Key Tronic Q3 Revenue Falls 20% to $89.6M, Plans China Exit
Key Tronic reported Q3 fiscal 2026 revenue of $89.6M, down from $112M a year earlier, while gross margin rose to 8.0%. The EMS provider is winding down China operations to save $1.2M per quarter and expects Q4 revenue to rebound with new program wins.
1. Q3 Financial Performance
Key Tronic reported revenue of $89.6 million in the third quarter of fiscal 2026, a 20% decline from $112.0 million a year earlier. Gross margin improved to 8.0% and operating margin narrowed to (0.3)%, while net loss widened to $2.6 million, or $0.24 per share.
2. Operational Challenges and Efficiency
Winter Storm Fern forced temporary site closures in the South, with damage costs expected to be largely covered by insurance. Despite these disruptions and lower legacy program demand, adjusted gross margin rose to 8.5%, reflecting effective cost-cutting and efficiency measures.
3. Strategic Shift from China
The company is completing the wind-down of its China manufacturing operations by fiscal year-end, shifting capacity to expanding US and Vietnam facilities. This near-shoring strategy is forecast to save approximately $1.2 million per quarter and mitigate tariff risks.
4. Outlook and Program Wins
Key Tronic secured new automotive, industrial tooling, pest control and power management contracts during Q3. It anticipates these wins will drive a revenue rebound and a return to profitability in Q4, but will not issue formal guidance due to macroeconomic uncertainties.