Author: LBank Research Analyst: Steven.fu
Disclaimer: This report is based on publicly available information and analysis and is intended solely for informational and research discussion purposes. It does not constitute investment advice, a securities recommendation, a trading instruction, or any guarantee of returns. Company operations, valuations, market prices, and consensus expectations discussed herein may change over time. Readers should independently verify the data and make their own decisions.
This issue reviews the latest June-quarter results from seven technology and AI infrastructure companies: Corning (GLW), Palantir (PLTR), onsemi (ON), Snap (SNAP), Advanced Energy (AEIS), Powell Industries (POWL), and Ultra Clean (UCTT). Corning reported calendar Q2 before the US market opened on July 28, while the other six companies released results after the close on August 3. Powell reported FY2026 Q3; the other companies reported calendar Q2. Together, the seven span AI optical connectivity, application software, advertising platforms, power semiconductors, precision power, data-center power distribution, and semiconductor-equipment subsystems. They collectively answer one question: where has AI capital spending already reached revenue and cash flow, and how much growth has already been priced into elevated valuations?
1. Key Conclusions
Overall view: This earnings cycle confirms that AI demand has spread from cloud contracts to fiber connectivity, power devices, precision power, distribution equipment, and semiconductor subsystems. Operating quality was generally strong across the seven companies. Corning, however, shows that even when some current-quarter financial metrics beat expectations, slightly below-consensus guidance and decelerating growth in the core business can still puncture a premium valuation. On stock risk-reward, Snap and onsemi are positive, Ultra Clean is neutral-positive, Advanced Energy and Powell are neutral, Corning is neutral-negative, and Palantir is clearly negative. The central question is whether growth can exceed the expectations embedded in share prices and convert into sustainable free cash flow.
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Corning is the largest expectations-gap loser in this group: GAAP revenue and Q3 sales guidance both missed expectations, while the growth implied by the share price was far more demanding than headline consensus. Q2 GAAP sales of $4.505B were 3.1% below the $4.65B secondary-source analyst estimate. The $4.95B midpoint of Q3 core-sales guidance was 1.8% below the $5.04B estimate. This was not a broad collapse: core sales of $4.738B exceeded the $4.61B Reuters/LSEG figure, and core EPS of $0.78 also beat the $0.75-$0.76 expectation. Optical Communications growth slowed from 36% in Q1 to 32%. On the first trading day after the report, the shares fell as much as 20.1% intraday from the pre-earnings close and still finished down 12.1%. Even after the decline, the stock traded at roughly 36.2x simply annualized Q3 core EPS, leaving risk-reward neutral-negative.
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Palantir delivered a perfect Q2 report. Revenue rose 93% to $1.935B, 7.5% above the high end of prior guidance. US commercial revenue grew 149%, GAAP operating margin reached 47%, and adjusted FCF margin reached 63%. After an approximately 14.9% after-hours gain, the implied market capitalization of about $339.1B equated to roughly 41.6x the $8.154B midpoint of full-year revenue guidance. Against the $4.6B midpoint of adjusted FCF guidance, the cash yield was only about 1.4%. The company delivered an almost flawless quarter, but the stock demands perfection for years; risk-reward is negative.
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onsemi's automotive-cycle recovery and incremental AI power demand reached earnings and cash flow at the same time for the first time, leaving risk-reward positive. Revenue increased 9% to $1.604B, Power Solutions Group revenue rose 19%, and GAAP gross margin expanded 80bp to 38.4%. FCF increased to $425M, or 26.5% of revenue. The midpoint of Q3 revenue guidance implies about 6% sequential growth, while the midpoint of non-GAAP EPS guidance is $0.87. At approximately 24.8x simply annualized guided non-GAAP EPS after hours, the stock is not cheap, but it trades well below the narrative valuations assigned to the high-growth names in this group. AI data-center revenue is expected to more than double, providing a second growth engine.
