• Conference Call Time: 8:30AM ET

Cognex (NASDAQ:CGNX) is a leading provider of machine vision systems, software, sensors and industrial barcode readers used to automate manufacturing, logistics and distribution processes. The company designs and develops vision-based products that help manufacturers and logistics operators inspect, identify and guide parts, assemblies and packaged goods in real time. Its solutions are applied in a broad range of industries, including automotive, electronics, semiconductor, pharmaceutical, food and beverage, and general manufacturing.

The company’s product portfolio includes stand-alone vision systems, vision sensors and deep learning-based software platforms that enable automated inspection, quality control and traceability. Cognex’s DataMan line of handheld and fixed-mount barcode readers is widely used for 1D and 2D code reading in compliance with global track-and-trace standards. Its In-Sight and VisionPro platforms offer configurable and programmable vision tools that can be customized to address tasks such as defect detection, measurement, text verification and robot guidance.

Cognex serves a global customer base through a network of direct sales offices and channel partners in the Americas, Europe and Asia. Its solutions are integral to production lines in major automotive assembly plants, semiconductor wafer fabrication facilities and pharmaceutical packaging operations, as well as in warehouse and distribution centers worldwide. By combining advanced optics, illumination techniques and proprietary image processing algorithms, the company helps customers reduce defects, improve throughput and lower operating costs.

Founded in 1981 by Robert J. Shillman and headquartered in Natick, Massachusetts, Cognex has built a reputation for innovation in the machine vision industry. The company invests heavily in research and development to stay at the forefront of emerging technologies such as deep learning and 3D vision. Over its history, Cognex has expanded both organically and through strategic acquisitions to broaden its product offerings and strengthen its global reach.

Cognex Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record Q2 performance: Revenue rose 17% year over year, adjusted EBITDA margin expanded to 32.2%, adjusted EPS increased 80% to $0.45, and free cash flow conversion reached 114%.
• Positive Sentiment: Cognex raised its full-year 2026 outlook to $1.13 billion–$1.15 billion in revenue, 29%–31% adjusted EBITDA margin, and $1.64–$1.68 adjusted EPS, reflecting stronger demand and improved operating leverage.
• Positive Sentiment: Growth was broad-based, led by semiconductor, electronics, packaging, and logistics. The company raised its full-year growth expectations for semiconductor, electronics, packaging, and logistics, while semiconductor demand continues to benefit from AI infrastructure investment.
• Positive Sentiment: The data center supply-chain opportunity is still nascent but growing more than 30% year over year and now represents a low-single-digit percentage of revenue; Cognex sees several years of potential growth from AI-related component manufacturing, server assembly, and inspection applications enabled by OneVision.
• Negative Sentiment: Rising memory prices are expected to create approximately 75 basis points of gross-margin pressure in Q3, with some impact potentially extending into Q4. Automotive also remained weak in Europe, and management cautioned that electronics demand could eventually be affected if higher memory costs pressure consumer demand.

Presentation

[Operator]

Greetings, and welcome to the Cognex Corporation Second Quarter 2026 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Greer Aviv, Head of Investor Relations. Thank you. You may begin.

[Greer Aviv, Head of Investor Relations at Cognex Corporation]

Thank you, operator. Good morning, everyone, and thank you for joining us. Our earnings release was published yesterday after market close, and our 10-Q was filed this morning. The earnings materials are available on our investor relations website. I am joined here today by Matt Moschner, our CEO, and Dennis Fehr, our CFO. Today, we plan to share several key messages, including progress against our strategy, opportunities to drive diversified growth and market trends, our strong second quarter performance, and our expectations for the third quarter and full year.

[Greer Aviv, Head of Investor Relations at Cognex Corporation]

After prepared remarks, we'll open the line for Q&A. Both our published materials and the call today will reference non-GAAP measures. You can find a reconciliation of certain items from GAAP to non-GAAP in our press release and earnings presentation. Today's earnings materials will contain forward-looking statements, including statements regarding our expectations. Our actual results may differ from our projections due to the risks and uncertainties that are described in our SEC filings, including our most recent form, 10-K. With that, I'll turn the call over to Matt.

[Matt Moschner, CEO at Cognex Corporation]

Thanks, Greer. Good morning, everyone, and thank you for joining us today. Q2 is another strong quarter for Cognex and further evidence that our strategy is driving results. We delivered record quarterly revenue, significant adjusted EBITDA margin expansion, and strong double-digit adjusted EPS growth. The demand environment remains favorable, with no material negative impact from macroeconomic or geopolitical events. We continue to benefit from an improving industrial cycle while also seeing accelerating adoption of automation and AI-enabled machine vision.

[Matt Moschner, CEO at Cognex Corporation]

Importantly, our performance reflects more than cyclical recovery. It reflects focused execution against the strategic objectives we have outlined for Cognex, along with the operating discipline required to convert growth into profitability. Our focus remains on profitable growth, operational excellence, and productivity across the organization. Turning to page three of our earnings presentation, I'll start with a strategy update.

[Matt Moschner, CEO at Cognex Corporation]

First, we are extending our technology leadership in AI-enabled machine vision using the OneVision platform to enable new AI-driven applications and expand into high-growth end markets, including the data center supply chain. Recently, we announced the general availability of OneVision, with hundreds of customers already using the platform to reduce deployment complexity, shorten time to value, and scale AI-driven vision applications.

[Matt Moschner, CEO at Cognex Corporation]

Second, we are focused on delivering the number one customer experience in the industry. As part of this journey, we are building the most comprehensive and easy-to-use machine vision ecosystem. Recent product launches have meaningfully expanded the breadth of our portfolio, giving customers access to new cutting-edge capabilities all within the same In-Sight Vision Suite software environment.

[Matt Moschner, CEO at Cognex Corporation]

Customers can now address entry-level inspection applications with the In-Sight 2800, perform advanced 3D inspection with the In-Sight L38, perform complex inspections with the new In-Sight 3900, and gain maximum flexibility for the most demanding applications with the In-Sight 6900. Just as importantly, we are making our products easier to evaluate, deploy, and support by enhancing intuitive product setup, expanding self-service resources, and continuing to drive efficiency through a unified software ecosystem.

[Matt Moschner, CEO at Cognex Corporation]

Third, we are focused on driving growth through diversification. We are targeting growth across a broader set of customers, channels, adjacencies, and end markets. While these initiatives will take time, they are central to building a more resilient and scalable business. Let's take a closer look at each of these areas on page four. Starting with customers, we are very pleased with the progress we have made towards our objective of doubling the customer base.

