Nordson's Q4 2025: Contradictions Emerge on Semiconductor Demand, ATS Growth, and Automotive Market Outlook

Date of Call: December 11, 2025

Financials Results

• Revenue: Q4 FY2025: $752M, up 1% YOY; FY2025: $2.8B, up 4% YOY
• EPS: Q4 GAAP: $2.69 per diluted share; Q4 adjusted EPS: $3.03, up 9% YOY; FY2025 GAAP EPS: $8.51; FY2025 adjusted EPS: $10.24, up 5% YOY
• Gross Margin: FY2025 average gross margin 55% (maintained); Q4 FY2025 EBITDA margin 34%, up 160 bps vs prior-year Q4

Guidance:

• FY2026 sales expected 1%–6% above FY2025 (midpoint 3.5%); assumes ~1% FX benefit net of the divested medical contract manufacturing business.
• FY2026 adjusted EPS growth forecast 6%–12% (midpoint 9%); Q1 adjusted EPS guidance $2.25–$2.45 per diluted share.
• Q1 FY2026 sales guidance $630M–$670M.
• Modeling assumptions: effective tax rate 18.5%–19.5%; capex $55M–$65M; interest expense $85M–$95M.
• Backlog ≈ $600M (up ~5% YoY); expect normal seasonality and a modest Q1 start.

Business Commentary:

• Strong Financial Performance in Q4 and Fiscal Year 2025:
• Nordson Corporation reported sales of $752 million for Q4 2025, up 1% year over year, with adjusted earnings per share growing 9%.
• The company achieved record EBITDA of $256 million, expanding EBITDA margin to 34% in the quarter.

• This performance was driven by strong operational execution, portfolio optimization, and the divestiture of the medical contract manufacturing business.

• Divestiture and Strategic Focus:

• Nordson divested its medical contract manufacturing business in Q4 2025.
• The divestiture allowed for a focus on core differentiated medical businesses, contributing to a 10% organic growth in the first year of integration.

• This strategic decision resulted in improved margins and increased focus on high-value medical segments.

• IPS Segment Performance Challenges and Recovery:

• Industrial Precision Solutions (IPS) segment sales were $362 million, down 2% year over year, with a significant decline in polymer processing systems.
• Despite challenges, there was improvement in precision agriculture and packaging product lines.

• The company anticipates stabilization and improvement in these areas, with continued stable demand for aftermarket parts.

• X-ray Systems Challenges and Strategic Positioning:

• Advanced Technology Solutions (ATS) sales were $171 million, down 4% year over year, primarily due to a decline in X-ray systems demand.
• The X-ray systems business remains fundamentally strong, with exposure to semiconductor and automotive markets.
• Nordson is launching new products and sees potential for X-ray systems to contribute positively in fiscal 2026.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted record FY EBITDA $900M and Q4 EBITDA $256M (34% of sales), record free cash flow $661M (136% conversion), FY sales $2.8B up 4%, and narrowed leverage to 2.1x—statements and metrics emphasizing operational strength, cash generation, and constructive FY2026 guidance support a positive tone.

Q&A:

• Question from Mike Halloran (Baird): Are you seeing any broadening out across the semiconductor applications yet, or is it still concentrated in AI/cloud areas? And on the margin side, are this quarter's elevated margins (especially in Medical) the right baseline to build from into 2026?
  Response: Semiconductor strength remains concentrated in AI/cloud; automotive is stabilizing. Medical's 40% Q4 margin was aided by portfolio actions and operational tailwinds—management expects a sustainable upper‑30s% margin for Medical rather than 40% as the ongoing baseline.

• Question from Mitch Moran (for Jeff Hammond, KeyBanc): For IPS, what are you expecting from polymer processing versus the rest of the business in 2026 and how is order intake/backlog trending? And for Q1 ATS growth, how much is comps vs. underlying demand or timing?
  Response: Polymer processing has troughed—order entry and backlog indicate improvement into 2026. Q1 ATS growth is driven partly by easier comps and materially stronger backlog entering the year, reflecting genuine demand improvement.

• Question from Matt Somerville (D.A. Davidson): Can you explain the X‑ray inspection weakness versus broader semiconductor strength and comment on M&A/buyback activity given ~2.1x leverage?
  Response: X‑ray mixes semiconductor and automotive exposure—near‑term auto exposure weighed on X‑ray but new products and tech transitions position it to contribute in 2026. M&A remains disciplined with a robust pipeline; capital allocation will be balanced between acquisitions and continued share buybacks.

• Question from Andrew Buscaglia (BNP): Why is full‑year guidance range relatively conservative if you view several headwinds as having troughed? Where are the risks you’re planning for? Also, how do you view IPS sensitivity to industrial activity?
  Response: Guidance is a scenario range to prudently cover potential downside despite current signs of trough; management feels confident about a strong Q1 but is cautious about unforeseen macro shifts. IPS headwinds (polymer processing, automotive) look troughed; aftermarket parts and precision ag are stable, so IPS planned to return to low single‑digit growth.

