Why Is Cognex (CGNX) Down 16.9% Since Last Earnings Report?

It has been about a month since the last earnings report for Cognex Corporation (CGNX). Shares have lost about 16.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cognex due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Key Highlights

• Revenue: $252 million in Q4 2025, up 10% year over year.
• Adjusted EPS: 27 cents, up 35% year over year.
• Free Cash Flow: $72 million in Q4 2025, up 47% year over year.
• Capital returns: Q4 repurchases of $25 million; quarterly dividend of 8.5 cents per share.

Cognex Q4 Earnings Beat Estimates, Revenues Rise Y/Y

Cognex reported fourth-quarter 2025 non-GAAP earnings of 27 cents per share, which beat the Zacks Consensus Estimate by 23.85%. The earnings per share (EPS) figure increased 35% year over year and reflected revenue growth, operating discipline and a lower diluted share count.

Revenues of $252.3 million beat the Zacks Consensus Estimate by 7.17%. The figure appreciated 10% year over year on a reported basis and 9% on a constant-currency (cc) basis. Management cited broad-based, strong year-end spending across factory automation end markets, while Logistics continued steady growth.

On a cc basis by region in the fourth quarter of 2025, Americas increased more than 11%, Europe appreciated over 13% (driven by packaging strength), and Greater China climbed more than 7% (driven by consumer electronics and semiconductor growth). However, Other Asia was flat on a year-over-year basis.

CGNX Operating Details

Fourth-quarter 2025 gross margin on a non-GAAP basis was 71.6%, which expanded 220 basis points (bps) year over year, driven by volume and favorable mix.

Adjusted EBITDA margin rose 420 bps to 22.7%, the sixth straight quarter of year-over-year expansion.

Selling, general & administrative (SG&A) expenses increased 0.1% year over year to $94.6 million. Research & development (R&D) expenses were $36.1 million, up 10.8% year over year. As a percentage of revenues, SG&A expenses decreased 360 bps year over year to 37.5%, whereas R&D expenses inched up 20 bps year over year to 14.3%.

The non-GAAP operating margin was 20.9%, up 470 bps year over year.

CGNX’s Balance Sheet Remains Strong

As of Dec. 31, 2025, Cognex had cash and cash equivalents of $262.9 million compared with $245.9 million as of Sept. 28.

In the fourth quarter, CGNX generated $74.9 million in cash from operating activities compared with the previous quarter’s $87.5 million. The company generated a free cash flow of $72.3 million in the reported quarter.

Shareholder returns in the fourth quarter of 2025 included $25 million of repurchases and $14 million of dividends. For 2025, Cognex bought back shares worth $151 million and paid $55 million in dividends.

Subsequent to quarter-end, the company’s board increased the repurchase authorization by $500 million. Cognex declared a quarterly cash dividend of 8.5 cents per share payable on March 12, 2026, to all shareholders of record as of Feb. 26, 2026.

CGNX Offers Positive Guidance

For the first quarter of 2026, Cognex expects non-GAAP revenues between $235 million and $255 million and an adjusted EBITDA margin in the range of 19-22%. Non-GAAP EPS is anticipated between 22 cents and 26 cents. Quarter dynamics include some year-end spending shifts from fourth-quarter 2025 into first-quarter 2026 and a weak year-ago comp.

Cognex is executing on additional portfolio optimization (exiting approximately $22 million of low and/or no-growth, lower-margin revenues) and has identified $35-$40 million of net operating expense reductions for 2026, with most actions in the first half and benefits expected to show from the third quarter of 2026.

For 2026 directionally (not formal guidance), Cognex’s initial view is mid to high-single-digit organic revenue growth, with vertical expectations of moderate mid to high-single-digit growth in Logistics and Packaging; high single to double-digit growth in Consumer Electronics; flat to low-single-digit growth in Automotive; and back-half-weighted mid-single to double-digit growth in Semiconductor.

Cognex updated its multi-year framework under which the through-cycle adjusted EBITDA margin range rose to 25-31% (from 20%-30%), through-cycle revenues CAGR was maintained at 13-14%, and continued expectation of more than 100% free cash flow conversion. The next milestone is a 25% adjusted EBITDA margin on a run-rate basis exiting 2026, alongside a target of at least 20% adjusted EPS growth, supported by operating expense efficiency, portfolio mix optimization, and productivity and pricing improvements.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in estimates revision.

The consensus estimate has shifted 23.75% due to these changes.

VGM Scores

Currently, Cognex has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Cognex has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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This article originally published on Zacks Investment Research (zacks.com).

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