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Snap's core improvement is monetization and cash, not user count; its low valuation makes risk-reward positive. Revenue rose 19%, ARPU increased 13%, adjusted EBITDA climbed from $41M to $250M, and TTM FCF reached $706M. North American DAU fell 7% year over year, GAAP net loss remained $164M, and quarterly stock-based compensation was $263M. Yet based on the implied after-hours market capitalization, the stock traded at approximately 1.3x TTM sales and an 8.5% FCF yield. As long as ARPU grows faster than mature-market users decline, cash-flow recovery should outweigh near-term GAAP losses.
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Advanced Energy and Ultra Clean jointly validate the broadening semiconductor-equipment upcycle, but their cash-flow quality sends the opposite warning. AEIS revenue rose 30%, semiconductor-equipment revenue grew 33%, and the midpoint of Q3 revenue guidance implies another 11.5% sequential increase. UCTT revenue increased 24%, with the midpoint of Q3 guidance implying another 12.4% sequential gain. The problem is cash: AEIS generated only $79M of operating cash flow in the first half against $86M of capital expenditures, leaving simplified FCF at -$7M. UCTT posted first-half operating cash flow of -$74M and simplified FCF of -$100M. Equipment-chain orders are reaching revenue, but inventories, capacity, and working capital are still consuming cash.
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Powell's orders were stronger than its income statement, validating the AI power-distribution scarcity thesis from the Eaton report in Issue No. 29 as well as its warning that orders do not automatically equal profit. New orders increased 158% to $934M, book-to-bill reached 3.0x, and backlog rose 69% to $2.4B, including a data-center order of more than $400M. Yet quarterly revenue increased only 9% to $312M, EPS of $1.42 fell short of the $1.49 expectation listed on Nasdaq's calendar, and the shares declined approximately 14.3% after hours. The demand is real; so is the mismatch between the delivery schedule and a premium valuation.
2. Company-by-Company Review
Corning: GAAP Revenue and Guidance Miss, and a Core EPS Beat Cannot Rescue a Premium Valuation
Results and expectations gap. Corning's Q2 GAAP sales were $4.505B, approximately 3.1% below the $4.65B analyst estimate in the secondary StockStory calendar, while GAAP EPS was $0.64. The company's preferred core-sales measure was $4.738B, up 17% year over year, 3.0% above the roughly $4.6B guidance issued in Q1, and 2.8% above the $4.61B Reuters/LSEG figure. Core EPS of $0.78 exceeded the prior $0.73-$0.77 guidance range, the $0.75 secondary-source estimate, and Nasdaq's $0.76 figure. Describing the report as "far below expectations" is directionally accurate for GAAP revenue, Q3 sales guidance, and the expectations embedded in the share price, but EPS and core sales did not miss. Corning is a textbook case of diverging reporting measures colliding with the destructive force of a premium valuation.
Business, profit, and cash. Optical Communications sales rose 32% to $2.072B, including 65% growth in Enterprise Networks and even faster growth in Gen AI products. However, Optical Communications growth slowed from 36% in Q1 and was substantially below the prior-year quarter's 81%. Display Technologies grew only 1%, Automotive rose 2%, and Life Sciences and Emerging Growth Businesses declined 15%. Solar sales increased 90% to $438M, but the business still posted a $7M net loss. Core gross margin expanded 120bp to 39.6%, while core operating margin improved 190bp to 20.9%. Q2 GAAP operating cash flow was $1.717B and adjusted FCF was $1.423B; first-half adjusted FCF rose from $450M to $1.611B. Operating quality is strong, but growth is overly concentrated in AI optical connectivity.
