OSI Systems Announces Third Quarter FY2026 Results
OSI Systems, has reported its financial results for the third quarter of fiscal year 2026, highlighting steady revenue growth, record earnings on a non-GAAP basis, and a strong backlog that underscores continued demand across its key business segments.
Strong Quarterly Performance Driven by Diversified Operations
For the third quarter ended March 31, 2026, OSI Systems generated revenues of $453.2 million, representing a modest increase of 2% compared to $444.4 million in the same period last year. This growth reflects consistent performance across its Security and Optoelectronics and Manufacturing divisions, supported by solid execution and ongoing customer demand.
Despite a slight decline in GAAP diluted earnings per share (EPS), which came in at $2.33 compared to $2.40 in the prior-year quarter, the company delivered a record non-GAAP EPS of $2.60. This marks a 7% increase year-over-year and highlights improved operational efficiency and profitability when excluding non-recurring and acquisition-related expenses.
For the first nine months of fiscal 2026, OSI Systems reported revenues of $1.30 billion, up 8% from $1.21 billion in the corresponding period of fiscal 2025. GAAP EPS for the nine-month period increased slightly to $5.71, while non-GAAP EPS rose 8% to $6.60, demonstrating sustained earnings growth.
Record Backlog Signals Strong Future Demand
One of the standout highlights of the quarter was the company’s backlog, which reached a record $1.9 billion as of March 31, 2026. This represents an increase from $1.8 billion at the end of the previous quarter (December 31, 2025), reflecting continued strength in order bookings.
The company also reported a healthy book-to-bill ratio of 1.3x for the quarter, indicating that new orders exceeded revenue recognized during the period. This metric is often seen as a key indicator of future revenue growth, suggesting that OSI Systems is well-positioned to sustain its performance in upcoming quarters.
Leadership Commentary on Performance
Ajay Mehra, President and Chief Executive Officer, emphasized the company’s resilience and execution capabilities, noting that the third quarter results demonstrate the strength of OSI Systems’ diversified portfolio.
He highlighted that record non-GAAP earnings per share and strong bookings were key achievements, supported by disciplined operations across both major business segments. Mehra also pointed to the company’s substantial backlog and strong pipeline as indicators of future growth opportunities.
Security Division Delivers Solid Results
The Security division continued to perform well during the quarter, benefiting from strong bookings and improved operating margins. However, year-over-year comparisons were impacted by unusually high revenues from Mexico-related contracts in the third quarter of fiscal 2025.
When excluding those prior-year Mexico contracts, the Security division’s revenues actually increased by an impressive 25% year-over-year. This adjusted growth highlights the underlying strength of the division’s broader portfolio and its ability to secure new contracts globally.
The company also noted recent notable contract awards and expressed optimism about capturing additional large-scale opportunities in international markets. This positions the Security division as a key growth driver moving forward.
Optoelectronics and Manufacturing Division Shows Momentum
The Optoelectronics and Manufacturing division also delivered a strong performance, reporting 10% revenue growth in the third quarter. The division maintained a robust book-to-bill ratio, reinforcing continued demand from original equipment manufacturer (OEM) customers.
This segment benefits from OSI Systems’ vertically integrated global operating model, which allows the company to efficiently design, manufacture, and deliver components and systems. The division serves a wide range of industries, including aerospace, defense, healthcare, and consumer electronics.
The company emphasized that this integrated model provides both flexibility and efficiency, enabling it to respond quickly to customer needs while maintaining cost competitiveness.
Cash Flow and Capital Expenditures
Cash flow from operating activities for the third quarter was $14.5 million, compared to $81.6 million in the prior-year period. While this represents a decline, the company’s nine-month operating cash flow remained relatively stable at $93.8 million compared to $97.0 million last year.
Capital expenditures for the quarter increased to $7.6 million from $4.5 million in the same quarter of fiscal 2025, reflecting continued investment in infrastructure and growth initiatives. For the nine-month period, capital expenditures rose to $21.3 million from $17.7 million, indicating a strategic focus on long-term capacity and capability expansion.
Fiscal 2026 Outlook Reaffirmed
OSI Systems reaffirmed its full-year fiscal 2026 guidance, maintaining its revenue expectations in the range of $1.825 billion to $1.867 billion. The company also reiterated its non-GAAP diluted EPS guidance of $10.30 to $10.55.
Management noted that actual results could vary due to several external factors, including geopolitical uncertainties and operational disruptions. Specifically, the company cited potential impacts from the shutdown of the U.S. Department of Homeland Security and ongoing conflicts in the Middle East, which could affect near-term bookings and revenue timing.
The company clarified that it does not provide forward-looking GAAP EPS guidance due to the complexity of forecasting certain items, such as acquisition-related costs and other non-recurring expenses. These factors are difficult to predict accurately and may significantly impact reported GAAP results.
Strategic Positioning and Market Opportunities
OSI Systems’ performance reflects the advantages of its diversified business model, which spans multiple industries and geographic regions. By operating across security screening, advanced electronics, and manufacturing services, the company reduces its dependence on any single market.
Its strong backlog and consistent order intake suggest that demand remains robust across its core segments. Additionally, the company’s ability to secure large contracts and maintain a healthy pipeline indicates continued confidence from customers.
The focus on operational efficiency, combined with targeted investments in growth areas, positions OSI Systems to capitalize on emerging opportunities in sectors such as defense, healthcare technology, and global security infrastructure.
Upcoming Conference Call
To provide further insights into its financial performance, OSI Systems will host a conference call and webcast at 1:30 PM Pacific Time (4:30 PM Eastern Time). Investors and analysts can access the live webcast through the company’s Investor Relations website.
A replay of the webcast will be made available shortly after the call and will remain accessible for approximately three months, allowing stakeholders to review management’s commentary and detailed discussion of the results.
Overall, OSI Systems delivered a solid third quarter for fiscal 2026, marked by steady revenue growth, record non-GAAP earnings, and a strong increase in backlog. While certain external challenges remain, the company’s diversified operations, disciplined execution, and robust order pipeline provide a strong foundation for continued growth.
By reaffirming its full-year guidance and demonstrating resilience across its key segments, OSI Systems continues to position itself as a stable and forward-looking player in the global technology and security solutions market.
About OSI Systems
OSI Systems designs and manufactures specialized electronic systems and components for critical applications. The Company operates through three business segments: Security, Optoelectronics and Manufacturing, and Healthcare. Its Security division delivers advanced inspection systems, turnkey screening solutions, and comprehensive support services to protect people and infrastructure. The Optoelectronics and Manufacturing segment serves as a global supplier of high-performance optoelectronic solutions and precision manufacturing services for leading OEMs. The Healthcare segment focuses on patient monitoring, diagnostic cardiology, and related services with the goal of enhancing clinical care and patient outcomes. Serving customers in over 170 countries, OSI Systems strategically positions its sales, service, R&D, and manufacturing capabilities worldwide to provide fast and efficient delivery and support. For more information on OSI Systems or any of its subsidiary
