AMETEK's Q3 2025 Earnings Call: Contradictions Emerge on China Tariffs, Process Industry Sales, Margins, and Order Growth

Date of Call: October 30, 2025

Financials Results

• Revenue: $1.89B, up 11% YOY
• EPS: $1.89 per diluted share, up 14% YOY
• Operating Margin: 27%, up 90 basis points versus prior year (excluding recent acquisitions); EBITDA margin 31.3%

Guidance:

• Full year sales expected to be up mid-single digits vs 2024.
• Full year diluted EPS expected $7.32–$7.37, up 7%–8% vs prior year (prior range $7.06–$7.20).
• Q4 sales expected to be up ~10%; Q4 EPS expected $1.90–$1.95 (up ~2%–4% vs prior year; 6%–9% adjusting for last year's low tax rate).
• FY effective tax rate expected ~18.0%–18.5%.
• CapEx ~ $150M for the year; incremental $90M in organic growth investments for 2025.
• Free cash flow conversion expected ~110%–115% of net income.

Business Commentary:

• Record Sales and Orders:
• AMETEK reported record sales of $1.89 billion for Q3 2025, up 11% from the third quarter of 2024.
• The company also experienced record orders at $1.97 billion, up 13%, and a record backlog of $3.54 billion.

• This growth was driven by strong order growth across all segments, particularly in the Automation & Engineered Solutions, and robust momentum in Aerospace & Defense markets.

• Strong Margin Expansion and Earnings:

• AMETEK's operating income rose to $496 million, a 11% increase over the third quarter of 2024.
• Earnings per diluted share reached record levels at $1.89 per share, up 14% year-on-year.

• Margin expansion was attributed to operational excellence, strategic acquisitions, and favorable organic sales growth.

• Regional Performance and Market Dynamics:

• Sales in the U.S. increased mid-single digits, while internationally, there was low single-digit growth, with strength in Europe offsetting a decline in Asia, particularly due to challenges in China.
• The growth in Europe was driven by strong performance in Automation, Materials Analysis, and Aerospace businesses.

• In Asia, excluding China, sales were up mid- to high single digits, reflecting a recovery in some regions despite ongoing tariff renegotiation challenges in China.

• Acquisition Integration and Strategic Focus:

• Recent acquisitions, including FARO, Virtek, Kern, and Paragon, are integrating well and contributing to growth.
• The company increased its full-year earnings guidance due to strong third-quarter performance and integration of these acquisitions.
• AMETEK's strategic focus on acquisitions complements its efforts to invest in organic growth through R&D and digital marketing initiatives.

Sentiment Analysis:

Overall Tone: Positive

• Management: "AMETEK delivered outstanding results in the third quarter with double-digit growth in sales, orders, operating profit and diluted earnings per share." "Sales were a record $1.89 billion..." "Given these excellent results... we are increasing our full year earnings guidance." EBITDA margins called "outstanding" at 31.3%.

Q&A:

• Question from Deane Dray (RBC Capital Markets): Tour of key platforms/regions and what stands out, and Paragon performance?
  Response: Broad-based strength led by EMG/Paragon and A&D; Paragon had another strong quarter, Process organic down slightly but pipeline/visibility improving, US and Europe strong while China is weak due to tariff/timing issues.

• Question from Deane Dray (RBC Capital Markets): Are tariffs driving the softness in China?
  Response: Yes — tariff repricing is causing customers to renegotiate and delay orders; timing issues not permanent and AMETEK remains competitively well-positioned.

• Question from Matt Summerville (D.A. Davidson): Can you provide granularity on Paragon's organic performance, restructuring and profitability trajectory?
  Response: Paragon delivered strong double-digit orders, is ~halfway through restructuring with plant closures and cost reductions; margins now in line with AMETEK and targeted to be 35%+ EBITDA over ~one year of work.

• Question from Matt Summerville (D.A. Davidson): Additional color on Process end markets and potential pent-up demand?
  Response: Process improved sequentially across most markets and geographies except China; visibility and pipeline are strengthening and management expects an excellent 2026 when demand reaccelerates.

• Question from Andrew Obin (BofA Securities): What drove strength in Europe and did momentum sustain into October?
  Response: Europe strength was broad-based across Automation, Paragon, Materials Analysis and Aerospace (low-double-digit growth); September was the strongest month and October month-to-date remains solid, indicating sustained momentum.