Guidance, valuation, and view. Q3 core-sales guidance of $4.9B-$5.0B implies 4.5% growth at the midpoint from Q2 and is 1.8% below the roughly $5.04B analyst expectation. The $0.85-$0.89 core EPS range, by contrast, has a midpoint above the approximately $0.85 consensus. The shares fell from the July 27 close of $143.36 to $126.01 on July 28, while the intraday low of $114.50 represented a decline of as much as 20.1%. Even after the selloff, the stock traded at approximately 36.2x the midpoint of Q3 EPS on a simply annualized basis; the mechanical yield on simply annualized first-half adjusted FCF was only about 3.1%. Long-term partnerships with Amazon and NVIDIA support the growth path through 2028-2030, but the current valuation still leaves little room for error. Risk-reward is neutral-negative. Current pricing will regain earnings support only if Q3 core sales exceed $5.04B, Optical Communications growth returns above 35%, and Solar turns profitable.
Palantir: 93% Revenue Growth Breaks the Old Model, but 41.6x Sales Still Pulls Forward Distant Cash Flow
Results. Palantir's Q2 revenue reached $1.935B, up 93% year over year and 19% sequentially. US revenue was $1.573B, up 115%, including US commercial revenue of $764M, up 149%, and US government revenue of $809M, up 90%. The company signed 220 contracts worth at least $1M each. TCV was $3.373B, up 49%, while US commercial RDV reached $6.238B, up 124%. Revenue exceeded the $1.797B-$1.801B guidance range issued in Q1 by roughly $134M at the high end, showing that AIP deployments are rapidly moving from pilots into budgets.
Profit and cash. GAAP operating income was $912M, representing a 47% margin, while adjusted operating income was $1.194B, representing a 62% margin. The roughly $282M difference primarily reflects stock-based compensation and related payroll taxes, equivalent to about 14.6% of revenue. Operating cash flow was $1.216B and adjusted FCF was $1.220B. Cash, cash equivalents, and short-term US Treasury securities totaled $9.2B, so the balance sheet has not taken on debt to fund high-speed expansion. The company raised FY2026 revenue guidance from $7.650B-$7.662B to $8.150B-$8.158B and increased adjusted FCF guidance from $4.2B-$4.4B to $4.5B-$4.7B.
Investment view. The company's quality is exceptional; its stock pricing is even more exceptional. The after-hours price implied a market capitalization of approximately $339.1B, or roughly 41.6x FY2026 revenue guidance and an adjusted FCF yield of about 1.4%. Even with 93% revenue growth, the valuation requires extremely high growth and margins for years. If Q3 revenue merely reaches the $2.162B guidance midpoint, sequential growth will slow to approximately 11.7%; natural deceleration alone could trigger multiple compression. The operating view is strongly positive, but stock risk-reward is negative.
onsemi: Automotive Reaches a Bottom, While AI Power Begins to Lift Margins
Results. onsemi's Q2 revenue was $1.604B, up 9% year over year and 6% sequentially. Power Solutions Group revenue was $829M, up 19%; Analog and Mixed-Signal Group revenue was $546M, down 2%; and Intelligent Sensing Group revenue was $229M, up 7%. PSG now accounts for 51.7% of group revenue. From PSUs and 48V architectures to board-level conversion, AI servers require more MOSFETs, SiC, GaN, and controllers, making AI a steeper new growth source than automotive. The company expects AI data-center revenue to more than double in 2026 and is expanding its position in the NVIDIA MGX ecosystem.
Profit, cash, and capital allocation. GAAP gross margin was 38.4% and operating margin was 16.1%, up 80bp and 290bp year over year, respectively. Non-GAAP EPS was $0.74. Operating cash flow reached $460M, capital expenditures were $34M, and FCF was $425M, approximately four times the prior-year quarter's roughly $106M. First-half FCF was about $643M, while share repurchases were approximately $691M, so capital returns still slightly exceeded FCF. At the same time, the company plans to acquire Synaptics. If it continues to add leverage for both the acquisition and repurchases, improved cash generation will be diluted by capital allocation.
Guidance and view. Q3 guidance calls for revenue of $1.65B-$1.75B, non-GAAP gross margin of 40%-42%, and EPS of $0.81-$0.93. The midpoints are 6.0%, roughly 1.7 percentage points, and 17.6% above Q2, respectively. At approximately 24.8x simply annualized guided non-GAAP EPS after hours, the valuation already acknowledges a recovery, but it does not prepay years of growth as PLTR does. If PSG sustains growth above 15%, group gross margin reaches the 41% midpoint, and quarterly FCF remains above $350M, risk-reward stays positive. If automotive demand reflects only inventory restocking and AI revenue does not materialize, the current re-rating will lose its support.