[Matt Moschner, CEO at Cognex Corporation]

In 2025, we added approximately 9,000 new customers, and momentum continued in 2026 with approximately 4,500 new customers added year to date. This success meaningfully diversifies the customers we serve and broadens our opportunity set. As we look ahead, our focus will increasingly shift towards a land and expand strategy, building on these new relationships, identifying the right high-potential accounts, and capturing a greater share of wallet over time.

[Matt Moschner, CEO at Cognex Corporation]

As we continue our sales force transformation, we are revitalizing our channel partner program to strengthen our overall go-to-market. By working more intentionally with our global network of systems integrators, machine builders, and services partners, we can better identify new opportunities, fulfill demand more effectively, and bring Cognex products to a broader set of customers, applications, and end markets efficiently.

[Matt Moschner, CEO at Cognex Corporation]

We will also continue to explore opportunities in adjacent markets, both organically and inorganically, where our deep domain expertise can extend to solve critical automation challenges and create meaningful long-term growth. Finally, we have a strong track record of identifying attractive new end markets and scaling them into meaningful growth platforms.

[Matt Moschner, CEO at Cognex Corporation]

Logistics is a great example. When we entered the logistics market about 10 years ago, it represented only a single-digit percentage of total revenue. Today, logistics is our largest vertical. We are applying that same playbook as we expand into the data center supply chain market. Today, data center represents only a low single-digit percentage of revenue, but is growing more than 30% year over year.

[Matt Moschner, CEO at Cognex Corporation]

While still early, we believe the data center supply chain has compelling strategic characteristics. It is aligned with powerful secular growth trends, requires high levels of quality and throughput, and creates opportunities for Cognex to help customers improve productivity through automation. It also reinforces how our AI leadership can open new growth platforms over time.

[Matt Moschner, CEO at Cognex Corporation]

Turning to page five, let's look at a real-world example of how our technology is helping customers solve complex inspection challenges in this market. This is a server rack inspection deployment using our newest technologies, including the In-Sight 3900 in OneVision. For this application, Cognex vision systems will be mounted on robots to inspect fully assembled server racks and confirm that all major components are installed correctly and meet strict quality requirements.

[Matt Moschner, CEO at Cognex Corporation]

This demonstrates the broader applicability of our AI-enabled machine vision systems beyond our traditional end markets, and also provides an entry point into AI infrastructure manufacturing, a rapidly growing market. Turning to end market performance on page six, the demand environment remained favorable in the second quarter. Growth was led by semiconductor, electronics, and packaging, along with continued momentum from large logistics customers.

[Matt Moschner, CEO at Cognex Corporation]

Manufacturing indicators continued to improve across key regions in the second quarter, and the U.S. Purchasing Managers' Index has now remained in expansion territory for seven consecutive months. This improving macro backdrop, along with better visibility into the second half, gives us confidence to raise our full-year outlook for nearly all end markets. Starting with logistics, momentum continued, driven by large e-commerce customers. Q2 marked our 10th consecutive quarter of double-digit growth.

[Matt Moschner, CEO at Cognex Corporation]

Given the strength of our first half performance, we are raising our full-year outlook for logistics to high single-digit growth while continuing to expect growth rates to moderate in the second half. Packaging delivered strong performance. Excluding the divestiture of the Japan-focused trading business, packaging grew double digits. Based on this momentum, we are increasing our full-year packaging outlook to double-digit growth.

[Matt Moschner, CEO at Cognex Corporation]

Electronics growth was very strong, with double-digit growth driven by broad-based demand across customers and geographies. AI is driving a new wave of innovation in electronics as manufacturers incorporate increasingly sophisticated functionality into next-generation devices. For 2026, we are increasing our full-year outlook for electronics and now expect double-digit growth. Automotive revenue declined high single digits in the quarter but was nearly flat year-to-date. Growth in Asia and the Americas was offset by continued weakness in Europe.

[Matt Moschner, CEO at Cognex Corporation]

We are maintaining our full-year outlook for automotive of flat to low double-digit growth. Finally, semiconductor delivered exceptional performance with strong double-digit revenue across all geographies. Demand continues to be driven by AI infrastructure investment, and based on this strength, we are increasing our full-year outlook for semiconductor to double-digit growth. In summary, we are encouraged by the demand environment and pleased with our execution.

[Matt Moschner, CEO at Cognex Corporation]

Cognex is benefiting from both cyclical recovery and structural automation trends while continuing to diversify the business, expand margins, and position the company for sustainable growth through 2027 and beyond. With that, I'll turn it over to Dennis to walk through our Q2 financials and our outlook for the third quarter and full year. Dennis?

[Dennis Fehr, CFO at Cognex Corporation]

Thanks, Matt, good morning, everyone. Q2 was a strong financial quarter with record revenue and excellent flow-through to the bottom line. Page seven highlights our performance across three key financial metrics. First, adjusted EBITDA margin was 32.2%, expanding 1,150 basis points year-over-year and marking the eighth consecutive quarter of margin expansion. Second, adjusted EPS increased 80% year-over-year, representing the eighth consecutive quarter of double-digit EPS growth.

[Dennis Fehr, CFO at Cognex Corporation]

Third, trailing 12 months free cash flow conversion rate was 114%, meeting our greater than 100% target for the seventh consecutive quarter. Our strong bottom-line performance reflects continued execution of our profitable growth strategy and faster progress on cost reduction initiatives, resulting in about 100% revenue flow-through in the quarter. Turning to the income statement on page eight, revenue increased 17% year-over-year or 16% in constant currency, reaching a record quarterly revenue level for Cognex.

[Dennis Fehr, CFO at Cognex Corporation]

This was also our eighth consecutive quarter of year-over-year revenue growth. Looking at geographic revenue trends on a year-over-year constant currency basis, China was again our fastest-growing region, with revenue increasing 42%, led by semiconductor and electronics. Year-to-date, revenue in China is up 40%, driven in part by investments made over the past 12-18 months. In the Americas, revenue grew 27% with strength across nearly all end markets.

[Dennis Fehr, CFO at Cognex Corporation]

Americas revenue also benefited from certain electronics customers ordering through entities based in the Americas rather than Europe. This change does not reflect an underlying shift in business mix or customer demand. Excluding this procurement change, Americas revenue still grew double digits. Europe declined 15%. Excluding a procurement change in ordering entities, Europe declined low single digits. Weakness in automotive was partially offset by strength in semiconductor.

[Dennis Fehr, CFO at Cognex Corporation]

Other Asia grew 14%, driven primarily by semiconductor. Staying on page eight, adjusted gross margin expanded 350 basis points to 71.5%, driven by favorable mix and volume. Tariff refunds were not a material contributor to the strong gross margin performance. Adjusted operating expenses declined 3% year-over-year or 5% in constant currency, supported by accelerated cost reduction actions in the quarter. We now expect approximately $35 million of annualized net cost reductions by the end of 2026.

