Advanced Drainage 2026 Q1 Earnings Misses Targets with 11.2% Net Income Drop

Advanced Drainage Systems (WMS) reported fiscal 2026 Q1 earnings on August 7, 2025, showing mixed results. Revenue rose modestly by 1.8% year-over-year, but net income and EPS declined significantly. The company confirmed its fiscal 2026 guidance without adjustments.

Revenue
Total revenue for Advanced Drainage Systems (WMS) increased by 1.8% to $829.88 million in Q1 2026, compared to $815.34 million in the prior year. Domestic pipe sales fell 2.5% to $415.5 million, while domestic allied products & other sales rose 1.9% to $187.5 million. Infiltrator sales surged 21.1% to $178.4 million, largely due to the acquisition of Orenco Systems. International sales, however, declined sharply by 16.0% to $48.5 million. The overall domestic sales growth was driven by acquisitions and expansion in residential and non-residential construction markets.

Earnings/Net Income
Net income dropped by 11.2% to $144.09 million in Q1 2026, down from $162.32 million in the previous year. Earnings per share (EPS) declined by 11.1% to $1.85 from $2.08. Adjusted EBITDA, however, increased slightly by 1.0% to $278.2 million, reflecting improved operational efficiency. The decline in net income and EPS underscores the company’s struggles with elevated interest rates and wet weather disrupting project installations.

Price Action
The stock of Advanced Drainage Systems (WMS) has demonstrated strong short-term performance. It gained 6.73% in a single trading day, surged 16.36% over the past full trading week, and rose 12.19% month-to-date as of August 7, 2025. This upward momentum suggests strong investor confidence despite the earnings miss.

Post-Earnings Price Action Review
The strategy of purchasing Advanced Drainage Systems (WMS) shares following its Q1 revenue growth and holding for 30 days generated a moderate return of 2.77% CAGR. However, this underperformed the benchmark by 45.80 percentage points. While the strategy showed a low-risk profile with a maximum drawdown of 0.00% and a Sharpe ratio of 0.07, it also exhibited high volatility of 38.57%. These figures highlight the trade-off between risk and return for investors employing this strategy.

CEO Commentary
Scott Barbour, President and CEO of Advanced Drainage Systems, emphasized the company's strong Adjusted EBITDA margins of 33.5% in Q1. Despite challenges like wet weather affecting installations and high interest rates, Barbour highlighted strategic investments in engineering, customer service, capacity, and logistics as key drivers for long-term growth and profitability. Innovations such as the Arcadia stormwater separator and progress at Orenco were cited as notable advancements. Additionally, the acquisition of River Valley Pipe was mentioned as a strategic move to expand geographic reach and operational flexibility. Barbour concluded with cautious optimism, emphasizing the long-term attractiveness of the water management industry and the company’s resilience amid short-term macroeconomic pressures.

Guidance
Advanced Drainage Systems confirmed its fiscal 2026 guidance, maintaining its expectations for net sales in the range of $2.825 billion to $2.975 billion and Adjusted EBITDA between $850 million and $910 million. The company also projected capital expenditures in the range of $200 million to $225 million. These figures reflect confidence in the company's ability to sustain growth despite ongoing challenges.

Additional News
Advanced Drainage Systems completed the acquisition of River Valley Pipe in Q1 2026, enhancing its geographic presence and operational flexibility. The company also launched the Arcadia stormwater separator, marking a significant product innovation. No major C-level changes or significant buyback activity was reported within the three weeks following the earnings release.