Snap: North American Users Are Still Leaving, but ARPU and Cash Flow Have Already Turned
Results. Snap's Q2 revenue was $1.599B, up 19%. DAU reached 493M, up 5%; MAU was 971M, up 4%; and ARPU was $3.25, up 13%. The divergence in growth quality is clear: North American DAU fell to 92M, down 7% year over year, and European DAU declined 2%, while Rest of World grew 12%. Yet ARPU in North America and Europe increased 23% and 36%, respectively. Improvements in ad ranking, conversion tools, and direct revenue allowed group revenue to accelerate despite declining mature-market users.
Profit and cash. Adjusted EBITDA increased from $41M to $250M, with margin rising from 3.1% to 15.6%. FCF climbed from $24M to $121M, and TTM FCF reached $706M. GAAP operating loss remained $171M, while quarterly stock-based compensation of $263M equaled 16.5% of revenue. Common shares outstanding were roughly flat year over year, but shares underlying unvested equity awards increased 38%, so potential dilution has not disappeared. Headcount fell 9% year over year, showing that better monetization and cost cuts both contributed to the profit improvement.
Investment view. Based on the implied after-hours market capitalization, Snap traded at approximately 1.3x TTM revenue and an 8.5% TTM FCF yield, significantly below the other companies in this group. The reasons for the discount are real: mature-market user declines, GAAP losses, and high stock-based compensation. However, as long as ARPU sustains double-digit growth, TTM FCF remains above $700M, and total potential dilution growth falls below 3%, cash flow already provides a sufficient margin of safety. Risk-reward is positive. The primary invalidation condition is a North American DAU decline of more than 5% combined with ARPU growth falling into the single digits.
Advanced Energy: Precision Power Accelerates Broadly, but Negative Free Cash Flow Caps Valuation Expansion
Results. AEIS Q2 revenue was $574M, up 30% year over year and 12% sequentially. Semiconductor-equipment revenue rose 33% to $278M, data-center computing revenue increased 35% to $192M, Industrial and Medical grew 17%, and Telecom and Networking rose 11%. GAAP gross margin increased from 37.0% to 41.1%, while operating margin improved from 7.2% to 16.6%. Non-GAAP EPS of $2.74 exceeded the high end of the prior $1.93-$2.43 guidance range. Its core products are not commodity power supplies; they provide high-precision power conversion, measurement, and control in wafer-fabrication equipment, AI servers, networking gear, and medical devices. Customer qualification cycles are long, so share gains, once established, are usually more durable than a single equipment cycle.
Cash and guidance. Q2 operating cash flow from continuing operations reached a record $86M, but first-half operating cash flow was only $79M against $86M of capital expenditures, leaving simplified FCF at -$7M. Changes in operating assets and liabilities consumed $149M, meaning that capacity expansion and accelerating revenue have not yet converted into first-half cash returns. Q3 guidance calls for revenue of $620M-$660M and non-GAAP EPS of $2.75-$3.25, with the midpoints 11.5% and 9.5% above Q2, respectively.
Investment view. At approximately 27.2x simply annualized guided non-GAAP EPS after hours, the valuation requires simultaneous improvement in revenue, gross margin, and cash flow. Semiconductor Equipment and Data Center Computing together accounted for roughly 81.8% of Q2 revenue, giving AEIS greater AI exposure than traditional industrial power suppliers while also increasing its sensitivity to customer capital-spending cycles. The operating view is positive, but stock risk-reward is neutral. If second-half FCF turns positive and exceeds $150M, cash generation can support the current valuation. If revenue reaches a record while full-year FCF remains near zero, the after-hours gain will prove to have been paid in advance.
