A strong quarter from cooling technology supplier Solstice Advanced Materials is helping rebuild investor confidence that the artificial intelligence trade isn't dead and that the company's technology to cool advanced AI chips remains sorely needed.
Solstice reported adjusted earnings per share of 88 cents and earnings before interest, taxes, depreciation, and amortization, or Ebitda, of $290 million from sales of $1.15 billion. Wall Street was looking for EPS of 77 cents, Ebitda of $280 million, and sales of just under $1.1 billion.
A year ago, Solstice reported unadjusted EPS of 61 cents and Ebitda of $283 million from sales of $1 billion. (A year ago, Solstice was still part of Honeywell.)
Numbers look solid. Solstice stock was up 2.8% in premarket trading at $57.20, while S&P 500 and Dow Jones Industrial Average futures were up 0.5% and 0.3%, respectively. (The entire market got a boost from Microsoft's quarterly earnings report on Wednesday evening.)
Solstice spun out of Honeywell in October at about $50 a share, and the stock traded above $90 around late June. Then two things happened. For starters, investors started to lose confidence in the AI trade, worried that hyperscaler AI spending wouldn't generate acceptable returns. Next, Solstice announced the major acquisition of Element Solutions in early July. The deal announcement sent Solstice stock down 15%.
"We surprised the market," says CEO David Sewell. Sometimes investors don't like surprises, but "no one has questioned the strategic rationale of the deal."
Combined, the two companies will be at the leading edge of secular AI growth trends, producing materials that help make advanced semiconductors and then cool those chips in AI data centers. (Solstice also makes products for nuclear reactors that generate electricity to power AI data centers.)
The deal is expected to close in 2027. Investors will be thinking about it for a while. In the meantime, the outlook for Solstice is improving. Along with its quarterly earnings, Solstice raised its full-year guidance. Now, it sees earnings per share of about $2.85. The midpoint of prior guidance was $2.60. Wall Street models 2026 EPS of about $2.67.
Sewell is also bullish on the long-term outlook, pointing out that more advanced, difficult-to-make semiconductors, which aren't part of existing AI data center infrastructure, need more advanced cooling technologies. That's growth down the road for his company.
Of course, 0ne quarter won't shake all of investors' concerns, but it's a start.
Comments