Cognex at Baird Conference: Strategic Growth and AI Focus

On Tuesday, 11 November 2025, Cognex Corporation (NASDAQ:CGNX) presented at the Baird 55th Annual Global Industrial Conference, offering insights into its strategic direction. President and CEO Matt Moschner highlighted the company's focus on AI-driven machine vision and the impact of macroeconomic factors on its operations. While Cognex is optimistic about its growth prospects, challenges such as competitive pressures and economic uncertainties remain.

Key Takeaways

• Cognex plans to leverage AI to enhance product development and operational efficiency.
• The company targets a return to a 20-30% adjusted EBITDA margin.
• Logistics, automotive, and packaging are key growth markets.
• Government incentives are expected to support manufacturing investments.
• Cognex is exploring new markets such as aerospace, defense, and data centers.

Financial Results

• Q3 2023 Performance:

- Achieved 13% "apples to apples" growth after adjustments.

• Margin Objectives:

- Aims to return to 20-30% adjusted EBITDA.

- Historically averaged 28% adjusted EBITDA over the last decade.

• Future Expectations:

- Anticipates mid-20s to high-20s operating margins through cost management and growth.

- Q4 sales are expected to decline in line with seasonal trends.

Operational Updates

• Key End Markets:

- Logistics remains the largest and fastest-growing sector.

- Automotive market shows signs of stabilization.

- Packaging sector benefits from consumer goods and healthcare investments.

• Logistics:

- Seven consecutive quarters of double-digit growth.

- Expansion into 2D and 3D visual inspection.

• AI Investments:

- Focus on AI-driven visual inspection tools for defect identification.

- Enhancements aimed at improving user experience.

• Sales Force and Hardware Engineering:

- Increased direct sales force to target regional manufacturers.

- Designs proprietary hardware optimized for AI software performance.

Future Outlook

• End Market Optimism:

- Positive outlook across key markets for the coming year.

• Government Incentives:

- Anticipates benefits from incentives like the CHIPS Act, though timelines vary.

• Nascent Markets:

- Exploring growth opportunities in aerospace, defense, and data centers.

• Strategic Focus:

- Emphasis on cost management and growth to improve margins.

- Internal AI applications targeted at efficiency improvements.

Q&A Highlights

• Government Incentives Impact:

- Expected to aid domestic manufacturing, but timelines differ by sector.

• Logistics Growth:

- Driven by enhanced productivity in existing facilities.

• AI Leadership:

- Cognex claims a leading position in AI, focusing on transforming product experiences.

• Hardware Engineering:

- Designs hardware specifically for software requirements.

• Internal AI Applications:

- Aiming to use AI internally to boost margin improvements.

Cognex's detailed strategies and market insights provide a comprehensive view of its future direction. For more information, refer to the full transcript below.

Full transcript - Baird 55th Annual Global Industrial Conference:

Rob Mason, Senior Analyst, Bayer: Good afternoon. We'll go ahead and get started, and thank you for joining us for Cognex's presentation. I'm Rob Mason, the Senior Analyst at Bayer that covers advanced industrial technology, of which Cognex has long been a pillar of our coverage as a leading provider of machine vision and ID reading solutions in the industrial sector. I'm very glad to have Matt Moschner, who's President and CEO of Cognex, with us today. We're going to be able to take your questions, so feel free to send those up. We'll probably just have you raise your hand as well. I think, Matt, we'll just kind of dive right into Q&A, but maybe if you have any opening remarks, just to level set us.

Matt Moschner, President and CEO, Cognex: Yeah, sure. Maybe just a brief introduction. So, Matt Moschner, I assume the role of President and CEO July 1, succeeding Robert Willett, who led the business for 17 years. Prior to that, our founder, Dr. Bob Shillman. We're a 44-year-old technology leader in the field of industrial machine vision, and we are going through, along with the rest of our industry, sort of a generational shift in technology. I think now is, it couldn't be a more exciting time to be involved with the business. We have ambitious growth plans. We have a balance sheet and a P&L to support those growth plans, and so I'm very happy to be with you all today.

