Electronic components manufacturer Knowles (NYSE: KN) reported Q2 CY2025 results topping the market’s revenue expectations, but sales fell by 28.7% year on year to $145.9 million. Guidance for next quarter’s revenue was better than expected at $149 million at the midpoint, 1.2% above analysts’ estimates. Its non-GAAP profit of $0.24 per share was in line with analysts’ consensus estimates.

Is now the time to buy Knowles? Find out by accessing our full research report, it’s free.

“We closed the second quarter of 2025 with revenues and cash provided by operating activities exceeding the high-end of our guided range and non-GAAP diluted EPS from continuing operations above the mid-point of our guided range. Our cash generated by operating activities in the quarter was strong, allowing us to repurchase $30 million in shares,” commented Jeffrey Niew, President, and CEO of Knowles.

Company Overview

With roots dating back to 1946 and a focus on components that must perform flawlessly in critical situations, Knowles (NYSE: KN) designs and manufactures specialized electronic components like high-performance capacitors, microphones, and speakers for medical technology, defense, and industrial applications.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $563.1 million in revenue over the past 12 months, Knowles is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels.

As you can see below, Knowles struggled to generate demand over the last five years. Its sales dropped by 5.3% annually, a poor baseline for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Knowles’s recent performance shows its demand remained suppressed as its revenue has declined by 9.8% annually over the last two years.

This quarter, Knowles’s revenue fell by 28.7% year on year to $145.9 million but beat Wall Street’s estimates by 4.4%. Company management is currently guiding for a 4.6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 5% over the next 12 months. Although this projection indicates its newer products and services will fuel better top-line performance, it is still below the sector average.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.

Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Knowles’s operating margin has been trending up over the last 12 months and averaged 11.4% over the last five years. Its profitability was higher than the broader business services sector, showing it did a decent job managing its expenses.

Looking at the trend in its profitability, Knowles’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. Shareholders will want to see Knowles grow its margin in the future.

In Q2, Knowles generated an operating margin profit margin of 10.1%, up 3.6 percentage points year on year. This increase was a welcome development, especially since its revenue fell, showing it was more efficient because it scaled down its expenses.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Knowles’s EPS grew at an unimpressive 4.8% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 5.3% annualized revenue declines and tells us management adapted its cost structure in response to a challenging demand environment.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Knowles, its two-year annual EPS growth of 5.1% is similar to its five-year trend, implying stable earnings.

In Q2, Knowles reported EPS at $0.24, in line with the same quarter last year. This print beat analysts’ estimates by 3.2%. Over the next 12 months, Wall Street expects Knowles’s full-year EPS of $0.95 to grow 27.8%.

Key Takeaways from Knowles’s Q2 Results

We enjoyed seeing Knowles beat analysts’ revenue expectations this quarter. We were also glad its EPS guidance for next quarter outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The stock remained flat at $18.66 immediately after reporting.

Is Knowles an attractive investment opportunity at the current price? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.