Itron, which sells smart electricity, gas and water meters and the radio networks that carry their readings back to utilities, told investors on 28 July that its gross margin had reached the highest level in the company's history. Revenue fell for the fourth quarter running.

That combination is the whole story. Gross margin hit 41.0% on a reported basis in the second quarter, up from 34.1% two years earlier, so gross profit rose 3.1% to $230.6m even as revenue dropped 7.2% to $562.9m. Adjusted earnings of $1.59 a share beat consensus by 23%, and the shares rose about 20% in the session. Management raised full-year earnings guidance to $6.30–$6.50 a share from $5.75–$6.25 while narrowing the revenue range to $2.37–$2.41bn — roughly 1% growth. It was an earnings raise, not a demand raise.

Where the margin comes from

Itron is the incumbent in advanced metering infrastructure, holding roughly 34% of the North American market against Landis+Gyr's 32%, and about 63% of installed network endpoints. That installed base is the asset. Competition in the industry has moved away from commoditized meter hardware toward cellular connectivity, edge analytics and managed services carrying higher lifetime margins — which is precisely the shape of Itron's quarter. Its Outcomes software segment grew 13% with annual recurring revenue up 21% to $417m, while Networked Solutions revenue fell 17% on deployment timing and meter hardware slipped 3%. A new resiliency unit added $16m at roughly 75% gross margin. Licensed applications reached 28 million endpoints, more than half again the prior year, with platform expansions at the Los Angeles Department of Water and Power and the Sacramento Municipal Utility District.

Management says the 2027 company margin target has already been met and that the gain is structural mix rather than volume.

What the order book does not show

The demand backdrop is not in doubt. S&P Global Market Intelligence forecasts a record $1.295trn of US utility capital spending over 2026-2030, with data centers adding around 125GW of load. Itron's own examples fit: a West Coast utility deferring over $1bn of transformer upgrades through coordinated electric-vehicle charging, a Southeast utility cutting outage duration 12-15% with distributed intelligence.

None of it is in the bookings yet. Total backlog ended the quarter at $4.4bn against $4.5bn a year earlier, and second-quarter bookings of $550m against $562.9m of revenue put book-to-bill at 0.98. Operating income fell 2% and net income fell 22%. Investors are being asked to pay for a margin structure, not a volume inflection.

The price has not yet demanded much for it. Itron trades at 4.74x trailing gross profit and 4.58x forward, against 4.89x in late February and 3.93x in May, with a forward price/earnings ratio of 15.5 below its trailing 16.4, enterprise value at 9.4x EBITDA and a trailing free-cash-flow yield of 8.8%. The stock remains 20% below where it traded a year ago.

The two companies filed alongside it

Digi International, which sells cellular routers, embedded modules and console servers for connecting industrial machines, is the reverse case: revenue growth accelerated for three straight quarters to 29.0%, gross margin reached 64.8%, operating income rose 53%, and recurring revenue hit a record $191m. But its own target of $200m of that revenue by 2028 implies growth collapsing to about 2% a year after this one, much of the recent gain came from buying Jolt Software and Particle, and its data-center exposure — Opengear console servers sold to specialist cloud operators — is excluded from guidance. At 8.72x trailing gross profit, up from 6.70x six months ago against 14% gross-profit growth, and a trailing price/earnings ratio of 57.5, the multiple has run ahead of the numbers.

Montrose Environmental, an air, water and soil testing and remediation firm, renamed itself Onterris in April and now trades under the ticker ONT; price histories filed under the old symbol stop on 18 June. On the live listing the stock fell 33.8% on 6 August after second-quarter revenue dropped 20.4% to $186.7m and full-year guidance was cut roughly $80m — about $45m of pass-through work, $40m of emergency-response revenue with environmental event activity at historic lows, and $20m deferred by temporary air-permitting waivers. Margins actually improved, with the full-year EBITDA margin midpoint up 150 basis points. The board has launched a strategic review covering acquisition interest and adopted a shareholder rights plan triggering at 15% ownership.

One shared pressure links the first two. DRAM prices rose 80-90% in the first quarter as manufacturers shifted capacity to high-bandwidth memory for AI servers, and Samsung has warned the shortage will spread through mature nodes used in industrial devices. Itron says it is managing memory pricing proactively; Digi says the shortage is pushing customers to place orders early. Both statements describe the same cost arriving.

The setup

Where it stands — Itron is earning record margins on shrinking volume, with backlog and book-to-bill both pointing the other way. Would confirm — Third-quarter bookings above revenue, lifting book-to-bill over 1.0 and backlog back above $4.5bn. Would invalidate — Gross margin slipping below the roughly 40% full-year target as memory costs pass into meter builds. Watch next — Itron's third-quarter results, due late October, and Digi's fiscal fourth quarter in November. Valuation — Itron at 4.74x trailing gross profit, 4.58x forward, versus 4.89x in February; forward P/E 15.5 against trailing 16.4.