Rob Mason, Senior Analyst, Bayer: Excellent. Maybe just rewind just a little bit. We just wrapped up the third quarter, 13% apples to apples growth, little noise around some of the adjustments. It was all good, but 13%, strong number, a lot of momentum in your logistics business, consumer electronics also growing, packaging growing.

Matt Moschner, President and CEO, Cognex: Absolutely, yeah.

Rob Mason, Senior Analyst, Bayer: Automotive, maybe not so much, but the fourth quarter outlook seemed to suggest kind of normal seasonality as well. Some normalcy maybe in the business that we're calling out. I guess, and that does assume that sales will be down a high single-digit kind of quarter to quarter on a sequential basis.

Matt Moschner, President and CEO, Cognex: Sequential, yeah.

Rob Mason, Senior Analyst, Bayer: I guess maybe just as you go through those end markets, kind of give us a flavor for what you're seeing in kind of demand at the current point.

Matt Moschner, President and CEO, Cognex: Yeah, happy to. We define five key end markets for the business. The largest and fastest growing at the moment is logistics, warehouse automation. Maybe it's helpful to just know what is that. We define four subsegments in logistics: retail, so this is retail distribution. This is working with brands like Walmart, Target, Kohl's, TJX to ship their products directly to consumers and/or their stores where they would own and operate their own fulfillment centers, and they would use Cognex technology to do traceability and other vision inspections. That's a big part. The second is e-commerce. We've been riding the wave of the transition to e-commerce fulfillment the last many years. This is the Amazons of the world, the Coupangs in Korea, the Flipkarts, the Temus, the Sheins, in the area of fast fashion.

That's been a great grower for us over the last several years. A couple of new segments within logistics: airports automation, where we have great technology as a lot of the world's airports look to modernize and largely automate. Deploying Cognex vision inspection and barcode reading technology, that's been a good growth driver for us. Lastly, a market we call parcels. The legacy parcel and postal players around USPS, UPS, FedEx, DHL, relatively new market where we have less share. Logistics being our largest end market, we're about 10 years into developing technology for those customers, and it really feels like we're hitting our stride. We have good share with the leading providers. The investments in R&D that we've been making are paying off, and I still see tremendous white space for growth.

The biggest area, I would say, is really taking what is today mostly about reading barcodes. If you go to a modern warehouse and you see a lot of yellow cameras, that's Cognex. Those devices are still largely using the pictures to read barcodes, and we do that better than anyone else. There's a huge opportunity for us to do 2D and 3D visual inspection in addition to reading barcodes. We launched a product just before Q3 called the SLX. What is that? It's fundamentally about bringing our latest generation AI inspection tools to that market. AI vision is very well suited for logistics applications. If anyone that's been in a warehouse or ordered anything online, what makes the logistics market such an interesting one for a machine vision company is the sheer variety.

I think the statistic is a typical Amazon fulfillment center has 9 million items, 3 million SKUs. Think about just the sheer variety that a system has to perceive: different shapes, sizes, surface textures. AI tools, which we're heavily invested in, have been a huge unlock for us. I think logistics has been a good grower for us: seven consecutive quarters of double-digit growth in logistics, and I think it should continue, and we expect it to heading into next year, and we have great customer relations there. Automotive, second largest end market for Cognex. You can think of machine vision has been sold into the automotive vertical for over a decade, doing quality inspection to the assembly of the mechanical systems, the electrical systems of a car.

Has, over the last couple of years, been probably the biggest drag on growth for the company on the heels of the EV cycle that kind of was and then was not. A lot of the geopolitical uncertainty surrounding where vehicles are made and really what the platform of the future is. I remain optimistic for the automotive sector heading into next year. As we said in our Q3, we are seeing we called sort of the bottom of automotive. We are seeing very much that stabilize and even return to growth in North America. Asia, I would say the one area where we are still a bit cautious on our automotive growth is in Europe. I can go into why. The next would be packaging. We define packaging as a vertical which is really fast-moving consumer goods, sort of consumer products and healthcare together. We call it packaging.

