Going into iRobot's (NASDAQ:IRBT) second-quarter financial release, investors were increasingly optimistic about the company, having bid up its shares more than 20% last month. After several recent investor presentations and bullish analyst notes, iRobot has been gaining back some of the significant ground it lost over fears of growing competition in the robotic vacuum space.

However, the company was able to put those fears to rest -- at least for now -- after the company reported revenue and earnings that both handily beat expectations and raised its guidance for the full year.

The iRobot Roomba 700 Series robotic vacuum cleaning around the edge of a bed.

Image source: iRobot.

The raw numbers

Metric

Q2 18

Q2 17

Year-over-year change

Revenue

$226.3 million

$183.1 million

23.6%

Operating income

$13.4 million

$4.1 million

226.8%

Diluted earnings per share

$0.37

$0.27

37.0%

Data source: iRobot Second-Quarter Financial Release. Chart by author.

iRobot reported revenue of $226 million, an increase of nearly 24% year over year, easily topping analysts' consensus estimates of $229 million. Earnings per share of $0.37 were similarly impressive, up 37% compared to the prior-year quarter, and soaring past analysts' expectations of $0.18. 

The growth was broad-based across all major regions in which the company operates. Overall, the number of units shipped increased to 953,000, up 27% compared to the prior-year quarter. Domestic sales -- in the company's more heavily-penetrated market -- grew 15% year over year, while international sales jumped 34%.

The Roomba maker reported gross margins that improved annually from 49% of revenue to 52%, while expenses declined as a percentage of revenue. This allowed iRobot to triple its operating income.

The average selling price (ASP) for the robotic vacuums and mopping devices increased 3.6% year over year to $285.

What else happened during the quarter?

iRobot said it received a "favorable initial determination from the International Trade Commission (ITC) regarding our patent infringement claims." The final determination will be made by a panel of ITC commissioners and is expected by Oct. 25, 2018. If successful, the determination will bar the import of certain robotic vacuums found to be infringing on iRobot's patents. 

The company also completed the stock repurchase program of $50 million it initiated back in February. You may recall that the stock lost nearly a third of its value in a single day in February when its forecast for 2018 came in below analysts' expectations. The company saw this as an opportunity to pick up its shares on the cheap.

While it isn't included in the current quarter, iRobot said its Roomba robotic vacuum was a featured product in the U.S. for Amazon Prime Day, which took place on July 16. The device sold out, doubling the volume sold during last year's event in the process. The Roomba was also available for Prime Day events in Europe, Middle East, and Africa (EMEA), and Japan for the first time, and "the results in those regions were great," the company said in its press release

"We delivered strong second-quarter revenue growth of 24% in Q2 2018 over Q2 2017, driven by growth across all major regions ... Shipments to support Q2 holidays in the United States drove domestic revenue growth of 15% over last year," said Colin Angle, chairman and chief executive officer of iRobot.

Looking ahead

iRobot doesn't provide quarterly forecasts, but based on its strong performance so far this year, the company updated its guidance for the remainder of the fiscal year.

Metric

Current range

Previous range

YOY Change

Revenue

$1.06 billion to $1.08 billion

$1.05 billion to $1.08 billion

20% to 22%

Operating income

$90 million to $96 million

$86 million to $96 million

24% to 32%

Earnings per share

$2.30 to $2.50

$2.15 to $2.40

29% to 41%

Data source: iRobot Second-Quarter Financial Release. Chart by author. YOY = year-over-year

To put that into context -- and long-term investors shouldn't put much stock in the short-term whims of Wall Street -- analysts' consensus estimates for the year are calling for revenue of $1.07 billion and earnings per share of $2.37, both near the middle of iRobot's range.

After two successive quarters of delivering beyond expectations, investors seem convinced that iRobot's conservative guidance delivered at the end of last year was just that -- and now they're cleaning up.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and iRobot. The Motley Fool has a disclosure policy.