[Dennis Fehr, CFO at Cognex Corporation]

This is closer to the lower end of our originally $35 million-$40 million range, reflecting a balanced approach of disciplined cost management in times of strong growth. Looking ahead, our emphasis is increasingly shifting from cost reduction toward productivity optimization. We see meaningful opportunities to further drive efficiencies through automation and continuous process improvement initiatives by continuing to grow with largely existing resources.

[Dennis Fehr, CFO at Cognex Corporation]

Adjusted EBITDA was $94 million, up 81% year-over-year and our highest level since Q2 2021. Adjusted EBITDA margin reached 32.2%, expanding 1,150 basis points year-over-year and exceeding the midpoint of guidance by more than 250 basis points, driven by favorable mix and accelerated cost reduction. Adjusted diluted EPS increased 80% year-over-year to $0.45, driven primarily by operating leverage. Cash generation remains strong.

[Dennis Fehr, CFO at Cognex Corporation]

We generated $68 million of free cash flow in the quarter, compared to $40 million in the prior year period, representing approximately 70% growth. Over the trailing 12 months, free cash flow totaled $268 million, and free cash flow conversion was 114%. We returned nearly 80% of free cash flow to shareholders through both share buybacks and dividends over the trailing 12 months. Moving to page nine, I'll review our third quarter guidance.

[Dennis Fehr, CFO at Cognex Corporation]

For Q3, we expect revenue of $300 million-$320 million, representing approximately 12% growth at the midpoint. Excluding the $13 million one-time benefit from the commercial partnership in Q3 2025, our guidance implies 17% revenue growth at the midpoint. Adjusted EBITDA margin is expected to be between 32% and 35%, with the midpoint representing an increase of 860 basis points year-over-year.

[Dennis Fehr, CFO at Cognex Corporation]

Excluding the commercial partnership benefit, the midpoint implies adjusted EBITDA margin expansion of 1,140 basis points. Adjusted earnings per share is expected to be $0.50-$0.54, with the midpoint representing approximately 58% year-over-year growth. Excluding the commercial partnership benefit, the midpoint implies adjusted EPS growth of 86%. On page 10, we are issuing full year 2026 guidance.

[Dennis Fehr, CFO at Cognex Corporation]

While we continue to monitor macroeconomic and geopolitical risks, including memory market conditions and the broader inflationary environment, our guidance reflects improved visibility into the second half and confidence in our ability to execute our profitable growth strategy. For 2026, we expect revenue of $1.13 billion-$1.15 billion, representing approximately 15% growth at the midpoint, or 16% excluding the commercial partnership benefit.

[Dennis Fehr, CFO at Cognex Corporation]

Adjusted EBITDA margin is expected to be between 29% and 31%, with the midpoint representing an increase of 850 basis points year-over-year or 930 basis points excluding the commercial partnership benefit. This is well ahead of our prior target of exiting the year at 25% run rate and reflects disciplined execution of our cost reduction initiatives along with an improved demand environment.

[Dennis Fehr, CFO at Cognex Corporation]

At the midpoint, our outlook also implies approximately 87% flow-through on incremental revenue, up from 70% in 2025, highlighting the substantial operating leverage achieved through our transformation efforts. Adjusted earnings per share is expected to be $1.64-$1.68, with the midpoint representing approximately 63% year-over-year growth or 71% excluding the commercial partnership benefit. I would note that 2026 adjusted EPS includes approximately $0.11 per share of investment income.

[Dennis Fehr, CFO at Cognex Corporation]

As interest rates and cash balances evolve, the benefit from investment income may fluctuate, making year-over-year EPS growth comparisons more challenging on a multi-year basis. Investors should consider this contribution when evaluating EPS growth trends. I'll now briefly update you on baseline revenue assumptions for Q3 and Q4 to support comparability. As shown on page 11, there are several known items that impact year-over-year comparisons but do not reflect a change in underlying demand.

[Dennis Fehr, CFO at Cognex Corporation]

First, portfolio optimization. As discussed last quarter, the divestiture of our Japan-focused trading business, along with other non-core product exits, reduces revenue by approximately $5 million beginning in Q2 and each of the following three quarters. These actions are intentional and support improved mix, margin, and long-term profitability. Second, as expected, we saw approximately $7 million of electronics order timing shift into Q2 from Q3.

[Dennis Fehr, CFO at Cognex Corporation]

Third, Q3 and full year 2026 include the previously mentioned $13 million headwind from the one-time commercial partnership benefit. In summary, Q3 headwinds include order timing and portfolio actions, not a change in underlying demand, while Q4 reflects planned portfolio exits. Encourage you to reflect these factors in your models along with the strong Q4 2025 comparison. Overall, Q2 was another strong proof point for our profitable growth strategy. We delivered record revenue, significant margin expansion, strong EPS growth and robust free cash flow.

[Dennis Fehr, CFO at Cognex Corporation]

Demand remains healthy. Our operating model transformation is delivering results, and our financial model is demonstrating strong leverage. We believe Cognex is exceptionally well-positioned to deliver on our commitments and create long-term shareholder value. Now Matt and I are ready for your questions. Operator, please go ahead.

[Operator]

Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue.

[Operator]

For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We do ask that you limit yourself to one question and one follow-up. Again, that's star one to register a question at this time. Our first question is coming from Joe Ritchie of Goldman Sachs. Please go ahead.

[Joe Ritchie, Analyst at Goldman Sachs]

Hey, guys. Good morning. Congrats on the continued progress.

[Dennis Fehr, CFO at Cognex Corporation]

Thanks, Joe.

[Matt Moschner, CEO at Cognex Corporation]

Thanks, Joe.

[Joe Ritchie, Analyst at Goldman Sachs]

My first question, I wanted to expand on the data center opportunity that you referenced earlier, Matt. I'm really curious because obviously data center growth has been robust the last couple of years, and what I'm wondering is the opportunity ahead of you now because there are changes in the products that you're offering? Is there just greater adoption of machine vision for data centers today? Maybe just expand on what's creating the opportunity for you.

[Matt Moschner, CEO at Cognex Corporation]

Yeah. No, thanks, Joe. We've been serving the data center market for several years, but it was always a smaller portion of our business, and the application that we served there was automated and secure drive removal and destruction, right? Think of this as kind of the ongoing maintenance of a data center.

