Helios Technologies (HLIO) Lifts 2026 Outlook After Record Q2 Cash Flow and Data Center Progress

Helios Technologies hosted its second-quarter earnings call on Tuesday, Aug. 11, 2026, and management used the session to make a broader point: the turnaround phase is complete and the company is now compounding from a stronger base. The proof, executives said, is in the numbers — record operating cash flow, a fourth straight quarter of double-digit pro forma growth and a full-year outlook that was raised again.

“The CORE Strategy is working,” CEO Sean Bagan said. “We are tracking ahead of our organic growth and margin commitments.”

Q2 in numbers

Helios reported sales of $232 million, up 9% year over year and at the high end of its guidance range. Excluding the CFP divestiture and currency effects, sales rose 16%. Adjusted EPS came in at $0.88, up 49% and $0.05 above the top end of the company’s outlook. GAAP EPS was $0.66, up 94%.

• Gross margin: 34.6%, up 280 basis points year over year
• Adjusted EBITDA: $49 million, up 25%; margin of 21.2%
• Operating income: $33 million, up 48%
• Operating cash flow: $42 million, a second-quarter record
• Free cash flow: $31 million

Management credited volume, segment mix, footprint optimization and about $1 million in net tariff refunds for the margin improvement.

Both segments contributed

Hydraulics sales rose 14% on a pro forma basis to $146 million, with particularly strong growth in China and the broader APAC region. Construction and agriculture were the leading end markets, and management said Sun is on pace for a record year in APAC.

Electronics sales increased 19% to $86 million, helped by a record second quarter at Enovation Controls. Recreational and health and wellness demand was solid, while marine remained the soft spot.

Data center thermal management progresses from samples toward orders

The biggest strategic storyline on the call was Faster’s push into data center thermal management. Faster makes quick-disconnect couplings, and Helios has positioned that product line for a large new market. Bagan said the opportunity is “larger than our existing addressable markets” across agriculture and construction combined.

The company has sent samples to about a dozen prospective customers. No data center revenue is included in second-half or full-year guidance, but management said an order could be imminent. The bigger revenue contribution is expected in 2027 and should scale after additional hyperscaler validation. Helios expects to sell primarily to integrators that build cooling racks; hyperscalers are setting technical requirements under nondisclosure agreements.

Balance sheet gives management more flexibility

Net debt fell to $264 million, the lowest since the third quarter of 2020, and leverage improved to 1.4x on a trailing 12-month basis. That is below the company’s 1.5x to 2.5x target range and gives Helios room to fund organic investment, share repurchases and future M&A.

The company paid its 118th consecutive quarterly dividend and repurchased about 79,000 shares for $6 million in Q2. Year-to-date capital returns totaled $18 million, up 40% from the first half of 2025. About $76 million remained on the share repurchase authorization.

2026 guidance raised

For the full year, Helios now expects sales of $880 million to $900 million, compared with $839 million as reported in 2025 and $792 million on a pro forma basis excluding CFP. At the midpoint, that implies roughly 12% growth over the pro forma 2025 base and would mark the highest annual sales in company history, topping the 2022 record even after removing about $60 million in annualized CFP sales through last year’s divestiture.

By segment, Helios expects Hydraulics sales of $555 million to $565 million, up roughly 13% at the midpoint on a pro forma basis, and Electronics sales of $325 million to $335 million, up 11% at the midpoint. The company expects adjusted EBITDA margin of 20.2% to 21.0% and adjusted EPS of $3.05 to $3.25, implying 23% growth at the midpoint.

For the third quarter, Helios guided to sales of $215 million to $222 million, adjusted EBITDA margin of 19.8% to 20.6% and adjusted EPS of $0.70 to $0.77. Segment guidance: Hydraulics $133 million to $138 million; Electronics $82 million to $84 million.

The key reason management felt comfortable raising guidance: orders. Order intake grew double digits for a fourth straight quarter, and July was the company’s strongest July on record for both revenue and order intake.

What analysts focused on

Analysts pressed on three areas: margin durability, Electronics outgrowth and the data center timeline.

On margins, CFO Jeremy Evans said volume remains the biggest lever, and the recent footprint actions — including the closure of a Faster facility in Canada — will contribute more in the second half. On Electronics, Bagan said the company is outgrowing its end markets through new product launches and deeper OEM penetration; health and wellness has recovered, while marine is still depressed. Excluding CFP, management described the industrial end market as stable, with mobile, aerospace and health and wellness driving growth.

On M&A, Evans said the company is using its long-range planning process to identify white spaces and will be disciplined about deals that fit the current portfolio.

Investor takeaway

The raised guidance suggests Helios has moved beyond the repair phase. The biggest swing factor for investors is whether data center sampling converts into orders and then into meaningful revenue in 2027. Near-term growth still depends on the hydraulics and electronics end markets, which are improving but remain mixed. With July setting a record for the month, Helios enters the second half with momentum — but also with tougher comparisons. “We’ve moved from turnaround to takeoff,” Bagan said.