Powell Industries: 3.0x Book-to-Bill Validates AI Power-Distribution Scarcity, but Revenue Still Trails Orders
Results. Powell's FYQ3 revenue was $312M, up 9% year over year and 5% sequentially. Commercial and Other Industrial revenue increased 54%, Electric Utility rose 18%, and Petrochemical declined 49%. Gross margin was 30.6%, broadly flat year over year; GAAP operating margin was 20.6%, and EPS was $1.42. The operating result was solid, but it did not match the market's elevated expectations for AI power distribution.
Orders and review of the prior thesis. New orders reached $934M, up 158%, and book-to-bill was 3.0x. Backlog rose 69% year over year and 35% sequentially to $2.4B. Three major quarterly awards included a behind-the-meter power-distribution project for a data center worth more than $400M, a petrochemical project of approximately $75M, and an LNG project of roughly $60M. The Eaton report in Issue No. 29 argued that the true AI data-center bottlenecks are power distribution, thermal management, and prefabricated systems, but that orders must reach margins and FCF to support a premium valuation. Powell's orders prove the scarcity of demand; 9% revenue growth and the 14.3% after-hours decline prove that the delivery schedule matters just as much.
Investment view. The company expects gross margin to remain around its TTM level and is expanding capacity in Jacintoport, Houston, and Ohio. The $2.4B backlog equals approximately 7.7 quarters of current revenue, providing strong forward visibility, but project delays, customer modifications, and capacity ramp-ups also magnify working-capital and execution risks. Even after hours, the stock traded at roughly 33.1x simply annualized quarterly EPS. The operating view is positive and stock risk-reward is neutral. A more constructive stance requires revenue growth above 20% over the next two quarters, book-to-bill remaining above 1.5x, and gross margin holding at 30%.
Ultra Clean: Equipment-Subsystem Demand Surges, but Inventory Growth Keeps Profit on Paper
Results. UCTT's Q2 revenue was $645M, up 24% year over year and 21% sequentially. Product revenue increased 26% to $573M, while Services revenue rose 13% to $72M. GAAP gross margin improved from 15.3% to 16.1%, and operating margin increased from approximately 1.8% after excluding the prior-year goodwill impairment to 4.6%. GAAP EPS was $0.19, while non-GAAP EPS was $0.70. Q3 guidance calls for revenue of $700M-$750M and non-GAAP EPS of $0.83-$1.03. The midpoints imply sequential growth of 12.4% and 32.9%, respectively, showing that semiconductor-equipment customer demand continues to accelerate.
Cash-flow warning. First-half revenue increased 13.6% to $1.179B, but operating cash flow swung from positive $57M in the prior-year period to -$74M. Capital expenditures were $26M, leaving simplified FCF at -$100M. A $239M inventory increase was the largest drag and exceeded the period's $188M gross profit. Demand growth requires advance procurement and capacity expansion, but if customers delay deliveries, inventory can shift from a growth asset into impairment and pricing risk.
Investment view. At approximately 24.5x simply annualized guided non-GAAP EPS after hours and roughly 1.3x simply annualized Q3 revenue midpoint, the valuation does not price in the long-term margins assigned to higher-margin equipment makers. Risk-reward is neutral-positive, provided that Q3 GAAP operating margin rises above 6%, inventories stop increasing, and quarterly operating cash flow turns positive. If revenue reaches guidance while cash flow remains negative as it did in the first half, the low sales multiple merely represents a fair discount for low margins and high working-capital intensity.
3. Key Risks
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Corning's premium valuation, customer concentration, and slowing Optical Communications growth. If Q3 core sales fall below $4.9B, Optical Communications growth drops under 30%, or Amazon/NVIDIA delays capacity expansion, high fixed-asset investment would magnify the revenue shortfall through margins and FCF. At roughly 36x simply annualized core EPS, the multiple still has room to compress.