[Matt Moschner, CEO at Cognex Corporation]

What's changed, obviously, is the very aggressive build-out of new facilities, and in particular, very high-tech AI-oriented facilities that are placing demands on the supply chain that are driving demand for Cognex vision. You can think of it really in three major application areas. On one hand, we're working with the manufacturers of the componentry. These are electronic parts, metal parts, sort of the physical infrastructure of a server and of a rack. There's then the assembly of those things into that rack, and then there is the deployment and maintenance and operations of that.

[Matt Moschner, CEO at Cognex Corporation]

I would say the majority of where the revenue is coming today, and we in our prepared remarks, size that as a low single digits of revenue growing at above 30%, is mostly in that first bucket, right? We're still mostly doing quality assurance and visual inspection for the componentry, right? These are connectors, these are electrical parts, these are PCB boards, these are metal enclosures. We're starting to see activities flow through to CMs that are assembling those into servers.

[Matt Moschner, CEO at Cognex Corporation]

Still quite early in terms of doing more complete automation once those are deployed into facilities. I think we're still more on the early side of the growth wave that could come from the investment and build-out of data centers. I would still characterize it as quite nascent. On the technology side, for sure, as you saw in the slide, these are very complicated inspections, right?

[Matt Moschner, CEO at Cognex Corporation]

On one hand, hundreds of points to be inspected, very fine features, and very well suited for AI. We're seeing that. I'm not sure we could have solved these problems a couple of years ago without technologies like OneVision. You put those two things together, it's a market we know. It's one that is experiencing a huge wave of growth. I think our technology is very well positioned to capture that probably for the next several years.

[Joe Ritchie, Analyst at Goldman Sachs]

That's super helpful, Matt. Then maybe just my follow-up question for Dennis. Look, obviously organic growth has been very strong, expected to continue to remain strong throughout the year. Interesting that your OpEx was actually down on a year-over-year basis. Is the expectation for OpEx through the second half of the year to remain down on a year-over-year basis? I just want to make sure that I have that right in the forecast.

[Dennis Fehr, CFO at Cognex Corporation]

Yeah. Joe, yes, absolutely, I can confirm that. That's really in line with our $35 million net cost reduction target, which we re-emphasize and reconfirm, right? I think we made great progress already last year where we had $33 million gross cost reduction, right? Some of them did not show up in the P&L as we had some of the incentive comp headwinds.

[Dennis Fehr, CFO at Cognex Corporation]

In this year, we are really seeing net cost reduction. In that regard, bringing down the OpEx in this quarter and in the second quarter of 5% in constant currency really kind of shows the strength of the execution there. We then from there expect probably a bit smaller step downs into the third quarter, into the fourth quarter, right? As the step down from the first into the second quarter was already accelerated compared what we saw previously.

[Dennis Fehr, CFO at Cognex Corporation]

In short, yes, we definitely expect OpEx to stay well below prior year's levels. The second half also below the first half, and that's really kind of part of the strength which we are seeing in the leverage, right? 100% revenue flows through in the second quarter, 87% revenue flows through at the midpoint for the full year. Really great to see these numbers and the strength of the execution there.

[Joe Ritchie, Analyst at Goldman Sachs]

Very helpful. Thank you, guys.

[Operator]

Thank you. The next question is coming from Tomo Sano of JPMorgan. Please go ahead.

[Tomo Sano, Analyst at JPMorgan]

Hi. Good morning, everyone.

[Matt Moschner, CEO at Cognex Corporation]

Hey, Tomo. Good morning.

[Dennis Fehr, CFO at Cognex Corporation]

Good morning.

[Tomo Sano, Analyst at JPMorgan]

Thank you for taking my questions. Matt, at the most recent Automate show, I remember you noted the sense of urgency about the automations. Could you talk about what demos feature generate the strongest customer reactions, and how it's now translating into the pipeline and deal ASP, please? Thank you.

[Matt Moschner, CEO at Cognex Corporation]

Yeah. Thanks, Tomo. It was nice seeing you at the Automate show. It was great to be there. Great energy. As you said, if I was to summarize the show in one word, it's really urgency. What is driving that urgency? I think it's really the realization for manufacturers in North America, but frankly, around the world, that their ability to automate and drive efficiency, productivity, at the same time, higher levels of quality is table stakes now. It's how they're going to survive and thrive, it's no longer optional.

[Matt Moschner, CEO at Cognex Corporation]

So that was very much the mood in the air, if you will. Specifically, your question on which demos that we were showing resonated, I think for sure we were featuring our latest generation of AI tools running on our latest generation of embedded systems.

[Matt Moschner, CEO at Cognex Corporation]

Those are the products that we launched in the spring of this year. OneVision being our cloud training service, and then the In-Sight 3900 and the In-Sight 6900 really being the upgraded embedded system hardware to run those models all within the same software environment, which is our In-Sight Vision Suite application. That is what we featured.

[Matt Moschner, CEO at Cognex Corporation]

I would say that the head turners were really the inspections. Cognex has, for years, led in the area of 2D vision inspection. We've always said that there was still a big untapped market for inspections done by humans that were, in the past, not technically feasible to solve with machine vision, and we're increasingly solving some of those problems with our latest generation of AI tools. We showed very complex PCBA inspections using our In-Sight 3900. I think that was very well received.

[Matt Moschner, CEO at Cognex Corporation]

Back to the data center comment, inspecting these very large server boards as they're being built into servers and put into racks, I think very relevant technology. On the other hand, we had a demo on our In-Sight 6900, where we allowed users to kind of mark up pieces of art. Art is very difficult because it's highly variable in its feature set.

[Matt Moschner, CEO at Cognex Corporation]

There was a bit of glare, our systems really performed very well, where we were able to pick up very nuanced defects with no incremental training. I'd say those two, the 2D inspection demos featured very well. Again, that's an area we've really invested in over the last several years and where our AI advantage, I would say, is most pronounced at the moment.

[Tomo Sano, Analyst at JPMorgan]

Thank you, Matt. Follow up on, Dennis, if you could talk about the current environment through the margin expansions. How should we think about the lead times and supply chains, inventories? Is there any bottlenecks and margin impact expected in the second half or not? Thank you.

[Dennis Fehr, CFO at Cognex Corporation]

Happy to talk about that. First, in the quarter, we saw strength in the gross margin driven by favorable mix. I would also say that certainly on the bottom line, the OpEx efficiency, which we had there. To your question on the supply chain side, we have been talking about in the prior call that we expect that an impact from memory price headwinds in the second half of the year.

[Dennis Fehr, CFO at Cognex Corporation]

While we are offsetting as much as we can with that through pricing, we clearly have seen that memory prices are further increasing. In that regard, we would now say about 75 basis points of gross margin headwind being included in our Q3 guide. Probably some of that may still also show up in the fourth quarter.

