Last Update 27 Jan 26

Fair value Increased 15%

AEIS: Data Center And Semiconductor Spending Upside Will Support Balanced Expectations

Narrative Update on Advanced Energy Industries

The updated analyst price target for Advanced Energy Industries moves to $263.00 from $228.50. This reflects analysts' recent price target increases and more constructive views on revenue growth, profit margins, and future P/E assumptions following sector channel checks and company specific research.

Analyst Commentary

Recent research points to a more constructive setup for Advanced Energy Industries, with several price target increases and at least one rating upgrade helping to reset expectations for revenue, margins, and P/E assumptions linked to semiconductor and datacenter exposure.

Bullish Takeaways

Bullish analysts highlight the rating upgrade to Positive, along with a move in one price target to US$300 from US$190, suggesting increased confidence in the company’s ability to execute as wafer fab equipment spending and broader semiconductor revenues trend higher.
Channel checks indicating preparation for around US$120b in wafer fab equipment spending, and a supply chain geared for levels well above US$150b, are seen as supportive for Advanced Energy’s growth runway, which these analysts view as underappreciated in current valuation multiples.
Bullish analysts point to the firm’s datacenter exposure. One report cites this segment as a highlight, with expectations for it to be up roughly 2x in the current year and 25% to 30% next year, which they see as a key driver for earnings power and justification for higher price targets such as US$240.
Several recent price target increases, including moves of US$10 to US$40 from different research houses, are framed as reflecting stronger visibility into demand and a view that the company can at least meet near term expectations while building a case for higher outer year estimates.

Bearish Takeaways

Some cautious analysts focus on execution risk around scaling to meet elevated wafer fab and datacenter demand. They note that higher price targets still assume the company delivers on growth tied to large industry spending figures rather than more conservative scenarios.
There is implied concern that expectations for datacenter revenue, including calls for 2x performance in the current year and 25% to 30% growth in the following year, could be ambitious if customer spending patterns shift or orders are delayed.
A few of the more measured research notes, even when raising price targets, emphasize that upcoming quarters need to at least align with existing estimates. This signals limited room for operational missteps before valuation support could be questioned.
With multiple target hikes clustered together, some investors may worry the bar has moved higher on both growth and margins, which could increase share price sensitivity if future updates or channel checks point to slower momentum than currently assumed in these reports.

What's in the News

Management indicated that Advanced Energy Industries is actively looking for acquisitions, with the CFO highlighting interest in deals that add scope and leverage the company’s existing scale (Key Developments).
The company issued earnings guidance for the fourth quarter 2025, calling for GAAP EPS of $0.87 to $1.37, revenue of $450m to $490m, and GAAP EPS from continuing operations of $1.12 +/- $0.25 (Key Developments).
Advanced Energy Industries reported that between July 1, 2025 and September 30, 2025, it repurchased 0 shares for $0m, while overall completing the repurchase of 6,024,166 shares, or 15.36%, for $357.18m under its buyback program announced on September 16, 2015 (Key Developments).

Valuation Changes

Fair Value: moved from US$228.50 to US$263.00, representing a moderate upward reset in the reference valuation level.
Discount Rate: edged down slightly from 8.62% to 8.59%, implying a modest adjustment to the risk and return assumptions used in the model.
Revenue Growth: shifted from 9.89% to 10.10%, a small increase in the assumed growth rate used for future projections.
Net Profit Margin: adjusted from 16.52% to 16.65%, reflecting a slight change in expected profitability on future sales.
Future P/E: moved from 28.64x to 32.52x, indicating a higher valuation multiple being applied to projected earnings.

Growth in data center, AI, and semiconductor demand is driving strong adoption of new technology platforms, supporting future revenue and margin expansion.
Strategic focus on higher-margin products, operational efficiencies, and investments in R&D and acquisitions is boosting earnings growth and market share diversification.
Heavy dependence on a few large customers and cyclical sectors, combined with tariff and competitive pressures, threatens revenue stability, margins, and long-term diversification.

