Qnity's Q2 2026 sales rose 22% to $1.43B on AI-driven volume, and adjusted EPS rose 53% to $1.19, but GAAP EPS fell 34% to $0.59 on post-spin interest, separation charges and legacy DuPont costs; full-year guidance raised again.
Revenue
$1.4B
+22.1% YoY
Net income
$124M
-34.0% YoY
Diluted EPS
$0.59
-34.4% YoY
Operating margin
19.3%
Sales up 22% on AI-driven chip demand, but GAAP profit fell a third as standalone costs arrived
Qnity Electronics, the semiconductor- and electronics-materials business that DuPont spun off on November 1, 2025, reported second-quarter 2026 (three months to June 30) net sales of $1,429 million, up 22% from $1,170 million a year earlier. Almost all of that came from selling more product: the 10-Q attributes the increase "primarily" to "a 23% increase in volume", with price/mix down 1% and currency flat.
The bottom line moved the other way. Net income available to Qnity shareholders fell to $124 million from $188 million (-34%), and diluted earnings per share (EPS — profit divided by the number of shares) fell to $0.59 from $0.90. The business itself did better; the drop comes from costs that did not exist when Qnity was a division of DuPont: $61 million of interest on the roughly $4 billion of debt it took on at the spin-off, $42 million of transformation and IT-separation charges, $42 million of "indirect legacy costs" (its contractual share of old DuPont liabilities), and a much higher tax rate.
Takeaway: Qnity has two stories, and they point in opposite directions. The operations are growing fast and getting more profitable: segment earnings rose 24% on 22% sales growth, and management raised full-year guidance for the second quarter running. GAAP profit is shrinking because of costs from the spin-off: debt interest, IT separation, and liabilities inherited from DuPont. The debt interest is permanent. Most of the rest is supposed to be temporary, so whether GAAP earnings catch up depends on those one-off charges actually fading.
A note on the year-ago comparison
Q2 2025 predates the spin-off. Those figures are "carve-out" numbers taken from DuPont's books, with no interest expense and no standalone-company costs. So a GAAP year-over-year comparison makes Qnity look worse than the underlying trend. The earnings release also shows a pro forma Q2 2025, restated as if the spin-off had happened on January 1, 2025, which is the fairer comparison for the non-GAAP figures below.
Key metrics
Metric
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*Qnity's income statement has no "operating income" line. The figure here is net sales minus cost of sales, R&D, SG&A, amortization of intangibles, and transformation/integration charges, taken from the reported line items. It excludes equity earnings from affiliates, interest, and other income/expense. Operating margin is the share of revenue left after running the business, before interest and taxes.
Adjusted Operating EBITDA is the company's preferred profit measure. It is earnings before interest, taxes, depreciation and amortization, and it also strips out transformation charges, legacy DuPont costs and other "significant items". Adjusted EPS excludes those same items plus amortization. Both are company-defined and unaudited. The release reconciles them to GAAP.
What drove sales: two segments, both growing on volume
Segment
Q2 2026 sales
Q2 2025 sales
Change
Adj. Op. EBITDA
Prior year
Change
EBITDA margin
Semiconductor Technologies
$744M
$644M
+16%
$253M
$226M
+12%
34.0% (vs 35.1%)
Interconnect Solutions
$685M
$526M
+30%
$197M
$137M
+44%
28.8% (vs 26.0%)
Semiconductor Technologies sells materials used in chipmaking itself, such as polishing slurries and pads, and chemicals used in lithography and cleaning. Sales rose 16%, with volume up 18% partly offset by 1% lower price/mix and a 1% currency drag. The 10-Q credits "improved customer utilization rates" (chip factories running closer to full) and "growth in AI driven applications, particularly in advanced nodes, including advanced packaging and high bandwidth memory." Segment EBITDA grew more slowly (+12%) than sales because gains were "partially offset by investments to support future growth, including R&D and supply chain initiatives." The margin slipped by about a point.
Interconnect Solutions makes materials for circuit boards, chip packaging and thermal management. It was the standout. Sales rose 30%, with volume up 28% and 2 points from a stronger euro. The 10-Q attributes the volume to "continued demand strength from AI driven technology ramps and new content and share gains in advanced packaging, AI PCB and thermal management." Segment EBITDA jumped 44% on "an increase in sales volume, favorable mix and productivity gains," partly offset by higher raw-material costs and growth spending. The segment margin widened by almost 3 points to 28.8%.