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AI capital-spending concentration and a cyclical reversal. If large cloud providers delay GPU clusters, fiber, servers, power infrastructure, or fab expansions, the impact would propagate through Corning's connectivity shipments, Palantir's contract execution, onsemi/AEIS/UCTT customer purchases, and Powell's project deliveries. Orders and backlog could remain elevated even as revenue and cash slow first.
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Palantir multiple compression. Approximately 41.6x revenue and a 1.4% adjusted FCF yield imply an extremely long high-growth period. If Q3 sequential revenue growth falls below 10%, US commercial growth drops under 100%, or adjusted FCF guidance is reduced, the multiple could fall significantly even if absolute results continue to grow.
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onsemi automotive and acquisition risk. Customer inventory restocking could be mistaken for an end-demand recovery. If the Synaptics transaction raises debt, creates integration costs, or dilutes repurchase returns, capital allocation will absorb the cash improvement from AI.
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Snap user quality, competition, and dilution. Continued North American DAU declines would increase the monetization burden per user, while competition from TikTok, Meta, and YouTube could raise traffic-acquisition and R&D costs. Shares underlying equity awards rose 38%; if employee incentives continue to outgrow repurchases, FCF will not fully convert into per-share value.
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AEIS and UCTT working-capital risk. Both companies posted negative simplified FCF in the first half, while UCTT inventories increased $239M. Changes in customer delivery schedules, export restrictions, or a weaker equipment cycle could turn inventory and capacity expansion into impairments, price reductions, and cash shortfalls.
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Powell execution and order-cancellation risk. The $2.4B backlog includes long-cycle customized projects whose scopes can be changed or schedules delayed by customers. If capacity ramp-up, material, and labor costs exceed bid assumptions, the 30% gross margin could decline as revenue is recognized.
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Secondary-source consensus and market-price methodology risk. Corning's LSEG figures come from Reuters, while other expectations from the Nasdaq calendar may have limited sample sizes. After-hours trading is illiquid, and the mechanical valuations in this report are not formal price targets. Regular-session prices may differ materially from the final after-hours quotes.
4. Monitoring Checklist
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Corning: Can Q3 core sales exceed $5.04B and Optical Communications growth return above 35%? Does Solar turn from a loss to a profit? Can quarterly adjusted FCF remain above $1B? Meeting all three conditions would reinforce the high-quality growth thesis, while sales below $4.9B would further weaken valuation support.
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Palantir: Can Q3 revenue exceed the $2.164B high end of guidance? Can US commercial revenue continue to grow above 100%? Can adjusted FCF margin remain above 50%? A material slowdown in any one measure would undermine the current extreme valuation.
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onsemi: Can Q3 revenue reach the $1.7B midpoint and non-GAAP gross margin reach 41%? Does AI data-center revenue deliver on the full-year doubling target? Can quarterly FCF remain above $350M while repurchases no longer exceed FCF?
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Snap: Can the North American DAU decline narrow to less than 5%, while group ARPU continues to grow above 10%? Can TTM FCF remain above $700M? Can growth in total potential shares fall below 3%?
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Advanced Energy: Can Q3 revenue reach $640M and non-GAAP EPS reach $3.00? Can second-half FCF exceed $150M and cover capital expenditures? Can combined Semiconductor and Data Center growth remain above 25%?
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Powell: Can revenue growth rise above 20% over the next two quarters, book-to-bill remain above 1.5x, and gross margin hold at 30%? Do delivery milestones for the data-center project worth more than $400M enter revenue on schedule?
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Ultra Clean: Can Q3 revenue reach $725M and GAAP operating margin exceed 6%? Do inventories stop increasing and quarterly operating cash flow turn positive? If inventory continues to grow faster than revenue, the positive view should be revised downward.
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Cross-chain validation: Track Microsoft/Meta/Amazon capital expenditures, Corning Optical Communications revenue, Lam/KLA equipment orders, and Eaton/Vertiv/Powell backlog together. If cloud capital spending, optical connectivity, equipment orders, and power-distribution orders cool simultaneously, the physical AI infrastructure cycle is reaching an inflection point.
5. Sources