Catalysts

About Advanced Energy Industries

Provides precision power conversion, measurement, and control solutions in the United States and internationally.What are the underlying business or industry changes driving this perspective?

Sustained expansion in data center and cloud computing infrastructure, especially driven by AI workloads, is fueling robust demand for Advanced Energy's next-generation high-power density solutions; strong design win momentum and customer forecasts suggest revenue growth in this segment will remain above historical averages into 2026 and beyond, providing significant top-line upside.
Continuous acceleration in the global adoption of advanced semiconductor manufacturing (including leading-edge logic and memory), combined with the proliferation of digitization and IoT, is leading to strong customer pull for AE's new technology platforms (eVoS, eVerest, NavX), with revenue from these platforms expected to double in 2025 and ramp further as fabs move to volume production, supporting both future revenue and margin expansion.
A deliberate shift to higher-margin product segments, rationalization of the product portfolio, closure of China factories, and operational efficiencies (including supply chain optimization) are structurally raising gross margin levels; company targets gross margins of 39–40% by year-end 2025, paving the way for outpaced earnings growth relative to revenue.
Strong backlog and a record number of recent design wins in Industrial & Medical, supported by renewed investments in digital marketing and distribution channels, position AE to capture incremental market share as the broader I&M market recovers, underpinning a more stable and diversified long-term revenue stream.
Active expansion of manufacturing capacity and ongoing investments in R&D, together with a disciplined acquisition pipeline, are enhancing AE's product breadth and customer reach, setting the stage for accelerated revenue growth, improved operating leverage, and increased long-term earnings.

Advanced Energy Industries Earnings and Revenue Growth

Advanced Energy Industries Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Advanced Energy Industries's revenue will grow by 8.5% annually over the next 3 years.
Analysts assume that profit margins will increase from 5.2% today to 16.7% in 3 years time.
Analysts expect earnings to reach $348.3 million (and earnings per share of $7.86) by about September 2028, up from $85.4 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.4x on those 2028 earnings, down from 68.2x today. This future PE is lower than the current PE for the US Electronic industry at 23.9x.
Analysts expect the number of shares outstanding to grow by 0.12% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.47%, as per the Simply Wall St company report.

Advanced Energy Industries Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The company's heavy reliance on a concentrated set of hyperscale customers in its data center segment exposes it to significant customer concentration risk-if one or more hyperscalers curtail or redirect spending, revenue could be negatively impacted and earnings growth could falter.
The outlook for semiconductor growth has already been cut from 10% to mid-single digits due to tariffs, slowing China demand, and softness in trailing edge logic and DRAM, highlighting the sector's exposure to cyclical downturns and geopolitical pressures, which could further suppress future revenues.
Tariffs continue to be a dynamic and unpredictable headwind, already causing over 100 basis points of gross margin impact this quarter and driving customers to alter delivery schedules-if tariffs rise or mitigation efforts fall short, both margins and net earnings could further deteriorate.
Sales into the Industrial and Medical segment have been recovering only gradually after a multiyear downturn, with channel inventories and smaller customer sensitivity to tariffs slowing the rebound; a sluggish or uneven recovery in this segment would limit diversification benefits, negatively impacting broad-based revenue and cash flow.
The data center growth story is highly dependent on rapid cycles of new GPU introductions; failure to keep pace in engineering resources or technology innovation relative to larger or vertically integrated competitors could lead to lost design wins and eroding market share, ultimately constraining top-line growth and long-term profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $150.7 for Advanced Energy Industries based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $180.0, and the most bearish reporting a price target of just $120.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.1 billion, earnings will come to $348.3 million, and it would be trading on a PE ratio of 20.4x, assuming you use a discount rate of 8.5%.
Given the current share price of $154.76, the analyst price target of $150.7 is 2.7% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

AEIS: Execution Risks In Data Center And Semiconductor Expansion Will Limit Upside