By region, Asia Pacific led, up 24% (volume +25%). That is where most chip and circuit-board manufacturing happens. The Americas rose 16% and EMEA 11%, of which 2 points came from currency.
Sequentially, sales rose to $1,429M from $1,315M in Q1 2026 (derived from the $2,744M first-half total), an increase of about 9% in one quarter.
Why GAAP profit fell: the bridge from $255M to $199M pre-tax
Pre-tax income fell by $56 million even though computed operating income rose by $30 million. The difference came from items that sit below operating income or are tied to the separation:
Interest expense: $61M (vs $0). This is interest on the secured and unsecured notes and the term loan Qnity took on at the spin-off. Total debt was $4,020M at June 30 against $961M of cash. On July 1 the term loan was repriced (the margin over SOFR fell from 2.00% to 1.75%), which the company expects to save "approximately $6 million" of cash interest a year. That is small relative to about $236M of interest due over the next 12 months.
Transformation, integration and other charges: $42M (vs $2M). Per the 10-Q, about $24M was "information technology independence" (moving off DuPont's IT systems), about $8M transformation initiatives, about $3M other integration costs, and $2M severance plus $4M asset charges from organizational redesign.
Other expense: $27M (vs $4M). This includes $42M of "indirect legacy costs", which is Qnity's contractually allocated share of old DuPont liabilities. The notes show a $43M indemnification liability established this period for Qnity's share of DuPont's accrual in litigation brought by the State of North Carolina over the Fayetteville Works site.
Higher SG&A: $200M vs $154M, up to 14% of sales from 13%, reflecting the cost of running as a standalone public company.
Tax made it worse. The effective rate rose to 31.7% from 22.4%. The 10-Q attributes this to indemnified prior-year tax positions, "a non-deductible indemnification accrual recorded for the State of North Carolina litigation, a limitation on the deductibility of interest expense, and higher tax costs on the remittance of foreign earnings."
The costs that actually drove production were well controlled. Cost of sales rose 21%, slightly less than sales, because volume was up and material costs rose 3%. It fell to 53% of sales from 54%. R&D rose to $98M from $88M but fell to 7% of sales from 8%.
Cash, debt and shareholder returns
Operating cash flow (first half): $376M, down from $480M. The 10-Q attributes the drop mainly to "payments of interest on our long-term debt, which was not outstanding as of June 30, 2025," and to working capital (higher receivables and inventory to support growth).
Capital spending increased. Investing outflows were $205M vs $153M.
Buybacks: $25M in Q2 (183,107 shares at an average $136.51) and $50M year to date, leaving $450M under the $500M authorization.
Dividend: $0.08 per share per quarter.
Net debt (debt minus cash): about $3.06B.
Outlook
Management's guidance (raised for the second consecutive quarter):
FY2026 guidance
After Q1 (May)
After Q2 (August)
Net sales
$5.225B – $5.375B
$5.55B – $5.65B
Adjusted Operating EBITDA
$1.535B – $1.625B
$1.675B – $1.725B
Adjusted EPS
$3.80 – $4.14
$4.40 – $4.60
Adjusted free cash flow
$500M – $600M
$600M – $700M
The release says the raise reflects "strong second-quarter performance and continued near-term momentum, including strong customer engagement and demand across end markets."
Our read: First-half sales were $2,744M. Hitting the new $5.55–5.65B range therefore requires $2.81–2.91B in the second half, about $1.40–1.45B a quarter. That is roughly flat to modestly above Q2's $1,429M. After two quarters of sequential growth (Q2 was up about 9% on Q1), the guide looks achievable unless AI-related demand stalls. Two risks stand out. First, Semiconductor Technologies' margin dipped while Interconnect's rose, so continued margin expansion depends heavily on the circuit-board/packaging side staying strong. Second, the gap between adjusted EPS ($1.19) and GAAP EPS ($0.59) is wide. It narrows only if IT-separation and legacy DuPont charges fade as management implies. Watch the transformation-charge and "indirect legacy costs" lines in Q3: if they stay near $40M each, the "one-off" label becomes harder to accept. Interest expense of about $60M a quarter is permanent until debt is paid down.
Source: Qnity Electronics Form 10-Q for the quarter ended June 30, 2026 (filed August 4, 2026). Non-GAAP figures, pro forma comparatives and guidance come from the Q2 2026 earnings release (Form 8-K Exhibit 99.1, August 4, 2026), and prior guidance from the Q1 2026 earnings release (May 12, 2026).