Consumer goods really kind of driven by consumer demand, and I think we're all sort of attuned to some of the macroeconomic uncertainty around consumer budgets and consumer buying behaviors. A largely under-penetrated market when it comes to the technology that we produce, and we've made big investments in our sales channel as a way to drive penetration and drive growth in consumer products. In healthcare, which is the other side of packaging for us, really riding the wave of a lot of the manufacturing investments around some of the blockbuster drugs like the GLP-1s that we're seeing today. As there are more of those products available, and on top of that, as the push to relocate and even domesticate the production of those next generation of pharmaceuticals, Cognex is very much involved with the mass production in that sector.

That's our third packaging, and we expect growth in both consumer goods and healthcare to carry into next year. Advanced semiconductor manufacturing, that is the next market vertical that we participate in, have for many, many decades. Actually, the origin of the company was in advanced semiconductor. We work with the leading machine builders and OEMs that service the large fabs and packaging companies. I think we're all aware of the supercycle that we're in the middle of, largely driven by advanced AI chipsets, associated memory, and a lot of the capacity being built out not just in Taiwan or China, but also in the US and in other parts of Asia and Europe. Cognex is reaping the benefits of those buildouts.

There are several other markets that we're keeping a close eye on that are maybe more nascent for us today that I would call out. Aerospace and defense, not a huge market for us, but one that we see a lot of investment going into at the moment that we're really thinking hard about. The other would be data centers, the large infrastructure investments going into data centers, and what is the role of automation both in the assembly process of the servers, the server racks, as well as the ongoing automation of maintenance for those data centers. You put that together, and for sure there's a lot of uncertainty as we look into 2026, and I think we've articulated that well, but also quite a bit of optimism across those end markets as we look into next year.

Rob Mason, Senior Analyst, Bayer: I want to dig into those markets a little further. Maybe just before we do so, again, the current administration's put a lot of plans in place to try to incentivize more capital investment, more manufacturing investment. How do you think that starts to manifest? Is it starting to manifest? Can we see it anywhere, or can you see it anywhere in your order funnel yet? If not, maybe what's the timeline that your customers are talking about?

Matt Moschner, President and CEO, Cognex: Yeah, I would rewind even to the previous administration as well that placed quite a bit of an emphasis on domesticating semiconductor manufacturing through things like the CHIPS Act. Of course, this administration has done a really nice job to create incentives in a business environment where investing in domestic manufacturing makes sense as well. We, of course, are participating in that. The thing I would say is a lot of these plans are multi-year, where a lot of the announcements you would have seen in new facilities and new capacity in the US in manufacturing across those verticals could take multiple years, and we are working with those manufacturers in terms of what the role of automation and what the role of machine vision is in those plans. Yeah, is it a tailwind? I think it is.

Exactly what the time window is between policy to investment announcements to build out facilities to go live in operations, it varies by sector.

Rob Mason, Senior Analyst, Bayer: Yeah. Some of, I think, of your packaging business in particular, but broader factory automation may touch smaller enterprises. That's where you're also trying to penetrate with a new sales approach. Are you seeing any, do the tax incentives, near-term accelerated depreciation, or is any of that starting to resonate with those customers, do you think, smaller ones?

Matt Moschner, President and CEO, Cognex: We haven't heard those new tax programs necessarily tipping the scale on whether they would or would not choose machine vision or automation in their production facilities. I wouldn't call that out specifically. For sure, packaging and specifically consumer products has benefited from really two things. One, with the advent of AI in our products, and that's not a recent phenomenon. We've been working on that for almost 10 years. It has definitely reduced the complexity and upfront cost to deploy machine vision. The customer segment in the market that has likely benefited the most from that are our packaging customers, specifically consumer goods players who tend to be smaller, more regional manufacturers of whatever that is, a foodstuff, a consumable product like a razor blade or a shampoo bottle.

As the technology has gotten easier to use, the ROI for them has improved, and we're seeing penetration in consumer goods accelerate. Couple that with, as you mentioned, investments we've made in our own Salesforce. We largely sell our products through a direct Salesforce, and we have hundreds of Cognex salespeople promoting the benefits of machine vision around the world. We've increased that organization substantially in recent years, really to reach this cohort of smaller regional manufacturing players that I think are disproportionately in the consumer goods arena. You put those two things together, a product that is easier to use and faster to deploy with a sales organization that is now more capable of reaching them. I think we're seeing a lot of benefit in that part of our business.

