Water management company Advanced Drainage Systems (NYSE:WMS) reported Q2 CY2026 results beating Wall Street’s revenue expectations, with sales up 20.6% year on year to $1.00 billion. The company expects the full year’s revenue to be around $3.45 billion, close to analysts’ estimates. Its non-GAAP profit of $2.49 per share was 17.4% above analysts’ consensus estimates.
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Advanced Drainage (WMS) Q2 CY2026 Highlights:
- Revenue: $1.00 billion vs analyst estimates of $981.5 million (20.6% year-on-year growth, 2% beat)
- "results reflect some pull-forward of sales from the second quarter ahead of price actions in addition to the ongoing strength and resilience of our diversified water management platform, strong organic growth, and a meaningful contribution from NDS, which we acquired in February"
- Adjusted EPS: $2.49 vs analyst estimates of $2.12 (17.4% beat)
- Adjusted EBITDA: $358.3 million vs analyst estimates of $313.3 million (35.8% margin, 14.3% beat)
- The company reconfirmed its revenue guidance for the full year of $3.45 billion at the midpoint
- EBITDA guidance for the full year is $1.03 billion at the midpoint, in line with analyst expectations
- Operating Margin: 25.4%, in line with the same quarter last year
- Free Cash Flow Margin: 20.3%, down from 26.8% in the same quarter last year
- Market Capitalization: $11.47 billion
Company Overview
Originally started as a farm water drainage company, Advanced Drainage Systems (NYSE:WMS) provides clean water management solutions to communities across America.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Advanced Drainage’s 8.5% annualized revenue growth over the last five years was decent. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Advanced Drainage’s recent performance shows its demand has slowed as its annualized revenue growth of 5.2% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
We can dig further into the company’s revenue dynamics by analyzing its most important segments, Pipe
and Infiltrators, which are 80.8% and 19.2% of revenue. Over the last two years, Advanced Drainage’s Pipe
revenue (thermoplastic corrugated pipes) averaged 45% year-on-year growth while its Infiltrators revenue (wastewater treatment systems) averaged 37.9% growth. 
This quarter, Advanced Drainage reported robust year-on-year revenue growth of 20.6%, and its $1.00 billion of revenue topped Wall Street estimates by 2%.
Looking ahead, sell-side analysts expect revenue to grow 7.7% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and implies its newer products and services will catalyze better top-line performance.
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Operating Margin
Advanced Drainage has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 21.9%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Looking at the trend in its profitability, Advanced Drainage’s operating margin rose by 2.3 percentage points over the last five years, as its sales growth gave it operating leverage.
This quarter, Advanced Drainage generated an operating margin profit margin of 25.4%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Advanced Drainage’s EPS grew at 13.9% compounded annual growth rate over the last five years, higher than its 8.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Diving into Advanced Drainage’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Advanced Drainage’s operating margin was flat this quarter but expanded by 2.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Advanced Drainage, its two-year annual EPS growth of 2.4% was lower than its five-year trend. We hope its growth can accelerate in the future.
In Q2, Advanced Drainage reported adjusted EPS of $2.49, up from $1.95 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Advanced Drainage’s full-year EPS to shrink by 4.2% from $6.81 to $6.53.
Key Takeaways from Advanced Drainage’s Q2 Results
We were impressed by how significantly Advanced Drainage blew past analysts’ EBITDA expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $151.08 immediately following the results.
Advanced Drainage had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).