Battery manufacturer EnerSys (NYSE:ENS) fell short of the market’s revenue expectations in calendar Q3 2026 [fiscal Q2 2027], with sales flat year on year at $949.9 million. Next quarter’s revenue guidance of $955 million underwhelmed, coming in 1.1% below analysts’ estimates. Its non-GAAP profit of $3.22 per share was 1.3% above analysts’ consensus estimates.

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StockStory’s take

EnerSys delivered a mixed performance in the latest quarter, with market reaction turning positive despite a shortfall in revenue versus Wall Street expectations. Management highlighted robust demand in its Precision Power Solutions segment, particularly from defense customers, and strong momentum in data center solutions, which helped offset persistent weakness in the material handling market. CEO Shawn O’Connell attributed margin expansion to favorable product mix and operational improvements, while newly launched lithium battery offerings began to show early traction. O’Connell emphasized, “We are building momentum in some of the most attractive areas of our business while strengthening our operations and expanding our core capabilities.”

Looking to the next quarter and beyond, EnerSys management expects continued strength from defense and data center markets to anchor performance, while a gradual recovery in material handling is anticipated to support growth. New product introductions, such as the next-generation lithium battery and Synova charger, are expected to bolster margins as adoption ramps. CFO Andi Funk cautioned that material handling recovery is “frustrating but not concerning,” noting order backlogs and new product launches position the segment for future improvement. O’Connell stated, “The benefit when [material handling] comes back, and then add to that more Gen 2 lithium, the Synova, the Fortix… gives us a lot of confidence going forward.”

Key insights from management’s remarks

Management attributed the quarter’s results to persistent strength in defense, steady data center demand, and the impact of new product launches, while material handling remained a drag on performance.

• Defense segment acceleration: Precision Power Solutions saw over 20% sales growth, driven by high demand for batteries in defense applications, including orders for munitions and soldier power systems. Management underscored ongoing momentum from electrification trends in military and autonomous systems.
• Data center strength: EnerSys reported double-digit growth in its data center business, highlighted by its new DataSafe Noir lithium battery gaining its first major customer. Management believes this win validates the product’s competitive performance and expands its footprint in backup power for high-profile event infrastructure.
• Material handling softness: The Industrial and Material Handling Solutions segment continued to face headwinds from delayed capital spending and mixed market signals. While transportation demand improved, this was not enough to fully offset lower material handling volumes, resulting in segment margin pressure.
• Strategic M&A move: The proposed acquisition of Ultralife, a specialist in advanced battery technologies for defense and critical applications, is expected to accelerate EnerSys’ presence in high-growth military and drone markets. Management anticipates $15–$20 million in annual synergies and EPS accretion within 18 months post-closing.
• Digital transformation and operational upgrades: The appointment of a Chief Digital, AI and Information Officer reflects EnerSys’ intent to leverage AI and digital tools for improved efficiency and productivity. Management also continues to focus on inventory discipline and capital allocation, including ongoing share buybacks.

Drivers of future performance

EnerSys’ outlook is shaped by anticipated recovery in material handling, ongoing strength in defense and data centers, and the ramp of new product introductions.

• Material handling recovery prospects: Management expects delayed capital spending in material handling to rebound by year-end, supported by growing backlogs and customer enthusiasm for next-generation lithium batteries and integrated charger solutions. The pace of recovery remains uncertain, but order trends and product launches are seen as positive indicators for margin normalization.
• Defense and data center tailwinds: The Precision Power Solutions segment is projected to sustain high demand due to continued investment in electrified military and autonomous systems. Data center growth is expected to remain robust, with incremental sales from both lead-acid and new lithium battery offerings, including opportunities from brownfield data center upgrades.
• Margin pressures and inflation risks: While new products are forecast to enhance margins, management acknowledged near-term headwinds from commodity and freight inflation. Additionally, the project-based nature of certain segments may result in quarter-to-quarter margin variability, and tariff policy changes remain a potential source of volatility.

Catalysts in upcoming quarters

In the coming quarters, the StockStory team will be monitoring (1) concrete signs of recovery in material handling volumes and margins, (2) the pace of adoption for new lithium battery and charger products across core segments, and (3) the successful integration and synergy realization from the Ultralife acquisition. Progress on digital transformation efforts and the stability of defense and data center demand will also be important markers.

EnerSys currently trades at $151.94, up from $147.65 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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