Rob Mason, Senior Analyst, Bayer: Yeah. Let's go back to logistics real quick. Again, you talked about seven quarters of double-digit growth there. That's in the context of maybe when greenfield investment has been lower as well. Obviously, a lot of brownfield investment happening. To kind of sustain that double-digit growth, what are you seeing in the brownfield arena? Is it the uptake of more machine vision applications, or do we need the greenfield activity to start to elevate?

Matt Moschner, President and CEO, Cognex: Yeah, I don't think you need the greenfield activity. The way I'd characterize it is a big portion of our growth in logistics from, say, 2017 to 2021 was mostly funded through new capacity. These are new facilities. You all have seen them spring up next to the side of the road, big boxes that are either 3PLs, ECOM, or something else. That was maybe the first wave of growth. You're right in saying as the capacity buildout trend kind of subsided post-COVID, a lot of the focus was on how do we make the facilities that we have much more productive. That's where we've gone to work and been very successful driving penetration of vision and automation into those existing facilities.

I would say today it is a lot of traceability and putting barcode reading scan points in more places to get better fidelity on where that item is in the building. For sure, the second piece of that is adoption of 2D and 3D vision for the purposes of inspecting for damage, for mis-sortations, for hazardous labels, for human-readable marks. There is a variety of visual inspections our customers and warehouse automation would like to do. We now have the technology to do it, and you are seeing good penetration there. On the 3D vision side, which is really about measurement, if 2D is about inspection, 3D is really more about measurement, there has been increased demand there really on the heels of tariffs. A tariff really drives demand for knowing more precisely the dimensions and weight of the thing that is either coming into your facility or leaving your facility.

We're seeing increased interest and demand from customers for weights and measurements as well, which we're suited to deliver.

Rob Mason, Senior Analyst, Bayer: Would you make any kind of regional distinction between the logistics growth? Has it been North America-centric, or where are the other regions of the world in their adoption?

Matt Moschner, President and CEO, Cognex: Yeah, I really wouldn't. Our logistics business is relatively more concentrated in North America. That's where I would say we see more maturity, particularly in e-commerce, a large player out in Seattle that has been driving that, and maybe in retail distribution as well. We have a great growing business in Europe, very sophisticated players across those four sectors. We are very present in Asia as well. We've been servicing logistics in China for over a decade, Japan, Korea, in the ASEAN region. I was just in India. They have big ambitions to grow domestically their own fulfillment and warehousing network, both for retail distribution and e-commerce. Maybe on a relative basis, the growth rates would be higher in Asia, but I think we're seeing good activity across regions.

Rob Mason, Senior Analyst, Bayer: Yeah. I kind of want to go back to just you called out aerospace defense and data centers as maybe some nascent markets that you're reviewing. What would be the insertion point for machine vision or ID reading in those applications that you're thinking about?

Matt Moschner, President and CEO, Cognex: Yeah, sure. Let's talk about each maybe separately. Aerospace and defense. These are highly engineered products where precision matters. Maybe the throughputs are relatively lower, but the cost of poor quality is extremely high. These are also highly regulated areas where traceability at a part level matters. Those are the sorts of things, the ingredients we look at when we look at a new market. Do they care about quality? Is the cost of quality high? Do they care to serialize, really understand every single component that goes into that thing? I think you have those ingredients in aerospace and defense. Machine vision systems are very well suited to solve both of those problems. Data centers is a bit interesting where if anyone's been to a modern data center, there aren't a lot of people around.

Often what we do is we're replacing some kind of a human operator with a machine vision system, trading these eyes for a machine's eyes, if you will. In data centers, really what we're targeting is given the sheer scale and pace of the buildout of these facilities, how and quality matters to have a server fail, a server rack assembled incorrectly. Really, that's a big deal. How do we participate in the entire supply chain of the electronic equipment that goes into a data center from inspecting the raw components, the boards, the servers, the server racks, the connectivity that underpins the server racks? All of that can be automated in terms of its quality assurance, if you will. You take a picture of 2D or 3D and assure that it was assembled correctly.