[Dennis Fehr, CFO at Cognex Corporation]

While in, I would say if you think about 2027, we would think like we would fully offset that through pricing. Think about it more like a timing impact, that memory prices are going up, we're increasing prices, memory prices going up further, and we'll increase prices further. I wouldn't say it's a midterm headwind, but it's a headwind for the second half of the year.

[Dennis Fehr, CFO at Cognex Corporation]

Perhaps that we currently would expect that mix still favorable in the second half of the year, but probably not as strongly favorable in the first half of the year. In that regard, our Q3 guide as well as our full year 2026 guide expects a gross margin not as strong as in the first half of the year. Nevertheless, we can show strong bottom-line performance as we further drive OpEx efficiencies as just mentioned before.

[Tomo Sano, Analyst at JPMorgan]

Thank you, Dennis. Appreciate it.

[Operator]

Thank you. The next question is coming from Tommy Moll of Stephens. Please go ahead.

[Tommy Moll, Analyst at Stephens]

Good morning. Thank you for taking my questions.

[Matt Moschner, CEO at Cognex Corporation]

Hey, Tommy. Good morning.

[Dennis Fehr, CFO at Cognex Corporation]

Good morning.

[Tommy Moll, Analyst at Stephens]

I noted you're halfway toward the 9,000 customers you added in 2025. I'm curious what KPIs you could share around that progress. Clearly, on the net customer adds, there's a lot of progress. Can you share anything in terms of the win rate for these leads that get put into the top of the funnel or the speed of converting those leads? Relatedly, where are we on the need or lack thereof to continue to hire new cohorts of additional sales folks? Thank you.

[Matt Moschner, CEO at Cognex Corporation]

Yeah. Sure, Tommy. Thanks. Yeah, no, really happy with the progress we've made last year and the first half of this year acquiring new customers. It's a key piece of our strategy to diversify, frankly, and build a stronger foundation of growth.

[Matt Moschner, CEO at Cognex Corporation]

At the same time, as we said in our structured remarks, we're thinking, as you rightly point out, as we acquire those customers, how do we expand our business with them? How do we better understand their potential so that we can direct our internal resources to really focus on the accounts where we see higher potential and maybe think of different paths to market or ways to serve on those with lower potential.

[Matt Moschner, CEO at Cognex Corporation]

There's a bit of that internally where, as we acquire new customers, we, I would say, have a much better way of understanding potential in terms of how we pursue additional opportunities with them. I would say, in terms of market verticals, packaging continues to be an area where we are acquiring customers in a very strong way.

[Matt Moschner, CEO at Cognex Corporation]

On one hand, these are manufacturers that are more regional, perhaps more fragmented to serve their local markets in the production of consumer products and other healthcare products. A segment that we didn't serve as well in years past, I'd say there is a disproportion of customer adds in the packaging area. I think your question around, as we acquire customers, as we grow the customer base, how does that imply to our sales organization?

[Matt Moschner, CEO at Cognex Corporation]

It's an area where we've invested significantly over the last five years to grow our direct sales channel. It's one of the biggest assets we have as a company. Hundreds of very talented technical vision experts that consult around the world. I would say at the same time, our expectation is not necessarily to continue to invest in that area as we expand our customer count.

[Matt Moschner, CEO at Cognex Corporation]

This is really where we are emphasizing our channel partners and how do we revitalize the relationships we have with systems integrators, machine builders, services partners to drive productivity in our sales organization while we acquire new customers and diversify that growth basis. Hopefully that's helpful.

[Dennis Fehr, CFO at Cognex Corporation]

Maybe let me add to that and just re-emphasize what I said also in the prepared remarks, right? I think 2026, and especially the first half of the time, we were really working or have been working to take out cost out of the organization. I think from here, it's really about growing the existing resources, and that applies to sales, but also to the broader part of the organizations. In that regard, we clearly are looking forward to deliver strong leverage as we continue to grow.

[Tommy Moll, Analyst at Stephens]

Yeah. Thank you both. That's very helpful. Matt, you mentioned the point about strengthening the channel relationships, which also falls under this diversification theme that you've talked about at length today. What details can you share there on channel? Should we think of this as enhancing the prior framework you had for channel relationships, or are there some new strategies here that you could comment on? Thank you.

[Matt Moschner, CEO at Cognex Corporation]

I think it is more enhancing what we've had. Also taking a more coordinated, I'd say, global approach to how we manage those partnerships. We have great partners all over the world, and when I say partners, it's kind of an umbrella term for resellers that are an extension of our sales force, systems integrators and machine builders that incorporate Cognex vision into their much larger kind of solutions and machines, and then services partners that are very key to how we deploy at scale machine vision with customers around the world.

[Matt Moschner, CEO at Cognex Corporation]

Partners is kind of that umbrella term for really those four main categories. You can think of us as being a little more coordinated in terms of how we think about the role that they play in each of our geographies. Having better scorecards around investments that we're making with them and how do we measure success of those investments?

[Matt Moschner, CEO at Cognex Corporation]

Again, partner with them to be much more coordinated around our joint go-to-market efforts. I think it is much more about enhancing what we have than a fundamental shift. Doing it in a way that is frankly very complementary to our own direct selling efforts, right? I think it would be a mistake to think that an investment in our channel partners is somehow an investment away from our direct sales activities. They are really one and the same as we think about our overall go-to-market strategy.

[Tommy Moll, Analyst at Stephens]

Thank you, Matt. I appreciate it, and I'll turn it back.

[Operator]

Thank you. The next question is coming from Joseph Giordano of TD Cowen. Please go ahead.

[Chris Grenga, Analyst at TD Cowen]

Hi. Good morning. This is Chris on for Joe. Thank you for taking the questions. This is the first time that Cognex has issued full year guidance alongside 2Q results. What has changed in the outlook that gives you confidence and visibility to provide the full year at this stage?

[Dennis Fehr, CFO at Cognex Corporation]

On the one side, and Matt talked about it, we see really strong demand across most of our end markets, and it has led us to increase the outlook for these end markets. There's clearly strong conviction in the demand environment.

[Dennis Fehr, CFO at Cognex Corporation]

At the same time, I really want to emphasize that it's still a short cycle, low visibility company in that sense. That means typically like a three to four months type of visibility. We would not be a company issuing full year guidance at the end of the prior year or the beginning of a year. We need to have really good visibility into the second half of this year, and this also means that we are not yet seeing everything into Q4.

