ATS Corporation: Backlog-Driven Growth Surges Ahead of EV Sector Shifts

The ATS Corporation has set an ambitious revenue target for its first quarter of fiscal 2026, projecting between $680 million and $730 million—a range buoyed by a record-breaking order backlog and a strategic settlement in the EV sector. Yet, beneath these figures lies a complex interplay of opportunities and challenges. Can ATS sustain its growth trajectory amid shifting market dynamics, or is its current optimism a fleeting mirage? Let's dissect the data to uncover why now could be the moment to bet on this industrial powerhouse.

The Backlog Bonanza: A Foundation for Future Growth

ATS's $2.139 billion order backlog as of March 31, 2025, represents a 19.3% year-over-year surge, signaling robust demand across its core sectors. This backlog isn't merely a number—it's a pipeline of confirmed revenue. Key contributors include long-cycle projects in life sciences, where pharmaceutical and medical device automation is booming, and food & beverage, where automation adoption remains steady.

The backlog's composition is critical: while some sectors face headwinds, ATS's diversified portfolio ensures no single industry can derail its progress. Life sciences alone, with its multi-year projects, provides a stable revenue stream, offsetting volatility in transportation.

Navigating EV Crosscurrents: A Settlement, Not a Strategy

The $194 million settlement from an EV customer—accounting for nearly 28% of the low end of Q1 2026 guidance—is a one-time windfall. However, ATS's direct exposure to EV production is waning. North American EV investments have cooled, shrinking the transportation funnel and shifting focus toward nuclear power plants and grid battery storage in the energy sector.

This pivot highlights a strategic shift: ATS is moving beyond the EV boom-and-bust cycle. While the settlement boosts near-term results, its long-term reliance on EV projects is diminishing—a prudent move as the sector faces overcapacity and regulatory uncertainty.

Sector Strength Beyond EVs: Life Sciences and Food Fuel the Future

ATS's true growth engine lies in life sciences, where its expertise in radiopharmaceuticals and integrated solutions aligns with global healthcare spending trends. The sector's funnel activity is robust, and its longer revenue cycles mean today's wins will pay dividends for years. Meanwhile, food & beverage automation remains a steady contributor, benefiting from rising consumer demand for premium products and supply chain resilience.

Even in transportation, ATS is pivoting toward emerging energy opportunities. Small modular reactors and grid storage—sectors less tied to EVs—are ripe for growth as governments prioritize energy security.

Challenges on the Horizon: Tariffs and Margin Pressures

No outlook is without risks. Tariffs, inflation, and supply chain volatility could delay revenue recognition or squeeze margins. ATS's Q4 2025 net loss of $68.9 million (vs. $48.5M profit in 2024) underscores the pressure of rising costs. However, its adjusted EBITDA of $97.1 million—despite the loss—shows operational resilience.

The disclosure of ineffective internal controls is a red flag, but since it didn't lead to restatements, it appears more of a procedural hiccup than a systemic issue. Management's focus on resolving this will be key to rebuilding investor confidence.

Why Invest Now? The Case for Immediate Action

The Q1 2026 guidance is not just a number—it's a catalyst. The backlog's size and diversification, combined with a reduced reliance on volatile EV markets, positions ATS to deliver consistent growth. The settlement's influx of cash provides a near-term boost, while its focus on high-margin sectors like life sciences and energy ensures long-term profitability.

Investors should act now for two reasons:
1. Valuation Timing: ATS's stock is likely undervalued given its backlog visibility.
2. First-Mover Advantage: As other firms struggle with EV overexposure, ATS is already pivoting to sectors with clearer demand.

The risks are real, but manageable. With a backlog-driven revenue machine and a strategic pivot away from EV dependency, ATS is primed to outperform peers in 2026 and beyond. This is no time to hesitate—the backlog is calling, and growth is on the horizon.

In a world where supply chain and macroeconomic uncertainty loom large, ATS's diversified backlog and adaptive strategy make it a compelling bet for investors seeking stability amid disruption. The next quarter's results could be the catalyst to push ATS into the spotlight—and your portfolio.