ATI Inc. Form 10-Q Summary: Quarter Ended June 28, 2026
Business Context and Reporting Period
This report covers the quarterly period ended June 28, 2026, for ATI Inc., a manufacturer of specialty materials and components. The company operates through two segments: High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions (AA&S). The primary end markets are Aerospace & Defense, which accounted for 68% of sales in the quarter, followed by Specialty Energy, Conventional Energy, and other industrial markets.
Key Financial Metrics
| Metric (in millions) | Q2 2026 | Q2 2025 | YTD 2026 | YTD 2025 |
|---|---|---|---|---|
| Sales | $1,261.1 | $1,140.4 | $2,412.6 | $2,284.8 |
| Gross Profit | $309.8 | $242.5 | $572.7 | $478.3 |
| Gross Margin | 24.6% | 21.3% | 23.7% | 20.9% |
| Operating Income | $220.0 | $161.0 | $383.8 | $307.9 |
| Net Income (ATI) | $151.0 | $100.7 | $269.2 | $197.7 |
| Diluted EPS | $1.09 | $0.70 | $1.94 | $1.38 |
| Operating Cash Flow (YTD) | $260.0 | $69.0 | $260.0 | $69.0 |
| Cash & Equivalents | $783.0 | $319.6 | $783.0 | $319.6 |
| Total Debt | $2,192.0 | $1,749.4 | $2,192.0 | $1,749.4 |
Material Changes vs. Prior Period
- Revenue Growth: Q2 sales increased 11% year-over-year, driven by higher pricing and strong demand in Aerospace & Defense (up 13%). YTD sales increased 6%.
- Profitability Expansion: Gross margin improved to 24.6% in Q2 2026 from 21.3% in Q2 2025, attributed to favorable pricing and sales mix. Net income attributable to ATI rose 50% in Q2 and 36% YTD.
- Debt Restructuring: The company issued $450 million in 5.875% Senior Notes due 2033 in June 2026. Proceeds were used to redeem $350 million of 2027 Senior Notes (completed July 8, 2026) and for general liquidity.
- Working Capital: Managed working capital increased to 34.3% of annualized sales (from 32.5% at year-end 2025) due to seasonal inventory builds. Days sales outstanding improved by 12%.
- One-Time Items: Q2 2026 included a $9.8 million gain on the sale of a closed manufacturing facility. Q2 2025 included a $7.0 million benefit from deferred employee retention tax credits.
Guidance, Outlook, and Risks
- Outlook: Management expects continued growth in Aerospace & Defense, particularly commercial jet engines and defense applications. The company maintains a backlog of $4.4 billion, with approximately 70% expected to be fulfilled within 12 months.
- Liquidity: The company holds $783 million in cash and has approximately $570 million available under its Asset Based Lending (ABL) facility. The next significant debt maturity is $325 million in Q4 2029.
- Capital Allocation: The company repurchased $50 million of stock in Q2 2026. Approximately $495 million remains under the active share repurchase program.
- Risks: Key risks include geopolitical instability (specifically conflicts involving the U.S., Israel, and Iran) affecting energy prices and supply chains; volatility in raw material costs (nickel, natural gas); and potential litigation outcomes regarding pension annuitization (though a motion to dismiss was granted in July 2026).
Investor Verification Checklist
- Debt Maturity Profile: Verify the impact of the new 2033 Notes issuance on future interest expense and the successful redemption of the 2027 Notes.
- Inventory Levels: Assess the sustainability of the increased inventory levels ($1.67 billion) and the impact on future working capital cash flows.
- Non-GAAP Reconciliations: Review the reconciliation of Adjusted EBITDA to Net Income to understand the magnitude of excluded items like restructuring charges ($10.9 million YTD) and transaction costs.
- Segment Mix: Monitor the shift in revenue mix toward Aerospace & Defense and the associated margin profile compared to cyclical industrial markets.
- Legal Proceedings: Track the status of the pension annuitization litigation despite the recent dismissal, as plaintiffs may appeal.