• Question from Chris Glynn (Oppenheimer): Does ATS lumpiness negate multi‑quarter growth when viewed over a 12‑month period? And is polymer processing definitively turned?
  Response: Lumpiness is expected quarter‑to‑quarter but smooths over a 12‑month view—management expects mid‑single‑digit ATS growth over that horizon. Polymer processing is at the trough with order/backlog signs of recovery, implying nominal growth in 2026.

• Question from Brad Hewitt (Wolfe Research): Backlog was up 5% YoY—how did backlog trend sequentially and what seasonality should we expect for 2026?
  Response: Backlog is up ~5% year‑over‑year but down sequentially as Q1 is seasonally the weakest quarter; management expects normal seasonality for 2026 with sequential improvement after Q1.

• Question from Walter Liptak (Seaport Research): Looking back at five years of NBS Next, what worked best, what was toughest, and what is the focus next five years?
  Response: NBS Next delivered strategic discipline, operational gains and margin expansion; the toughest part was full deployment—management says they are 'halfway there' and will now focus on commercial excellence to convert innovation and operations into sustained profitable growth.

• Question from Robert Jamison (Vertical Research Partners): To reach the top end of your EPS growth targets, is the bridge primarily operational execution, buybacks, or market upside? Also, are recent working capital improvements sustainable?
  Response: Upside to EPS growth comes from stronger organic growth and accretive M&A; buybacks complement returns. Working‑capital improvements are intentional, sustainable, and management sees further opportunity to drive strong cash conversion.

Contradiction Point 1

Semiconductor Market Demand and Growth Expectations

It involves differing perspectives on the stability and growth expectations of the semiconductor market, which are crucial for understanding the company's revenue potential and strategic positioning.

Is there expansion in semiconductor applications into traditional electronics or are they still focused on AI and cloud computing? - Mike Halloran (Baird)

2025Q4: The strength continues to be in semiconductor applications for AI, cloud computing, and similar areas. However, automotive is stabilizing, and general electronics have shown decent growth, though lower than semiconductor growth rates. - Dan Hopgood(CFO)

Can you explain the backlog situation and order momentum across your businesses, particularly in ATS? - Jeffrey David Hammond (KeyBanc Capital Markets)

2025Q3: Our electronics dispense segment, which focuses on throughput and throughput enhancement for our semiconductor and general electronics customers, grew 8% on a year-over-year basis in the quarter, reflecting strong momentum in our semiconductor and electronics dispensing businesses. - Sundaram Nagarajan(CEO)

Contradiction Point 2

ATS Segment Momentum and Growth Expectations

It involves differing expectations regarding the growth trajectory and momentum of the Advanced Technology Solutions (ATS) segment, which is a key driver of the company's revenue and strategic focus.

How does the lumpiness in electronics processing system orders affect your guidance? - Chris Glynn (Oppenheimer)

2025Q4: We expect ATS to grow mid-single digits over a 12-month period, with some peaks and valleys due to delivery timing. - Dan Hopgood(CFO)

What's the current status of the backlog and order momentum across the businesses, especially in ATS? - Jeffrey David Hammond (KeyBanc Capital Markets)

2025Q3: ATS is coming out of a multiyear down cycle, now growing for several quarters. The cycle has begun, with 8% growth over 9 months. - Sundaram Nagarajan(CEO)

Contradiction Point 3

Semiconductor and Automotive Market Dynamics

It involves differing assessments of the semiconductor and automotive market dynamics, which are crucial for understanding the company's revenue growth and market positioning.

Are semiconductor applications expanding into traditional electronics or remaining focused on AI and cloud computing? - Mike Halloran (Baird)

2025Q4: Approximately 50% of revenues come from semiconductors, 15% from automotive, and the rest from electronics. - Dan Hopgood(CFO)

Can you discuss full-year trends, what's included in guidance, specifics about ATS, interventional destocking, and key variables impacting the second half? - Michael Halloran (Baird)

2025Q2: Automotive is a little bit of a headwind. In some segments that we're in, like automotive, we are down year-over-year. That's the single big headwind we have. - Sundaram Nagarajan(CEO)

Contradiction Point 4

Automotive Market Recovery

It highlights differing views on the recovery and stabilization of the automotive market, which affects Nordson's revenue forecasts and market positioning.

Are semiconductor applications expanding into traditional electronics or are they still focused on AI and cloud computing? - Mike Halloran(Baird)

2025Q4: Automotive is stabilizing, and general electronics have shown decent growth. - Dan Hopgood(CFO)

Could you provide an update on your electronics business performance for the quarter? What is the outlook based on current order trends? - Matt Summerville(D.A. Davidson)

2025Q1: Automotive market demand remains challenging due to destocking and slower new model introductions. - Sundaram Nagarajan(CEO)