Impinj, Inc. (PI) Earnings

Management highlights

- **Market and Vertical Demand Growth** * Strong demand is broad-based across retail apparel, general merchandise, supply chain and logistics, and grocery food verticals, driving record quarterly results and accelerating Q3 demand. Demand strength was boosted by market expansion, retailer pre-tariff pull-ins ahead of temporary tariff expiration, and ongoing consumer resilience. * The custom ASIC ramp for a large second North American supply chain and logistics end customer is ahead of schedule, with full conversion expected in Q3 2026. * Three of the five largest U.S. grocers have now launched pilots or deployments for RFID tracking across bakery, deli, and meat categories, with four distinct food use cases in progress: store replenishment, in-store inventory tracking, loss identification at point of sale, and automated self-checkout. Management notes the breadth of large engaged enterprises this early in the food market adoption cycle is unprecedented, though food volume remains small relative to other verticals today. * Underpenetrated high-potential categories in general merchandise include OTC pharmaceuticals, cosmetics, and health and beauty, which represent large untapped volume opportunities. - **Product and Foundry Capacity** * Impinj has sufficient wafer inventory from its foundry partner to meet current strong demand for both Endpoint and Reader ICs. Reader IC demand beat expectations in Q2, driven by strong enterprise demand, and management expects it to be the fastest growing product line in Q3. * The ongoing ramp of the higher-margin M800 product platform continues to drive product gross margin expansion, with custom ASICs falling under the M800 platform. * Gen2x technology delivers material readability and throughput benefits, especially for fixed reading solutions that are core to Impinj's long-term strategy. - **Strategic Transition to Solutions** * Management is actively expanding Impinj from a primarily component seller to a full solution provider, focused on addressing key enterprise pain points (replenishment, point of sale operations). Impinj's solutions combine endpoint/reader ICs, hardware, and software to deliver verified real-time event data that improves AI model accuracy for enterprise operations automation. * Impinj will partner with existing ecosystem players (system integrators, ERP/WMS providers, other RFID partners) for large-scale deployments, and does not plan to compete with partners in solutions delivery. Custom ASIC development will only be pursued on an as-needed basis for large customers to avoid unnecessary operational complexity.

Guidance

- Total Q3 2026 revenue is expected to range between $105.5 million and $108.5 million, representing a 17% sequential increase at the midpoint from Q2 2026 product revenue. Adjusted EBITDA is projected between $20.7 million and $22.2 million. - Non-GAAP net income is expected to range between $18.5 million and $20 million, equal to $0.59 to $0.63 non-GAAP fully diluted earnings per share. - Management expects Q3 Endpoint IC product revenue to increase sequentially above the high end of typical seasonal growth, and expects a strong sequential increase in Systems revenue. - Q3 product gross margin is expected to increase sequentially, with a similar size of step-up in product gross margin as seen in Q2 2026 driven by continued M800 platform ramp. - Total Q3 operating expense is expected to increase sequentially from Q2 levels.

Segment performance

Impinj's total Q2 2026 revenue hit a record $108.4 million, growing 46% sequentially from Q1 2026 and 11% year-over-year from Q2 2025. The Endpoint IC segment achieved a record $96.4 million in revenue, accounting for 88.9% of total Q2 revenue. This represents a 53% sequential increase and 14% year-over-year increase; excluding licensing revenue, Endpoint IC product revenue grew 26% sequentially and 16% year-over-year, exceeding internal expectations. The Systems segment posted $12 million in revenue, representing 11.1% of total Q2 revenue. This is an 8% sequential increase from Q1 2026 but a 10% year-over-year decrease from Q2 2025, and met internal expectations as strong Reader IC performance offset weakness in label production systems. Other key Q2 segment and company-wide performance metrics: Q2 gross margin hit a record 60.9% (up from 52.4% in Q1 2026 and 60.4% in Q2 2025), with non-licensing product gross margin at 53.6%. Total operating expense was $35.3 million, in line with expectations. Adjusted EBITDA reached a record $30.7 million (28.3% adjusted EBITDA margin), and non-GAAP net income hit a record $27 million, or $0.86 per fully diluted share. Endpoint IC bookings hit an all-time high for the second consecutive quarter, and Endpoint IC unit volumes set a new quarterly record.