We're seeing novel uses of robotics in the automated assembly of these things, again, as a way to keep up with the demand. That's more on the construction side. On the operation side of a data center, there's a lot of ongoing maintenance around failed drive removal and destruction. Today, that's a very manual task where a person has to go to the rack, pull out the drive, detect what it is, and destroy it in a way that's fully traceable and documented. We're working with customers on a way to automate and drive efficiency in that process as well.

Rob Mason, Senior Analyst, Bayer: Okay. Implementation of robotics in that instance?

Matt Moschner, President and CEO, Cognex: Absolutely. Yeah. Vision as a means of enabling those automated robotic drive removal and destruction activities.

Rob Mason, Senior Analyst, Bayer: I see. I see. Consumer electronics, we did not really dive in there. That was a business that had returned to growth after a couple of depressed periods. Still, the consumer electronics market in general, smartphone market in general, not great. Kind of what is working there for Cognex right now? You talked about visual inspection. Have we gotten any more traction around those type applications in consumer electronics?

Matt Moschner, President and CEO, Cognex: Yeah. No, you're absolutely right. I think I missed that in my vertical market sweep initially. I think what we said in Q3 was we expect consumer electronics to return to growth for the first time this year for us since 2022. That is very encouraging. We said that growth is broad-based, which is really beyond just any one customer, which is also encouraging. There is a lot happening in that industry. Consumer electronics from the phone in your pocket to your earbuds, to your tablets, to your laptops, all of those things as they get manufactured and assembled, you would find Cognex vision in those assembly processes. There are a number of things that are driving growth in that sector. One, obviously, we're seeing new form factors and new device types being introduced.

Those device types, like glasses, for example, are very precisely manufactured where cost matters, quality matters, and produced in quantities of tens or even hundreds of millions. Those are the ingredients that are really ripe for machine vision to play a key role in the manufacturing process. Any substantial changes to form factors in phones, for example, would require a more substantial retooling of the machines that assemble that device. As the large providers of those smartphones and other devices consider new form factors, you'd see us participating in that transition. Technology, AI, we are doing things now around cosmetic defect inspection. I think that's maybe what you were alluding to with advanced AI methods that we couldn't do before. That's driving penetration of vision on those machines. That's very exciting.

The last thing I would say is historically, the majority of consumer devices were really made almost exclusively in mainland China. We're seeing some of those manufacturing footprints shift to other geographies for a variety of reasons: cost, geopolitics, tariffs, whatever it is, to ASEAN, to India, to other parts of Asia. As I would say, the supply chain of consumer electronics reshuffles, that creates opportunities for Cognex, for us to take share, for us to introduce new technology, for us to work with new partners, machine builders. You kind of put all three of those, or really four of those ingredients together, I think that's really underpinning the growth we're seeing in consumer electronics at the moment.

Rob Mason, Senior Analyst, Bayer: Yep. You made mention earlier just around deep learning capabilities, AI. Cognex has been on that road for quite some time. I think externally, it's difficult to assess who's winning in AI or with AI, of course. Maybe a few points around why you think you have a leadership position there. How do you demonstrate that? How does it compare? Where are your competitors in that chase, you think, relative to Cognex at this point?

Matt Moschner, President and CEO, Cognex: Yeah, it's a great question. We've been heavily invested in this new paradigm of AI-driven visual inspection for about almost 10 years, 8 to 10 years. We made two foundational acquisitions in this area. One was VD Systems, a Swiss company that was really at the forefront of industrial AI, and then SulaLab in 2020, which was a Korean company also doing excellent work here. We've also built out our own team. It really is, it's my top strategic priority. We are funding this initiative very well. It's mostly in the area of creating new tools that can do something that we've never done before, finding very hard-to-describe defects on very difficult surfaces. It's also doing things we've been able to do before much, much simpler. We're pursuing both vectors.

