OSI Systems, Inc. (NASDAQ: OSIS) reported higher full-year revenue and earnings for fiscal 2026, supported by stronger operating cash flow and a growing backlog, even as geopolitical disruptions in the Middle East affected the timing of some deliveries during the fourth quarter.
The security and technology systems company reported fiscal-year revenue of $1.786 billion, up 4% from $1.713 billion in fiscal 2025. Fourth-quarter revenue, however, declined 4% year over year to $484.1 million from $505.0 million.
OSI Systems said the quarterly decline was partly linked to delivery delays caused by conflicts in the Middle East. The company said the affected orders were not cancelled and remain in its backlog under revised delivery schedules.
GAAP diluted earnings per share for the fourth quarter rose 8% to $3.27, compared with $3.03 a year earlier. On a non-GAAP basis, diluted EPS increased 17% to $3.78 from $3.24.
For the full fiscal year, GAAP diluted EPS increased 3% to $8.95 from $8.71, while non-GAAP diluted EPS rose 11% to $10.35 from $9.36.
Operating cash flow also strengthened considerably. Cash provided by operating activities reached $275.9 million for fiscal 2026, compared with $97.6 million a year earlier. Capital expenditure increased to $30.6 million from $23.8 million.
The company ended the year with approximately $1.9 billion in backlog, compared with $1.8 billion at the end of fiscal 2025. Management said bookings across its three operating divisions contributed to the increase and provide visibility into future revenue.
“Fiscal 2026 was a strong year for the Company,” said Ajay Mehra, President and CEO of OSI Systems. He cited record fourth-quarter non-GAAP EPS and operating cash flow, while noting that Middle East-related revenue headwinds shifted the timing of planned deliveries.
Security Division Faces Delivery Delays
OSI Systems said its Security division continued to deliver strong profitability, cash generation and bookings during the fourth quarter despite disruptions affecting revenue.
Mehra said underlying demand remained encouraging and stressed that the delayed deliveries had not been cancelled. The orders remain part of the company’s backlog, with delivery schedules adjusted.
The division enters fiscal 2027 with a substantial backlog, a broad opportunity pipeline and recent programme wins, according to the company.
Optoelectronics and Healthcare Improve
The Optoelectronics and Manufacturing division reported fourth-quarter revenue growth of about 5% year over year. OSI Systems attributed the performance to broad demand across aerospace, defense, healthcare, technology and industrial markets.
The company highlighted its engineered products, precision manufacturing capabilities and global operating footprint as factors supporting demand in the division.
The Healthcare division also delivered a stronger quarter. Revenue increased about 5% year over year, while adjusted operating margin improved to 10%, compared with 1% in the same quarter a year earlier.
OSI Systems attributed the improvement to operational measures implemented during fiscal 2026. The company said it plans to focus on expanding its installed base, developing clinical solutions and advancing products aimed at healthcare providers.
Share Repurchases and Balance Sheet
OSI Systems returned significant capital to shareholders during the quarter, repurchasing 564,880 shares for $123.6 million.
The company finished fiscal 2026 with $359.8 million in cash and cash equivalents, up sharply from $106.4 million a year earlier.
During the year, OSI Systems refinanced and expanded its long-term debt, extended maturities and increased financial flexibility for growth initiatives. It also reduced bank lines of credit to zero while continuing its share repurchase programme.
Fiscal 2027 Guidance
For fiscal 2027, OSI Systems expects revenue between $1.875 billion and $1.930 billion, representing year-over-year growth of approximately 5% to 8.1%.
The company forecasts non-GAAP diluted EPS of $11.13 to $11.49, implying growth of roughly 7.5% to 11%.
OSI Systems cautioned that actual results may differ from its guidance because of factors including the timing of deliveries, acquisitions and other variables affecting its operating performance.
The company is providing its fiscal 2027 EPS outlook on a non-GAAP basis only. It said it cannot provide a meaningful forward-looking reconciliation to GAAP EPS because the timing and value of certain adjustments, including acquisition-related and other non-recurring costs, cannot be reliably forecast.
The guidance nevertheless points to another year of expected growth as OSI Systems seeks to convert its backlog and opportunity pipeline into revenue while maintaining its focus on cash generation and shareholder returns.