Risks & headwinds

- Forward-looking statements about future performance are subject to material risks and uncertainties that could cause actual results to differ materially from expectations, as detailed in Impinj's SEC filings. - A competitor has launched a new endpoint IC product, though management notes it has not yet meaningfully entered the market and new semiconductor products require end customer qualification and testing, which takes time. Impinj maintains a strong competitive share position with high-performing products that meet customer needs. - Prior to 2026, Impinj faced channel inventory visibility challenges supporting the large second North American supply chain logistics customer, leading to unforeseen volatility in early calendar quarters. The transition to a custom ASIC for this customer has improved channel visibility, though management acknowledges it must still prove this improved visibility in Q1 2027. Peak purchasing seasonality for this customer is concentrated in Q2 and Q3, with steeper consumption declines in Q4 ahead of the customer's annual RFP process.

Analyst Q&A

• Q: Management's Q3 guide was stronger than expected. Where is the unexpected demand strength coming from? How is the large U.S. grocer food program progressing, and have tariffs impacted demand? /

  A: Demand strength is broad-based across general merchandise, supply chain and logistics, food, and retail apparel, with ongoing new program launches and expansion of existing programs, plus momentum from 2025 share gains driving growth. Impinj lets customers and partners announce their own program updates, but confirms it is supporting all engaged grocers including the one referenced. There was modest Q2 demand pull-ahead ahead of temporary tariff expiration, but underlying market demand remains strong driven by consumer resilience and category expansion; inlay partners are expected to rebuild inventories in the back half of 2026.

• Q: The main large supply chain and logistics partner has announced expanded RFID deployment and international expansion. What does this mean for Impinj, and are there other emerging logistics opportunities? Also, what is the progress on digital product passports (DPP)? /

  A: Impinj is fully supportive of the partner's growth initiatives, and the verified 100% accurate event data Impinj provides greatly improves AI models for enterprise operations optimization, enabling the partner to scale its solutions to third-party logistics customers. Other logistics customers are also being supported, though this leading partner is well ahead of the industry. Untapped general merchandise categories (OTC pharmaceuticals, health and beauty, cosmetics) are large potential growth opportunities. DPP and consumer-facing RFID use cases remain in early stages, with regulatory progress and Qualcomm's integration of RFID reading into mobile chipsets expected to drive adoption by the end of the 2020s, holding significant long-term promise.

• Q: Will a competitor's new endpoint IC impact Impinj's recent share gains, and how much of Q3 product gross margin expansion comes from the custom ASIC ramp? /

  A: Both Impinj and its competitor are seeing strong demand driven by overall market growth, and the new competitor product has not yet meaningfully penetrated the market. New products require extended end customer qualification, so Impinj's current strong share position remains solid, supported by its high-performing product lineup including Gen2x and machine learning-enabled solutions. Q3 gross margin expansion will continue to be driven by the ongoing ramp of the M800 product platform, which includes the custom ASIC for the logistics customer; management expects a roughly 120 basis point sequential increase in product gross margin, similar to the Q2 2026 step-up.

• Q: What benefits does Gen2x provide, and what is the outlook for additional custom ASIC development? When will food pilots convert to full deployments and drive an inflection in RFID volumes? /

  A: Gen2x delivers material readability benefits for both handheld inventory counting and fixed reading for transition/point of sale use cases, with particularly outsized benefits for the fixed reading solutions that are core to Impinj's strategic direction. It is already enabling use cases for Impinj's largest enterprise customers. Additional custom ASICs will only be developed on an as-needed basis for customers; no new custom ASIC programs are ready to be announced today, as custom ASICs add operational complexity that is only justified for specific large use cases. While several large grocers are already progressing to chain-wide rollouts, it will take time for food volumes to overtake larger existing verticals (retail apparel, supply chain, general merchandise), but the pace of early engagement is unprecedented and rapid percentage growth is expected going into 2027 and 2028.