At the moment, we're actually trying to tackle both, kind of push the boundary of what's possible, while at the same time making a dramatically simpler experience for the user. If we can do that, that will be a huge accelerator for us, a huge accelerator for our industry. How do we measure if we're ahead or behind? That's a great question. We benchmark ourselves, and we work with customers in some cases to do that in terms of like-for-like performance of a visual inspection. More often than not, we show that we're ahead. We measure it on the % of our portfolio where an AI-based technology or method is the primary feature or function of that product. We think we're ahead on that.

We are really trying to take AI from where it is today, which is really still focused on the visual analysis task, to how can it transform the rest of the product experience? As all of us have become more savvy using prompt-based tools like GPT, how would you bring a prompt-based workflow to the setup of a machine vision system where there is still a big barrier for our customers today in deploying vision? They have to think like a vision engineer. How do you solve for that? How do you have them do their job well, which is think about the problem they are trying to solve, not have to be a vision expert? We think AI can bridge that gap for our customers, and that can act as an accelerator of adoption for machine vision across industries. That is how we think about it.

We're heavily invested. We think we're ahead. We have ways to measure that by benchmarking our product performance versus our peers. That is something we have to continue to stay focused on.

Rob Mason, Senior Analyst, Bayer: Yeah. A lot of what you just discussed relates to that's done in software.

Matt Moschner, President and CEO, Cognex: It is. Yeah.

Rob Mason, Senior Analyst, Bayer: That's viewed as one of your key competitive advantages, just the software algorithms. I think domain expertise is probably underappreciated to a degree as well. What role does the hardware engineering play in this, particularly when you talk about AI and edge?

Matt Moschner, President and CEO, Cognex: Great question. Yeah, it plays a really key role. We design in many cases our own hardware. I think when Cognex is at its best, we're deploying the world's best vision analysis software and applications within the world's best industrial hardware, embedded computing, smart vision systems. We do have our own in-house embedded systems design capabilities. We design our hardware very purposefully for the software that it will run. Our computing vendors tell us that we get more performance out of their chipsets than anyone else in the world. We know how to optimize silicon for high-performance embedded computing. That's a huge advantage for us, particularly in the world of AI where the best model far surpasses the computing of the best available embedded chipsets.

A lot of where our IP is today is taking the best frontier transformer AI model, distilling it, adding context, adding our secret sauce so that it can run on a relatively low-performing, relatively inexpensive piece of embedded hardware. We do that better than anyone else in the world. That is really important because it means we can design systems that are smaller, more cost-effective, can be put in more places. Bridging that gap from large data center scale AI to near edge or far edge, I think is what it is called, embedded systems that can run those tools is fundamentally where a lot of our IP is created today.

Rob Mason, Senior Analyst, Bayer: Yeah. Just bridging off the AI question, that was all externally customer-facing. Maybe in the limited time we have left, to kind of blend this in with margin objectives as well. How are you applying AI internally? And just speak to maybe the path you're on from a margin improvement point to the extent that can help.

Matt Moschner, President and CEO, Cognex: Yeah, great. Yeah, absolutely. So, we're very focused on getting our margins, our operating margins back into the financial framework that we put during our investor day in June where we defined an operating margin range of 20-30% adjusted EBITDA. The last couple of years, we have been underperforming versus those metrics, and we're very committed through a mixture of cost and growth initiatives to get back into that target operating range. I'm very optimistic that we will in the near term get back to the 20% or greater level. Obviously, we're going to continue to manage our costs, drive some cost efficiency programs internally, get back to growth, and get operating leverage, the mixture of those two things bringing us to the mid-20s, high 20s, and potentially beyond. Cognex, over the last 10 years, has an average adjusted EBITDA of 28%.

The last couple of years has been significantly below that, but we feel very optimistic that we can get back not just to that target range of profitability, but to the high end of it through a mixture of focused cost management and cost reductions as well as getting back to the growth story of the company.

Rob Mason, Senior Analyst, Bayer: Yep. Very good. Perfect. We're at time, so we'll stop there. There is a breakout session in the Salon A room. If you go out to your left, we can take further questions there. But thank you, Matt.

Matt Moschner, President and CEO, Cognex: Thanks everybody.

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