Acuity · AYI
Acuity's guide implies 6.8% adjusted EPS growth as memory costs head for Intelligent Spaces and lighting's adjusted margin slips
Acuity guided next year's adjusted earnings per share to a midpoint 6.8% above this year's, on a sales range it missed this year, with memory costs and lighting margin the two swing factors, by our arithmetic.
Published · Updated · Inve Research Desk
6.8%
guided midpoint EPS growth for next year, our arithmetic
$21.25 against $19.90 earned: slower than the 10.5% of the year just ended, and by our model it holds if lighting margin stays flat and Intelligent Spaces keeps its 23.0% margin despite memory costs, and the share count keeps falling.
How they did last quarter
Sales of $4,641.8 million missed the fiscal 2026 guide of $4.7 billion to $4.9 billion; adjusted EPS of $19.90 was inside its $19.00 to $20.50 range.
- Net sales, fiscal 2026$4,641.8 million for the year to 31 August 2026vs guidance of "within the range of $4.7 billion and $4.9 billion" (1 October 2025, reaffirmed 8 January 2026)Missed: below the low end, with lighting sales down 1.0% against a guide that began at low single-digit growth.
- Adjusted EPS, fiscal 2026$19.90, up 10.5% on $18.01vs guidance of "within the range of $19 to $20.50" (1 October 2025)Met: inside the range and about $0.15 above its midpoint, by our arithmetic.
- Lighting adjusted operating margin18.8% in the quarter, down from 20.1% a year earliervs 18.1% for the full year, down 0.2 pointsMargin fell 1.3 points while gross margin rose: costs below gross profit grew on flat sales.
- Intelligent Spaces operating margin24.9% in the quarter, up from 21.4% a year earliervs 23.0% for the full year, up 1.5 pointsUp 3.5 points: the margin gain came from this smaller segment, not from lighting.
The guide's midpoint is slower than the year just delivered
Acuity said that adjusted earnings per share for the new fiscal year would land between $20.50 and $22.00. The midpoint of that range is 6.8% above the $19.90 earned in the year just ended, by our arithmetic. That is slower growth than the latest year delivered, and the guide sits on a net sales range the company missed this year. Measured on the year's sales, the range implies growth of 1.3% to 5.6%, by our arithmetic.
The record on that range is short and plain. A year earlier the company guided a sales range and an adjusted earnings per share range, and reaffirmed both in January. In April it cut its lighting sales assumption to flat to down low single digits, said AIS growth and EPS guidance were unchanged, and did not restate the sales range. Sales came in below the range, while lighting sales fell, against a guide that began with an assumption of low single-digit lighting growth. Earnings per share landed inside the range.
Lighting's costs rose while its sales did not
The larger segment, Acuity Brands Lighting, is where the margin story is weakest. Last quarter its adjusted operating margin was 18.8%, down 1.3 points on a year earlier, even though its gross margin rose. The year-on-year change in that margin went from a gain two quarters earlier to a fall the quarter before and a larger fall last quarter.
Chief executive Neil Ashe, asked whether the rise in selling and administrative costs was structural, said: "So those will normalize over time. That's just 1 quarter, so I wouldn't place too much credence on the fourth quarter." Management says it intends to add around half a point to a full point of adjusted operating margin a year in lighting. This year the margin fell 0.2 points.
Memory costs now have a number, and the guide absorbs it
On its April and June calls the company called memory-chip supply tight and a supply shock, without sizing either. With the new guide it gave a figure: about 2 percentage points of gross margin at Intelligent Spaces, its smaller and faster-growing segment, probably starting late in the first quarter. Management expects that segment's operating margin to stay flat to slightly up. Mr Ashe added that the dollar margin matters more than the percentage, which is the easier test to pass when sales are growing quickly.
What would have to be true for the midpoint? By our arithmetic, with lighting sales flat, Intelligent Spaces growing at a low-to-mid-teens rate and both segments holding this year's margins, adjusted earnings per share comes to about the midpoint (holding this year's 22.1% adjusted tax rate, other expense of $33.0 million and 30.4 to 30.8 million shares). So the midpoint does not need lighting to improve. Lighting margin gains are the clearest route above it; fewer shares or a lower tax rate are others. The low end is where memory costs with no offset would leave it. This is our model, not the company's.
Much of the quarter's gain did not come from operations
Adjusted earnings per share rose $0.57 to $5.77 last quarter. By our arithmetic higher adjusted operating profit supplied about a third of the $0.57 gain; the rest came from fewer shares, a lower adjusted tax rate (21.4% against 23.1%), lower interest and lower other expense. Management credited higher profitability and a lower share count. A share count falls only while a company keeps buying back stock, and a tax rate can move either way; sales growth is the part that repeats.
What we do not know yet
We do not know whether the memory cost arrives evenly or lands harder from the second quarter, given a late-first-quarter start and a figure stated for the whole year. The first test is the first quarter of the new fiscal year: whether lighting's operating costs fall back from the share of sales they took last quarter, and whether the memory cost shows up.
A cost described as one quarter's business is easy to accept for one quarter. The next report will be the second.
The record: notes, full financial tables
Notes
Impact 4/5 Guidance Mixed
Acuity guides FY27 adjusted EPS $20.50-$22.00, midpoint 6.8% above FY26
Acuity guided FY27 adjusted EPS of $20.50 to $22.00, a midpoint 6.8% above FY26's $19.90, by our arithmetic. For FY26 Acuity had guided net sales of $4.7 billion to $4.9 billion and adjusted EPS of $19.00 to $20.50 (call of 1 October 2025, reaffirmed in January). Sales of $4,641.8 million fell short of that range; adjusted EPS of $19.90 was inside it. The FY27 sales range is the same $4.7 billion to $4.9 billion; in April the company had cut its lighting sales assumption and did not restate the range.