[Dennis Fehr, CFO at Cognex Corporation]

We have a good view into a good portion of the remaining five months, but not into the full part of the full year. That means like year-end demand. We believe, considering the demand environment where we are, it will be a strong year-end demand. We haven't baked in an exceptional year-end demand. Certainly there are still also uncertainties still around memory prices, for example, how these will develop in that regard.

[Dennis Fehr, CFO at Cognex Corporation]

There are still some uncertainties out there, nevertheless, we felt, as part of our efforts over the last one and a half years to enhance investor communications and being as transparent and forthcoming as we are, we felt that we want to provide that view if we are able to. In that regard, we felt confident enough to put out this guide, while we may not know everything at this moment.

[Chris Grenga, Analyst at TD Cowen]

Thank you. We've spoken about data center on the call. Could you help us put a framework around sizing that opportunity, perhaps like relative to some of your other end markets, and maybe provide some color on how meaningful you anticipate data center related revenue could become?

[Matt Moschner, CEO at Cognex Corporation]

Yeah, Chris, I think we're not prepared necessarily to do a full sizing on full potential. We're in the process of that. As I said before, it's still a very nascent opportunity, and I think, many years of future growth ahead of us. We're sizing it today as low single digits of revenue, with a growth path right now of 30%.

[Matt Moschner, CEO at Cognex Corporation]

You can kind of extrapolate that, whether that accelerates or decelerates, we're not prepared to say full potential. Again, I think it's an application area and it's a market that really plays to a lot of the advantages we have, and where we've created value for customers in the past, right? The cost of poor quality is extremely high, right? These racks are tens of millions of dollars, and the cost of downtime is enormous when they're not generating results and tokens, so that's great.

[Matt Moschner, CEO at Cognex Corporation]

The demand to roll them out quickly and scale quickly is high. That places a strain on the production capacity up in the supply chain, and that's certainly an area where we help with automated inspections during the manufacturing process. A lot of the component suppliers are Cognex customers already and very familiar with vision and how to apply vision to their own quality inspection processes. We're very optimistic that the technology we have and the value we typically provide is very well positioned for this market. As we get a better sense for the full potential, we will be updating you on future calls.

[Chris Grenga, Analyst at TD Cowen]

Thank you very much.

[Operator]

Thank you. The next question is coming from Jake Levinson of Melius Research. Please go ahead.

[Jake Levinson, Analyst at Melius Research]

Hi. Good morning, everyone.

[Matt Moschner, CEO at Cognex Corporation]

Hey, Jake.

[Dennis Fehr, CFO at Cognex Corporation]

Good morning.

[Jake Levinson, Analyst at Melius Research]

Just expanding on electronics here, I think the expectation is that given all those memory price increases, that the actual volumes in consumer electronics are going to slow from here. How do you balance that with some of this new data center business you talked about and your own efforts with new products and the sales force changes and your customers' CapEx plans? I'll leave it at that, but it seems like there's some nuance there.

[Matt Moschner, CEO at Cognex Corporation]

Thanks, Jake. No, it's certainly a risk we're thinking about, I would say it's not one we're really seeing evidence of playing out in the business today, meaning higher memory prices, putting downward pressure on demand for automation with our electronics customers. It's a risk, I would say it's not one that we're seeing manifest yet in the business.

[Matt Moschner, CEO at Cognex Corporation]

Demand remains strong, that certainly could change. I would say our growth plan and strategy in electronics is multifaceted, right? It's not just about consumer demand and line counts. That's certainly a component, as we've talked about before, there continue to be shifts in the geographic locations of supply chains out of China to the broader ASEAN region and India, we expect that to continue, and that's a tailwind for growth.

[Matt Moschner, CEO at Cognex Corporation]

Our own technology developments are letting us penetrate further into applications, primarily in 2D inspection. We expect that to continue. We are broadening our customer base in this area. On one hand, there are new entrants to consumer devices that are looking to embed the latest generation of AI technology through consumer hardware, and you can imagine Cognex would be supporting those efforts.

[Matt Moschner, CEO at Cognex Corporation]

Our growth in electronics and then on top of the data centers, as you mentioned. Our growth in this area is multifaceted. I think to the extent that memory prices put downward pressure on consumer demand, certainly could happen. I wouldn't say we're seeing it yet. If it does, there's other tools that we would exercise to try to overcome that headwind should it arrive.

[Dennis Fehr, CFO at Cognex Corporation]

Maybe to add to that, I think historically, certainly end user demand and volume throughput for our customers is a factor, but it's not the largest factor in terms of our electronics demand, right? Think about that changes in production are a big factor as well in terms of new form factors, new device types, shift in supply chain locations, adoption of latest technologies. That's probably the much bigger factor which drives our demand in consumer electronics. From that regard, I just want to also make sure that you're not over-indexing just on the end user demand.

[Jake Levinson, Analyst at Melius Research]

Okay, that's helpful. Just on some of these new AI featured products, if you will, you've had certainly a big uptick in these new product introductions. I think there's always been this promise that the capability and the cost of those products was going to bring that to a level that broadened your TAM pretty considerably, especially with some of those customers that maybe don't have the expertise in-house to adopt the older technology.

[Jake Levinson, Analyst at Melius Research]

Just trying to get a sense of what kind of uptake you've seen, and I know you talk about packaging as an example market, but just trying to get a sense of what kind of uptake you've seen with these products in some of these markets you haven't traditionally been as large in.

[Matt Moschner, CEO at Cognex Corporation]

Yeah. Absolutely. I think, Jake, just to be clear, your question is about as we've been able to roll out AI, more powerful tools into our products, how has that driven penetration? Is that right in various end markets?

[Jake Levinson, Analyst at Melius Research]

Correct.

[Matt Moschner, CEO at Cognex Corporation]

Yeah. Great. No, for sure. I would say in all of our five verticals, it's been helpful, but most notably, I think you rightly point out in packaging, right? These are historically very difficult areas to perform vision given the high variability of packaging designs. Our latest generation of tools, whether it's classifying, defect detecting, segmenting, doing optical character recognition, we have great AI-based tools in all those areas and very well-positioned for packaging applications.

[Matt Moschner, CEO at Cognex Corporation]

For sure, that's an area where we're driving penetration of vision. We've talked about logistics in the past where today our logistics business is still primarily traceability, which is reading barcodes to track items through fulfillment centers. SLX, which was the product that enabled vision for logistics last year, is seeing great traction, and again, all those tools are fully AI based. Couldn't solve the problem without that technology.

[Matt Moschner, CEO at Cognex Corporation]

Consumer electronics, very difficult inspections on, you can think of fully populated PCBAs, where you're looking for small parts, very densely populated on a board, looking for missing parts, broken solder joints. Again, perfect application for AI that we're deploying. Semiconductor, very difficult surfaces, shiny, metallic even, silicon wafers.

