tapebrief
AVY · Q1 2026

AVY · Q2 2026 Earnings

Bullish

Avery Dennison

Reported July 30, 2026

30-second summary

30-second take: Revenue of $2.46B grew 10.9% YoY with non-GAAP EPS of $2.89 crushing the $2.43-$2.53 guide by 36 cents at the high end, and organic sales growth of 7.6% shattered the 0-2% guide by roughly 6 percentage points — the first genuine base-business inflection since the cycle started. Materials Group revenue of $1.80B grew 15.9% YoY (+9.7% organic) at a 15.8% adjusted operating margin (+20bps YoY), while Solutions Group swung to +2.6% organic (reported -0.5%) with overall apparel up high single digits and adjusted op margin expanding 150bps YoY to 11.5% — a broader recovery than the reported headline suggests. FY2026 adjusted EPS guide stands at $10.00-$10.30 alongside a new $9.40-$9.70 GAAP range; with $5.36 of H1 adjusted EPS already banked, the implied H2 of $4.64-$4.94 is well below the Q2 run-rate, meaning management is either sandbagging or expects meaningful sequential deceleration.

Headline numbers

EPS

Q2 FY2026

$2.89

+17.0% vs est.

Revenue

Q2 FY2026

$2.46B

+10.9% YoY

+7.1% vs est.

Gross margin

Q2 FY2026

29.6%

Operating margin

Q2 FY2026

12.7%

Key financials

Q2 FY2026
MetricQ2 FY2026Q2 FY2025YoYQ1 FY2026QoQ
Revenue$2.46B$2.22B+10.9%$2.30B+7.1%
EPS$2.89$2.42+19.4%$2.47+17.0%
Gross margin29.6%28.8%+80bps28.9%+70bps
Operating margin12.7%12.9%-20bps11.8%+90bps

Guidance

Q2 FY2026 actuals significantly beat both revenue and EPS guidance; full-year adjusted EPS guidance reaffirmed at $10.00-$10.30.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
Adjusted EPSQ2 FY2026$2.43 to $2.53$2.89+$0.36 to $0.46 above guideBeat
RevenueQ2 FY20262% to 4% reported10.9% YoY+6.9 to +8.9 percentage points above guideBeat

New guidance

MetricPeriodGuideYoY
Reported EPS (GAAP)FY2026$9.40 to $9.70—

Segment KPIs

Q2 FY2026
SegmentQ2 FY2026Q2 FY2025YoY
Materials Group$1.796B$1.55B+15.9%
Solutions Group$0.667B$0.67B-0.4%
Materials Group Adjusted Operating Margin15.8%——
Solutions Group Adjusted Operating Margin11.5%——

Other KPIs

Q2 FY2026
SegmentQ2 FY2026Q2 FY2025YoY
Adjusted Operating Margin (non-GAAP)13.6%——
Adjusted EBITDA Margin (non-GAAP)17.1%——
Organic Sales Growth7.6%——
Sales Growth ex. Currency8.9%——
Net Debt to Adjusted EBITDA2.3x——
Adjusted Free Cash Flow (YTD)$469.8M——

Management tone

No transcript was available for this quarter; tone analysis is limited to press-release qualitative statements. The two management quotes released — "We continue to leverage our productivity playbook to expand margins and improve earnings growth" and "Our focus on innovation and service-led differentiation continues to deliver for our customers, driving strong organic sales growth" — are notably absent the hedged, macro-conditional language that dominated the Q1 press release. The word "strong" applied to organic sales growth is the first unqualified positive descriptor management has used in several quarters. Full tone analysis will resume when the transcript is available.

Answers to last quarter's watch list

Q2 FY2026 non-GAAP EPS landing within $2.43-$2.53 — Landed at $2.89, beating the high end by $0.36 (a 17% surprise). This decisively breaks the cautious forward EPS framing from last quarter and validates the productivity playbook.
Resolved positively
Q2 FY2026 organic sales landing at the high end of 0-2% — Landed at 7.6%, roughly 6 percentage points above the high end of the guide. This is the first genuine base-business inflection of the cycle after four consecutive quarters near zero, and it materially rewrites the "gridlocked base business" thesis.
Resolved positively
Sequential price-cost dynamics into Q3 FY2026 — Not directly quantified without a transcript. However, Materials Group cited "net benefit of pricing and raw material costs, including raw material re-engineering," consolidated gross margin expanded 80bps YoY to 29.6%, and adjusted operating margin expanded 70bps to 13.6% — all inconsistent with a materially negative price-cost dynamic.
Resolved positively
Walmart food rollout cadence disclosure — Press release does not quantify Walmart-specific contribution or provide store count updates. Transcript will need to clarify H2 IL contribution cadence.
Continue monitoring
Second named grocery customer — No new customer named in the press release.
Continue monitoring
Solutions Group margin recovery — Solutions Group adjusted operating margin recovered to 11.5%, up 150bps YoY from 10.0%. Combined with a swing to +2.6% organic growth and apparel up high single digits, this is a clean recovery that eases the H2 consolidated margin math.
Resolved positively
Restructuring savings flowing through ($55M+, primarily H2) — Press release discloses approximately $34M in H1 pre-tax savings realized (against $34M in H1 charges), on track with the >$55M full-year expectation from prior guidance.
Resolved positively

What to watch into next quarter

Q3 FY2026 organic sales sustaining above 5%: A 7.6% organic print is now the bar. A Q3 print above 5% would confirm base-business inflection is durable, not a one-quarter pre-buy-reversal echo. A print back below 3% would reintroduce the pre-buy volatility interpretation and force a reassessment of the Q2 quality.

Implied H2 FY2026 EPS run-rate vs. FY guide: With H1 adjusted EPS at $5.36, the $10.00-$10.30 FY guide implies H2 EPS of just $4.64-$4.94 — roughly $2.32-$2.47 per quarter, well below the Q2 print. Either management is deliberately sandbagging H2, or they see genuine sequential deceleration coming. The Q3 print will resolve which.

FY2026 adjusted EPS guide raise timing: If management does not raise the FY guide at Q3 despite a Q2 beat of this magnitude, the market will start to price in H2 disappointment. The $10.00-$10.30 range should either move up at Q3 or come with an explicit H2 caution.

Solutions Group return to positive reported YoY growth: Q2's -0.5% reported (but +2.6% organic) is a meaningful narrowing. Positive reported YoY in Q3, with apparel continuing at high single digits, would confirm the recovery thesis is durable.

Materials Group organic sustainability: Q2's +9.7% organic came with base categories up low double digits — a strong figure that could reflect some pre-buy dynamics. Watch Q3 for whether base holds double-digit organic or reverts.

Walmart food rollout metrics: Store count, category scope, and any quantified Q3 revenue contribution. This remains the H2 IL bull-case anchor from Q1 and needs concrete disclosure to sustain the IL narrative.

Sources

  1. Avery Dennison Q2 FY2026 Press Release (Form 8-K Exhibit 99.1): https://www.sec.gov/Archives/edgar/data/8818/000000881826000127/ex9918k7-30x26.htm
  2. Avery Dennison Q1 FY2026 brief (Tapebrief) for prior-quarter watch list and guidance baseline
  3. Avery Dennison Q4 FY2025, Q3 FY2025, and Q2 FY2025 briefs (Tapebrief) for multi-quarter arc

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