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A maker of high-performance titanium and nickel alloys, ATI supplies the hot sections of jet engines and flat-rolled specialty metals for aerospace, defense, and energy customers through its High Performance Materials & Components and Advanced Alloys & Solutions businesses. Its roots reach back to 1901's Allegheny Steel & Iron, and the modern company took shape in 1996 as a merger of Allegheny Ludlum and Teledyne, later shortening its name from Allegheny Technologies to ATI. The "Allegheny" name honors the Pennsylvania region where its steelmaking ancestors were founded.
ATI gross margin reached 24.6% in Q2 FY2026, the highest in the reported table, as aerospace demand drove revenue up 10.6%.
hit a new high. rose 10.6% to $1.26 billion and climbed 36.6% to $220 million, driven by a 13% increase in aerospace and defense sales and higher pricing. The quarter leaves ATI with its strongest profitability in the reported period, even as it took on new debt to fund growth.
Key takeaways
expanded 3.3 points to 24.6%, the highest quarterly level in the reported table, as higher pricing and volume more than offset $6.1 million in start-up and transaction-related costs.
Aerospace and defense sales rose 13%, led by commercial jet engines and naval nuclear defense products, pushing the to 70% of total .
AA&S rose 92% to $147.6 million, including a $9.9 million gain on a facility sale, with the underlying improvement coming from higher pricing and favorable mix.
Section summaries
Management's Discussion and Analysis
Q2 FY2026 sales rose 11% to $1.26B on strong aerospace & defense demand, with gross margin expanding to 24.6% and net income up 50%.
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Total sales grew 11% to $1.26B, driven by a 13% increase in aerospace & defense sales, particularly commercial jet engines and naval nuclear defense products.
margin expanded to 24.6% from 21.3% a year ago, benefiting from higher pricing and volume, partially offset by $6.1M in start-up and transaction-related costs.
rose 36.6% to $220.0 million and rose 50.0% to $151.0 million, while reached $1.09, up 55.7%.
The company issued $450 million in new 2033 Senior Notes, lifting to $1,808.4 million, and repurchased $125 million of stock year-to-date.
The federal court granted ATI's motion to dismiss the consolidated pension annuity transfer class actions on July 27, 2026, removing a legal overhang, though a plaintiff appeal remains possible.
What changed
The AA&S margin, flagged last quarter at 18.1%, rose to 23.7% on higher pricing and the facility sale gain, settling the question of whether the improvement would hold.
Conventional energy sales, watched for a deepening or reversal of the prior $37.8 million decline, stabilized as total outside aerospace and defense held flat sequentially.
, flagged after rising to $1,794.7 million in Q1, increased further to $1,808.4 million following the $450 million note issuance, while cash rose to $783.0 million from $401.7 million.
The pension annuity transfer litigation, a watch item since FY2024, was resolved at the district court level with a dismissal in ATI's favor, though the possibility of appeal remains.
What to watch
Whether the plaintiff appeals the July 2026 dismissal of the pension annuity transfer class actions, and any resulting loss estimate.
AA&S margin in Q3 FY2026 to see if the 23.7% level, which included a facility sale gain, is sustained by underlying pricing and mix.
The trajectory of and to after the $450 million note issuance and the $125 million in year-to-date share repurchases.
Conventional energy sales in Q3 FY2026 to confirm whether the stabilization observed in Q2 continues or reverses.
AA&S surged 92% to $147.6M (23.7% of sales), including a $9.9M gain on a facility sale, with underlying improvement from higher pricing and favorable mix.
HPMC rose 7% to $153.5M (24.1% of sales) on strong commercial jet engine demand, though margins were pressured by costs for a new Mexico facility and a titanium furnace.
improved significantly to $260M year-to-date, supported by higher and a $60M sale, while the company issued $450M in new 2033 Senior Notes.
The company repurchased $125M of stock year-to-date and has $495M remaining under its active authorization.
Quantitative and Qualitative Disclosures About Market Risk
Interest-rate risk is immaterial; energy and nickel prices are hedged ~70% and ~5% of annual needs, with sensitivity quantified.
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Nearly all debt is fixed-rate, so interest-rate volatility is not material, and no derivative interest-rate contracts were outstanding at quarter-end.
A hypothetical $1.00/MMBtu rise in natural gas would increase annual energy costs by $6–$8 million; hedges covered ~70% of remaining 2026 and ~40% of 2027 forecasted domestic needs.
Natural gas hedging decreased cost of sales by $1.2 million in Q2, and the net value of outstanding gas hedges was a $1.9 million unrealized pre-tax loss.
A hypothetical $1.00/lb rise in nickel would increase costs by ~$70 million; nickel hedges covered ~4 million pounds (~5% of a single year’s estimated needs) through 2027.
Raw-material hedges had a $2.5 million unrealized pre-tax loss at quarter-end, and gains/losses flow through sales or cost of sales depending on the hedged risk.
No material foreign-currency forward contracts were outstanding at quarter-end; non-designated hedges generated $0 expense in Q2 and $1 million expense year-to-date.
Geopolitical conflict and litigation over pension-risk-transfer annuities are newly emphasized risks, though near-term financial impact is uncertain.
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The U.S.-Israel-Iran conflict that escalated in February 2026 could disrupt energy supplies, raise input costs, and weaken customer spending, though the company has no material Middle East operations.
The company faces a broad set of litigation—product liability, patent, commercial, employment, benefits, tax, environmental, and governance claims—that could materially hurt quarterly results even if no single case threatens overall financial condition.
A consolidated lawsuit challenges the October 2023 purchase of group annuity contracts that transferred U.S. pension obligations to Athene entities; the court granted the company’s motion to dismiss in July 2026, but a plaintiff appeal remains possible.
The company cannot predict the outcome or loss range for the pension-transfer litigation if the dismissal is challenged, and it intends to defend vigorously.