[Matt Moschner, CEO at Cognex Corporation]

AI is very good at finding defects, scratches, dents, other things as those wafers are being handled and processed. Quite frankly, I think our AI progress on the inspection side is quite broad. The one area I didn't mention was automotive, but there I think automotive, as we've said in the past, is probably our most heavily penetrated market today with automation, but still opportunities there too, maybe on a smaller scale. Yeah, I wish I could say it was one area in particular.

[Matt Moschner, CEO at Cognex Corporation]

It is quite broad-based, and the uptake on the new products has been strong. These are leading technologies solving novel applications, in many cases first of their kind. We're seeing strong demand, strong pricing that is commensurate to the ROIs that those problems have. Hopefully that's helpful, Jake.

[Jake Levinson, Analyst at Melius Research]

Super helpful. Thank you. I'll pass it on.

[Operator]

Thank you. The next question is coming from Guy Hardwick of Barclays. Please go ahead.

[Guy Hardwick, Analyst at Barclays]

Hi. Good morning. Congratulations on excellent results. Dennis, on the guidance, thanks for giving us the full year guidance, but obviously means we can back out what's implied for Q4. It looks like the step down at the midpoint would be 13% organically Q4 versus Q3. It's been quite a long time since Cognex has had a double-digit step down. Is it fair to suggest that except that Q3 guidance reflects exceptional demand that you referenced, but Q4 doesn't, and therefore it appears to have quite a bigger step down than perhaps it should have? Are you just baking in conservatism into your guidance there?

[Dennis Fehr, CFO at Cognex Corporation]

I would say this year is a year where you see strong growth in electronics. Of course, also in some of the other verticals like semi and packaging, but nevertheless, electronics is a strong growth driver, and that drives more seasonality, right?

[Dennis Fehr, CFO at Cognex Corporation]

That means in years where you have stronger electronics growth, you would expect then also a stronger seasonality effect. In that regard, that's one of the factors here. I would say I look at it, but also first half, second half, right? If you look at implied revenue for the second half, that's $580 million versus the $560 in the first half of the year. You see actually an increase of the second half revenue, and then you have effects, right?

[Dennis Fehr, CFO at Cognex Corporation]

Like that some electronics shifts into the first half, you have a stronger effect of the portfolio optimization in the second half of the year. If you would adjust for that, probably that growth from the first half into the second half is even more than the $20 million, probably more towards the $40 million. In that regard, I think in general, we feel like we see that demand momentum continuing.

[Dennis Fehr, CFO at Cognex Corporation]

The only thing I would maybe otherwise point out is that certainly Q4 last year is comparatively the strongest comp which we have, as that was the first quarter where we saw a much more favorable demand environment. Yeah, I think in general, we feel good about the demand environment.

[Guy Hardwick, Analyst at Barclays]

Just as a follow-up, I understand that Cognex put in a price increase in, I believe, in April. Does that gather momentum through the year, and how does that potentially impact gross margins?

[Dennis Fehr, CFO at Cognex Corporation]

In general, we are pleased with the pricing progress which we're making, right? If you think back, 2024 was a year where we had pricing headwinds impacting gross margins, now 2025 was a neutral year. I would say in the first half of this year, pricing was a net positive on gross margin, not one of the largest factors, right? We haven't called it out.

[Dennis Fehr, CFO at Cognex Corporation]

For the second half of the year, as I alluded before, memory pricing impacts are negative in the second half of the year. Again, it's just more a timing effect that we see memory price increases, we reacted to it with price increases by ourself. We see good traction with that, and probably memory prices increased further, probably a bit more than what we had baked in into our first round of price increases.

[Dennis Fehr, CFO at Cognex Corporation]

We'll adjust for that, and we'll add to that accordingly. In general, I think we'll probably still end 2026 with a net positive on pricing, and that's clearly if you think back about the bigger picture on 2024 being a headwind neutral 2025, a net positive in 2026 despite the memory price headwind. I think we are quite pleased about the pricing progress which we're making.

[Guy Hardwick, Analyst at Barclays]

Thank you.

[Operator]

Thank you. The next question is coming from Jairam Nathan of Daiwa Securities. Please go ahead.

[Jairam Nathan, Analyst at Daiwa Securities]

Hi. Thanks for taking my question. Just wanted to ask you a question on strategy. Cognex has generally tried to focus more on online high speed kind of applications and based on at least the picture in the slide for racks, server racks, it seems like this could be a little of a shift. I'm not saying it is bad, but I'm just wondering if that is the case internally and if that could open even more applications.

[Matt Moschner, CEO at Cognex Corporation]

Yeah. No, thanks. For sure, one of the advantages that we have with our technology is very accurate inspections, but at line speeds, right? Performing those inspections at sub-second, in some cases, sub-100 millisecond cycle times, which is and will continue to be a focus area for Cognex. Continuous flow manufacturing is one thing, right?

[Matt Moschner, CEO at Cognex Corporation]

Where you have parts that are flying by, whether it be a bottling plant or a logistics conveyor. I think that what we tried to convey in the image for the data centers is also somehow a continuous manufacturing line where what you typically see is discrete stations of assembly, but those stations still have pretty high demands on cycle times. Now, those cycle times tend to be seconds or minutes. It is, I would still consider it somehow a continuous flow manufacturing operation.

[Matt Moschner, CEO at Cognex Corporation]

Now what we're seeing is automation in that manufacturing process, what was a lot of manual labor potentially transitioning to more robotic-oriented assembly. We're putting a lot of investment in terms of how do we have our vision systems work more natively with the leading providers of robotic manipulation.

[Matt Moschner, CEO at Cognex Corporation]

I think you're seeing that get deployed in the manufacturing process of data centers, but also many other things. Jairam, I wouldn't say it's really a departure from where we focused, which as you rightly point out is inline manufacturing. The types of that inline manufacturing can be variable from continuous flow to more station-based manufacturing, which we would've featured in the data center example. Does that help?

[Jairam Nathan, Analyst at Daiwa Securities]

Yeah. No, thanks. Just if I could ask Dennis a question on pricing. Given the constant changes with supply chains and commodity costs, some of the companies seem to be going for dynamic pricing, where the pricing is kind of increased more regularly. Is that something Cognex would consider just to offset some of these inflations?

[Dennis Fehr, CFO at Cognex Corporation]

Yeah, I would say dynamic pricing sounds to me like in ticket selling, where you would really do whatever, every minute a price adjustment. It's probably not as much as we are pushing it, but clearly in an inflationary environment, which we are in at least what we think from a supply chain perspective, thinking about more frequent price adjusting is clearly a strategy.

