Knowles: 3 Key Takeaways for Long-Term Investors

On its third-quarter 2026 earnings call, held on Oct. 22, 2026, Knowles (NYSE:KN) announced third-quarter revenue of $184 million, representing 20% year-over-year growth. Customer demand for specialized electronic components across defense, medical, and industrial end markets is expanding sales and operational cash generation. Three takeaways from executive management explain why the business is well positioned for multiyear compounding.

1. Capacity Expansion Underway to Meet Surging Precision Devices Demand

Order volume in the Precision Devices segment, which manufactures custom capacitors and radio frequency filters, reached nearly $180 million during the quarter. That generated a book-to-bill ratio of 1.5, meaning customer orders exceeded shipments by 50%. The resulting backlog, representing signed customer orders awaiting fulfillment, has pushed manufacturing lines near maximum output until new facility capacity arrives in 2027.

With strong orders, a healthy backlog and continued design wins, we are in the process of adding capacity across most of our Precision Devices product lines to support the demand.
-- Jeffrey Niew, President and Chief Executive Officer

2. Three Strategic Paths Expand Total Addressable Opportunity

Leadership plans to broaden its serviced addressable market, which measures the total reachable revenue opportunity for its active technology portfolio. The company is developing new components, such as power attenuators, adapting core pulse-power products for new industrial clients, and increasing the component count within existing hearing health equipment.

By following the same playbook we used in our core of investing in innovative technologies, using these technologies to develop customized solutions to solve our customers' problems and then scaling into high-volume production, we expect 3 fundamental paths to supplementing our core growth.
-- Jeffrey Niew, President and Chief Executive Officer

3. Operational Gains Target 30% Operating Profitability Margins

Profitability is expanding as factory efficiency improves across higher manufacturing volumes. Management projects annual gross margin expansion alongside operating leverage, which occurs when revenue expands faster than operating overhead costs. That combination establishes a trajectory toward 30% operating margins for earnings before interest, taxes, depreciation, and amortization (EBITDA), a key measure of core operational profitability.

If you take what I said, the gross margin alone, we think there's 100 basis points of improvement annually. And then we're going to get operating leverage of 50 to 100 basis points with the growth that we have.
-- John Anderson, Senior Vice President and Chief Financial Officer

Looking Ahead

Customer demand across defense and medical applications remains dynamic. Proprietary engineering capabilities give the company a lasting structural edge while leadership focuses on capacity expansion, pricing discipline, and manufacturing yields.

Our close collaboration with customers continues to drive a robust pipeline of design wins as customers continue to choose our innovative and differentiated solutions.
-- Jeffrey Niew, President and Chief Executive Officer

Higher production throughput and disciplined capital allocation reinforce the long-term strategic trajectory.

Our strategy of combining unique technologies to create custom engineered solutions and then quickly ramping them at scale with a world-class operational capability is driving revenue growth in our core products and markets, margin expansion and strong cash flow.
-- Jeffrey Niew, President and Chief Executive Officer

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