Armstrong World Industries (AWI 9.38%), a leading manufacturer of commercial and residential ceiling systems and building products, released results for the second quarter of fiscal 2025 on July 29, 2025. The company reported GAAP revenue of $424.6 million, surpassing the $404.3 million analyst estimate and up from $365.1 million in the prior year period. Adjusted earnings per share (EPS) reached $2.09, ahead of analyst expectations of $1.78 (non-GAAP), and up from $1.62 a year ago. The period was marked by strong revenue growth and rising profitability, driven by robust demand, higher pricing, and contributions from recent acquisitions, resulting in performance ahead of expectations. Management upgraded its full-year 2025 guidance, while flagging increased caution for discretionary project activity in the second half of the year.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Adjusted, Non-GAAP) | $2.09 | $1.78 | $1.62 | 29.0% |
| Revenue (GAAP) | $425 million | $404.3 million | $365.1 million | 16.3% |
| Adjusted EBITDA | $154 million | $125 million | 23.2% | |
| Operating Income (GAAP) | $123.2 million | $95.0 million | 29.7% | |
| Free Cash Flow (Adjusted, Non-GAAP) | $88 million | $62 million | 41.9% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Focus Areas
Armstrong World Industries designs and manufactures ceilings, walls, and suspension systems used in a variety of commercial, residential, and institutional buildings. Its portfolio serves offices, schools, hospitals, retail, and transportation centers throughout the Americas, with a product mix that includes acoustic mineral fiber ceiling panels and specialty architectural solutions.
The company's recent strategic focus has centered around strengthening its leadership in commercial building products, expanding through targeted acquisitions, and accelerating sustainability and innovation. Key success factors include effective cost management, steady supply chain operations, new product development—such as energy-saving TempLock ceiling tiles—and investment in digital back-end tools. The firm’s ability to balance cost pressures and capture market share in a competitive landscape remains central to its performance.
Quarter Highlights and Segment Performance
Armstrong delivered year-over-year GAAP revenue growth of 16.3%, driven by both higher volumes and favorable product pricing, known as average unit value. Operating income rose 29.7%, and Adjusted EBITDA increased 23%. This expansion in operating margins resulted from higher sales and favorable product pricing.
The Mineral Fiber segment—its legacy business of acoustic ceiling tiles—grew sales by 6.7% compared to the prior-year quarter. The increase was attributed to both price/mix improvements and modest volume gains. Operating income in Mineral Fiber rose 20.4%, while margin expanded by 4.2 percentage points, supported by cost discipline and manufacturing productivity. The segment also benefited from a $6 million boost in equity earnings from the WAVE joint venture, a partnership for ceiling grid systems.
Architectural Specialties, the company’s division for more customized ceiling and wall systems, posted a standout 37.2% increase in net sales. Of this, $28 million was contributed by the 2024 acquisitions of 3form and Zahner—both specialists in differentiated architectural solutions. Operating income in this segment increased 80.3% to $25.6 million (GAAP), and margin rose to 16.2%. This was driven by broad-based demand across verticals such as transportation, education, and retail.
Innovation played a visible role in the quarter's progress. Notably, TempLock energy-saving ceiling tiles, which use phase change materials to store and release heat, were highlighted as a differentiator. These tiles can help building owners reduce heating and cooling costs by up to 15%, and, given the explicit inclusion of phase change material as qualifying technology, TempLock tiles may qualify for federal tax credits. The company's digital platforms, including ProjectWorks for automated design and the Canopy online sales portal, also contributed additional sales and operational efficiencies.
Raw material and energy inflation remained a pressure point, especially in fiberglass, perlite, and utility costs, with management citing mid-single digit inflation for raw materials in FY2025 and 10–15% increases in energy costs. These impacts were partially offset by two scheduled price hikes in Mineral Fiber during FY2025 and company-wide productivity improvements. Selling, general, and administrative (SG&A) expenses rose primarily due to the integration of recent acquisitions.
The company repurchased 0.2 million shares for $30 million, with $610 million remaining under the current buyback authorization at June 30, 2025. Shareholders’ equity was $837.8 million at June 30, 2025, and balance sheet cash stood at $81.1 million at quarter-end.
Looking Ahead
Management raised its full-year 2025 outlook. Net sales are now forecasted at $1.60 billion to $1.63 billion for the year ending December 31, 2025, up from $1.45 billion in the previous year and representing growth of 11–13%. Adjusted EBITDA is guided to between $545 million and $560 million, and Adjusted diluted EPS is expected in the range of $7.15 to $7.30. Adjusted free cash flow is projected at $330 million to $345 million. These upgrades reflect confidence in solid first-half results, particularly in the Architectural Specialties segment.
However, company leadership warned that the second half of 2025 may experience a pullback in discretionary renovation work. This caution arises from macroeconomic uncertainty, construction project timing risks, and persistent cost inflation for inputs and energy. Management emphasized that price increases, cost controls, and ongoing innovation will be vital to maintaining margins and achieving full-year targets. Investors are advised to keep an eye on organic-versus-acquisitive growth, the pace of backlogged project deliveries, and the ability to keep raising prices in line with input costs.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
