OSI Systems Raises Full-Year Guidance on Strong Quarterly Performance

OSI Systems (OSI) has upgraded its financial outlook for fiscal 2026 following a record-breaking second quarter, driven by robust operational performance and a substantial order backlog.

For the quarter ended December 31, 2025, the company reported a 11% year-over-year revenue increase to $464 million. Adjusted earnings per share climbed to an all-time high of $2.58. The firm's operational strength is further evidenced by a significant improvement in operating cash flow, which advanced to $62.2 million from $52.5 million in the prior quarter.

Bolstered by these results, management has raised its full-year adjusted EPS guidance. The new forecast now stands in a range between $10.30 and $10.55 per share.

Segment Performance and Strategic Wins

Growth was led by the Security division, which saw revenues expand by 15% to $335 million. This surge was supported by increased service income and contributions from the integrated RF (radio frequency) systems business.

The Optoelectronics and Manufacturing segment also posted a solid 12% gain, reaching $113 million in revenue. In contrast, the company's notably smaller Healthcare division faced a more challenging period.

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The firm's backlog remains a key pillar of strength, standing at approximately $1.8 billion. Recent strategic contract awards include:
* A $20 million agreement to install radiological threat detection systems for an international client.
* The selection of its security technology for a major sporting event in Europe.
* A defense-related RF systems contract worth about $30 million for international naval operations.
* Ongoing participation in the U.S. missile defense initiative known as "Golden Dome."

To support growing demand in defense, OSI Systems is currently expanding its manufacturing footprint in Texas.

Navigating Near-Term Headwinds

Despite the raised annual forecast, company executives anticipate some temporary pressure in the upcoming third quarter. A primary factor is a projected revenue decline of over $50 million related to significant security contracts in Mexico.

Revenue from these Mexican contracts had already decreased by half year-over-year to $27 million in Q2. Management believes this will represent the most substantial quarterly fluctuation for the current fiscal year.

The company expects growth to reaccelerate markedly in the fourth quarter. Furthermore, OSI Systems anticipates considerable cash inflows during the second half of the year as outstanding receivables from its Mexican operations are collected. Additional efficiency gains and margin expansion in the Optoelectronics segment are expected from new production facilities in Mexico.