[Dennis Fehr, CFO at Cognex Corporation]

Certainly at the same time, right there is a sales cycle, and you don't want to disrupt also sales cycle. There's too many price increases throughout that time. In that regard, there might be an opportunity here to think about price increases, which are aligning with the sales cycle of a few months. Like every few weeks price adjustments or every day a price adjustment is probably not helpful in the sales cycle either. In that regard, small opportunity perhaps, but not a major shift.

[Matt Moschner, CEO at Cognex Corporation]

Yeah. I would also say Cognex captures value through price based on the value created in each of those applications, and the variety of applications that we solve is very high. On one hand, when we say we're working on our pricing initiatives, it's not just about list price increases, it's also about how are we equipping our sales force with better tools to quantify the value and how we plan to capture that value.

[Matt Moschner, CEO at Cognex Corporation]

It's more like pricing execution. Keep that in mind as well. It's not just about continuous list price increases. It's also about how do we better quantify, how do we better articulate and capture the value that our products are creating in an extremely highly variable set of applications.

[Jairam Nathan, Analyst at Daiwa Securities]

Thank you. Thanks, Matt.

[Operator]

Thank you. The next question is coming from Amit Mehrotra of UBS. Please go ahead.

[Pratap Singh, Analyst at UBS]

Good morning. This is Pratap on for Amit Mehrotra. I wanted to discuss on the sales growth, like you have been delivering very strong growth, and it has been consistent across most of the end markets. Can you help us break it down, like what is driving this in terms of share gains and expansion into new markets versus the underlying market demand? In addition to this, like ISM and other macro indicators have been supportive as well, do you see the scope for underlying market demand to continue to improve from here?

[Matt Moschner, CEO at Cognex Corporation]

Yeah. Thanks for the question. It's always hard to piece out how much of our growth is market forces versus the quality of our own execution. I think it's a healthy portion of both. On one hand, the demand environment is strong. It's marked by our seventh month of PMIs, Purchasing Managers' Index in expansion territory, and I think Cognex continues to be well aligned with sort of the secular growth trends of automation, scarcity of labor, rising input costs, higher emphasis on product quality.

[Matt Moschner, CEO at Cognex Corporation]

Those things remain. You put those together and yeah, it drives strong demand for automation and particularly machine vision, and Cognex being the leader. On the same token, I think we are executing very well. We've talked about our sales force transformation over the last several months, and that's really a couple things.

[Matt Moschner, CEO at Cognex Corporation]

One, we did a lot of work on the organization of our sales force to make sure that they were organized for success, process and tools, making sure that they had leads, that we were fully leveraging our CRM systems that we've invested in. Then, of course, there's always the investments we've made in product.

[Matt Moschner, CEO at Cognex Corporation]

We've had great new product introductions over the last 18 months, four in 2025, and maybe our biggest set of launches in April of this year on the AI side. So, yeah, I think you put those things together, I think our team is executing really well. Really the strongest evidence is in the new customer adds that we continue to drive. At the same time, as I mentioned previously, new customer adds is one thing.

[Matt Moschner, CEO at Cognex Corporation]

We're also spending a lot more time thinking about, I said in the structured remarks, land and expand. What are the potential at the accounts that we already serve, and how do we expand our share? So there we've invested to get better data, and we'll be tracking that more rigorously internally. Yeah, I think it's a strong demand environment. I think we expect that that could persist into 2027. It's still too early to call, but we are continuing to drive internal growth initiatives, and those are paying off really strongly as well.

[Pratap Singh, Analyst at UBS]

That is very helpful. Thank you. Just as a follow-up on that, on the semiconductor market, the growth rate has been very strong. The underlying demand seems very good. As we look ahead, maybe over the next one to two years, do you believe these levels of demands are sustainable? Are you getting a little bit higher visibility in this market than what you have in the prior cycles? Thank you.

[Matt Moschner, CEO at Cognex Corporation]

Yeah. No, thanks. Yeah. Thank you. Couldn't be happier with the performance of our semi business. This is a market that Cognex has been in for decades. What that really means is the strength of the relationships that we have with leading semi machine builders and OEMs that deliver the capabilities to upstream and downstream producers of chipsets.

[Matt Moschner, CEO at Cognex Corporation]

Yeah, and it's an area that, in the last several years, we've been investing in new technologies, whether it be traceability, barcode reading, inspections. Then the acquisition of Moritex in 2023. Moritex as a business was heavily indexed more to a semi OEM selling advanced optics and lighting. So I think you put all that together, I feel like we're very well positioned to continue to capitalize on the growth momentum that we see in the semiconductor.

[Matt Moschner, CEO at Cognex Corporation]

For sure, I'd say this cycle feels different, perhaps more durable than previous semi cycles. I could imagine how that would extend well into next year and beyond. I think that's really predicated on the continued levels of investment in AI infrastructure. Should that continue, I would fully expect that that would flow through to strong demand for Cognex products as we work with our large semi OEM partners.

[Dennis Fehr, CFO at Cognex Corporation]

Maybe as we got the memory and semi question across now different end markets and different themes, maybe to summarize it. So there are clearly puts and takes, right? I think on the one side, clearly memory cost was first a headwind for us on the cost side. We feel confident that we can offset that through pricing, taking out some of the timing effects. We had the notion of potential demand impact on electronics, which could happen.

[Dennis Fehr, CFO at Cognex Corporation]

We also said at the same time, end user demand is only one factor which drives our electronics demand. At the same time, right, we have the positives, which is very clearly visible in the semi business, as Matt just outlined. We have a positive in the electronics business in the data center market. In general, I really want to emphasize that the environment for us is really net very favorable for us, and it's not a net headwind for us. In general, actually quite positive about what we see from these trends.

[Operator]

Thank you. This brings us to the end of today's conference. I would like to turn the floor back over to Matt Moschner for closing comments.

[Matt Moschner, CEO at Cognex Corporation]

Great. Thank you for joining us this morning and for your continued support. We look forward to updating you on our progress in the third quarter.

[Operator]

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines or log off the webcast at this time, enjoy the rest of your day.

Participants

Executives

• Greer Aviv, Head of Investor Relations
• Matt Moschner, CEO
• Dennis Fehr, CFO

Analysts

• Joe Ritchie, Analyst at Goldman Sachs
• Tomo Sano, Analyst at JPMorgan
• Tommy Moll, Analyst at Stephens
• Chris Grenga, Analyst at TD Cowen
• Jake Levinson, Analyst at Melius Research
• Guy Hardwick, Analyst at Barclays
• Jairam Nathan, Analyst at Daiwa Securities
• Pratap Singh, Analyst at UBS