“We expect to deliver adjusted diluted earnings per share within the range of $20.50 to $22.”— Karen Holcom, Chief Financial Officer
Impact 4/5 Margin Mixed
Acuity puts memory-chip cost at about 2 points of Intelligent Spaces gross margin in FY27
Acuity said memory-chip cost increases will cut Intelligent Spaces gross margin by about 2 percentage points over FY27, probably starting late in the first quarter, and management expects the segment's operating margin to stay flat to slightly up. The chief financial officer called it the gross impact, which sales growth and cost leverage may partly offset. Its FY26 adjusted operating margin was 23.0%, and on its 2 April and 25 June calls the company had given no number for memory costs. By our arithmetic, 2 points on about $1.25 billion of FY27 segment sales (assuming about 13% growth, within the guided low to mid-teens) is about $25 million.
“this is around a couple of hundred basis points. So think of it that way.”— Karen Holcom, Chief Financial Officer
Impact 4/5 Margin Negative
Acuity lighting adjusted operating margin falls 1.3 points to 18.8% as gross margin rises
Lighting's adjusted operating margin was 18.8% in the August 2026 quarter, down from 20.1% a year earlier, though adjusted gross margin rose 0.5 points to 46.2%; by our arithmetic, operating costs below gross profit rose to 27.5% of sales from 25.6%, on sales down 0.4%. The year-on-year change was +0.5 points in the quarter reported on 2 April, -0.6 in the one reported on 25 June and -1.3 last quarter, and the full year was 18.1%, down 0.2 points, against an intention to add around 0.5 to 1.0 points of adjusted operating margin a year. Asked if the cost rise was structural, the chief executive called it one quarter.
“So those will normalize over time. That's just 1 quarter, so I wouldn't place too much credence on the fourth quarter.”— Neil Ashe, Chairman, President and CEO
Impact 3/5 One-off Mixed
Acuity's adjusted EPS rose 11.0% to $5.77; reported EPS rose 56.0% on one-offs
Reported diluted EPS was $5.63 against $3.61 a year earlier, helped by a $44.9 million tariff refund and a year-ago $30.9 million pension settlement loss; adjusted EPS, which excludes both, rose 11.0% to $5.77. By our arithmetic, higher adjusted operating profit supplied about a third of the $0.57 gain, and fewer shares, a lower tax rate, lower interest and lower other expense the rest. Special charges of $29.7 million in FY25 and $23.7 million in FY26 are excluded too, and the chief executive said to expect more footprint actions of that kind.
Impact 3/5 Balance sheet Positive
Acuity's FY26 operating cash flow rises 37.3% to $825.6M as the acquisition debt is repaid
Acuity reported FY26 operating cash flow of $825.6 million, up from $601.4 million in FY25, and with capex of $77.7 million free cash flow was $747.9 million. The company said the QSC acquisition borrowings are now fully repaid, with $200 million repaid in FY26 and another $200 million after year end; by our arithmetic about $497 million of debt remains. By our arithmetic net debt at 31 August 2026 was $61.1 million against $474.3 million a year earlier. The chief financial officer credited operating performance, tariff refunds and lower tax payments; the release shows $51.3 million of tariff refunds, and inventories fell $76.3 million, by our arithmetic.
“we have now fully repaid the borrowings used to finance the QSC acquisition.”— Karen Holcom, Chief Financial Officer
Financials
Income statement, last 8 quarters
| Quarter end | Sales | YoY | Operating profit | Op. margin | Other income | PBT | Net profit |
|---|---|---|---|---|---|---|---|
| May 2026 | 1,198 | +1.6% | 193 | 16.1% | −8.1 | 185 | 141 |
| Feb 2026 | 1,056 | +4.9% | 133 | 12.6% | −10.1 | 123 | 97 |
| Nov 2025 | 1,144 | +20.2% | 160 | 14.0% | −7.8 | 153 | 121 |
| Aug 2025 | 1,209 | +17.1% | 181 | 14.9% | −42.9 | 138 | 114 |
| May 2025 | 1,179 | +21.7% | 140 | 11.9% | −14.4 | 125 | 98 |
| Feb 2025 | 1,006 | +11.1% | 110 | 11.0% | −7.9 | 102 | 78 |
| Nov 2024 | 952 | +1.8% | 133 | 14.0% | 1.5 | 135 | 107 |
| Aug 2024 | 1,032 | +2.2% | 157 | 15.2% | −4.5 | 153 | 119 |
Balance sheet
| As of | Equity | Debt | Cash | Fixed assets | Total assets |
|---|---|---|---|---|---|
| May 2026 | 2,852 | 697 | 412 | 346 | 4,635 |
| Feb 2026 | 2,841 | 697 | 273 | 350 | 4,559 |
| Nov 2025 | 2,794 | 797 | 376 | 345 | 4,652 |
| Aug 2025 | 2,725 | 897 | 423 | 343 | 4,755 |
Cash flow
| Year end | Operating | Investing | Financing | Free cash flow |
|---|---|---|---|---|
| Aug 2025 | 601 | −1,281 | 255 | 533 |
| Aug 2024 | 619 | −65 | −105 | 555 |
| Aug 2023 | 578 | −91 | −313 | 511 |
| Aug 2022 | 316 | −62 | −512 | 260 |