Cognex (CGNX -1.84%), a leading maker of machine vision systems for factory and logistics automation, released its financial results for the second quarter on July 30, 2025. The most significant news was that revenue (GAAP) outpaced analyst forecasts, coming in at $249 million versus a $246.15 million estimate. Non-GAAP earnings per share (EPS) of $0.25 also topped the $0.24 consensus, and the quarter marked the fourth straight period of Adjusted EPS growth. Compared to the same quarter last year, revenue grew 4%, and adjusted EBITDA margin improved to 20.7% from 19.9% in Q2 2024. Overall, the quarter reflected solid execution, visible progress in targeted markets, and improved profitability, although gross margin remained under pressure due to a less favorable mix and tariffs.
| Metric | Q2 2025 | Q2 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.25 | $0.24 | $0.23 | 8.7% |
| Revenue | $249 million | $246.15 million | $239 million | 4.2% |
| Adjusted EBITDA | $52 million | $48 million | 8.3% | |
| Adjusted EBITDA Margin | 20.7% | 19.9% | 0.8 pp | |
| Free Cash Flow (Non-GAAP) | $40 million | $23 million | 73.9% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
What Does Cognex Do and Why Does It Matter?
Cognex specializes in designing and manufacturing machine vision products. These systems are essentially high-tech cameras, sensors, and software that check, track, and guide products as they move through automated production lines or distribution centers.
The company's business revolves around industrial automation, with a focus on growing markets such as logistics (e-commerce parcel handling and sorting), factory automation (production of consumer electronics, automotive components, and packaging), and more recently, expanding into medical and packaging sectors. Recent years have seen Cognex double down on artificial intelligence (AI) capabilities in its vision systems, aiming to help customers automate quality control and traceability more efficiently.
Quarter Highlights and Key Developments
The second quarter showed progress in both revenue growth and profitability as disciplined expense management offset some ongoing pressures. Revenue increased 4% compared to last year, surpassing consensus GAAP revenue estimates by $2.85 million. Growth was led by the logistics segment, which extended its streak to five consecutive quarters of expansion as of Q1 2025. Increased demand from large e-commerce operators and continued investment in warehouse automation contributed to this positive momentum. Factory automation also performed well, particularly in the consumer electronics and packaging industries. The packaging area has grown into the company's third-largest market, positioning it for greater importance in the future.
Profitability improved as well. Operating expenses (GAAP) decreased 3% year over year, reflecting disciplined cost management. Adjusted EBITDA increased 9% year over year, with adjusted EBITDA margin rising to 20.7%. This is the first time since the second quarter of 2023 that margins have exceeded 20%, reflecting improved efficiency even as gross margin percentages declined. Gross margin (GAAP) was weighed down by a less favorable sales mix -- with higher revenue from lower-margin segments like logistics -- and the effects of tariffs. Management estimated tariffs reduced adjusted gross margin by about 50 basis points as of Q1 2025. but stated that these headwinds are not expected to materially affect adjusted earnings per share or EBITDA margins in coming quarters.
Product innovation remains a core strategy. During the period, Cognex launched OneVision -- its new cloud platform for AI-powered machine vision. Other recent launches, such as the In-Sight 8900 smart camera and DataMan 290 barcode reader, reflect ongoing investment in artificial intelligence and machine learning, with around 15% of annual revenue devoted to research & development in FY2024.
On the balance sheet as of Q2 2025, Cognex reported cash and investments totaling $553 million and remains debt-free. Free cash flow hit $40 million, almost double year-ago levels and representing 100% conversion of net income. The company also returned capital to shareholders by paying $13 million in dividends. The quarterly dividend was raised 6.7% to $0.08 per share, up from $0.075 in the prior year period.
Looking Ahead: Guidance and Priorities
For Q3 2025, management provided guidance for revenue in the range of $245 million to $265 million, an increase of 9% at mid-point compared to the same period last year. Adjusted EBITDA margin is expected to range from 19.5% to 22.5% (non-GAAP), while adjusted EPS (non-GAAP) should fall between $0.24 and $0.29. These targets exclude the impact of a one-time commercial partnership set to benefit results, which could lift revenue as high as $279 million and adjusted EBITDA margin up to 25.0% temporarily (non-GAAP). This suggests underlying momentum remains positive, but investors are cautioned to look through the effect of one-off items when evaluating ongoing trends.
Gross margin remains an area to monitor, as ongoing mix shifts toward lower-margin logistics and packaging end-markets continue to weigh on the company's margin profile. Continued cost discipline remains important. Strategic priorities are now focused on further penetrating the packaging sector, integrating recent acquisitions like Moritex, and rolling out the new OneVision platform. All of these initiatives are designed to expand Cognex’s reach and strengthen its leadership in machine vision technology for automation.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