• Question from Christopher Snyder (Morgan Stanley): Can you unpack Q4's ~10% guide between organic, M&A and FX?
  Response: Q4 guide (~10%) includes mid- to high-single-digit contribution from recent acquisitions; Dalip said FX is not expected to impact Q4 top or bottom line materially.

• Question from Christopher Snyder (Morgan Stanley): Is Industrial & Power strength all data-center related or broader?
  Response: Mainly Power: backup power, microgrids, solar racks and RTDS real-time simulation work for hyperscalers and grid T&D projects drive upside; Industrial is solid but the incremental growth is in Power.

• Question from Julian Mitchell (Barclays): Progress at FARO and organic trends post-acquisition?
  Response: FARO met top- and bottom-line commitments and is integrating well; it does not yet count in AMETEK organic metrics but management is optimistic about synergies with Creaform and new product/channel initiatives.

• Question from Nigel Coe (Wolfe Research): Is Automation growth driven by inventory/destock comps or real end-market demand; and EMG margin outlook with Paragon?
  Response: Growth is driven by discrete/precision automation (not broad factory automation) and recovery from prior destock; Paragon provides upside and EMG margins are expected to reach new record levels going forward.

• Question from Robert Jamieson (Vertical Research): Update on M&A pipeline and areas of interest?
  Response: Pipeline is strong and active across deal sizes in AMETEK's existing end markets; company remains disciplined on returns and has capacity to pursue strategic acquisitions.

Contradiction Point 1

Tariff and Pricing Impact on China Sales

It highlights changes in the company's approach to managing tariffs and pricing in China, which can impact revenue and profitability.

Can you highlight key platforms, regions, and notable factors? - Deane Dray (RBC Capital Markets)

2025Q3: Tariffs need renegotiation, causing delays in China. Prices get renegotiated to include higher tariffs. - David Zapico(CEO)

What assumptions are in the guide regarding the $100 million tariff costs last quarter and the $70 million from China? Does the core business reflect any changes? - Jamie Lyn Cook (Truist Securities)

2025Q2: The $100 million in tariff costs from last quarter are no longer a negative headwind as AMETEK has mitigated these costs through pricing and supply chain adjustments. - David Zapico(CEO)

Contradiction Point 2

Process Industry Sales Performance

It involves differing perspectives on the sales performance and outlook for the Process Industry sector, which is a key contributor to the company's revenue.

Can you break down Paragon's organic sales performance and profitability in more detail? - Matt Summerville (D.A. Davidson)

2025Q3: Strong visibility across process markets. Sees improvement sequentially, except China. Confident in future. Expects excellent performance in 2026. - David Zapico(CEO)

Can you provide a breakdown of end markets and regions under dynamic market conditions and discuss monthly trends given reported fluctuations? - Deane Michael Dray (RBC Capital Markets)

2025Q2: Sales for Process businesses were flat year-over-year, with contributions from acquisitions offsetting a 4% decline in organic sales. - David Zapico(CEO)

Contradiction Point 3

Margin Expectations and M&A Activity

It involves differing expectations regarding margin improvements and the impact of M&A activity, which are crucial for assessing financial performance and growth strategy.

Can you discuss revenue guidance for Q4, mergers and acquisitions, and the foreign exchange impact? - Christopher Snyder (Morgan Stanley)

2025Q3: 10% Q4 sales growth expected with M&A contributing mid- to high single digits. Foreign exchange not expected to impact top line. - David Zapico(CEO)

How will EMG segment's order growth and Paragon's cost actions affect margin trends? Are trade wars and tariffs affecting acquisition activity? - Jamie Cook (Truist)

2025Q1: EMG margins are expected to see upside in the second half of the year. AMETEK has a hedged position on EMG margins. The acquisition pipeline remains robust, with delays in some deals due to uncertainties. - Dave Zapico(CEO)

Contradiction Point 4

Order Growth Expectations

It involves changes in financial forecasts, specifically regarding order growth expectations, which are critical indicators for investors.

Can you discuss the strengths in Europe, including specific verticals and geographies? - Andrew Obin (BofA Securities)

2025Q3: Strongest month was September on both sales and orders. October is solid, no indications of slowdown. Steady momentum. - David Zapico(CEO)

Can you provide an update on Paragon’s revenue base and 2025 expectations? - Jeffrey Sprague (Vertical Research)

2024Q4: Orders have been increasing steadily since mid-2024, with strong December and January showing no signs of pre-buys. - David Zapico(CEO)