This probably will surprise most people reading this, but the robotics space overall faced one of its most challenging years in recent memory. There was 14 months of consecutive negative PMI in the US and slower-than-expected growth in China, per Schwab’s Market Update on June 4th. The industry suffered a 2% decline in revenue and 14% decline in EPS.
Brighter Earnings Picture Ahead
As Q1 earnings season wraps up, it’s clear that robotics is at a critical juncture. Our earnings analysis suggests a tipping point towards recovery in core markets during the second half of the year. This potentially could lead to an unprecedented growth cycle ahead.
According to FactSet consensus estimates on a weighted average basis, constituents in the ROBO Global Robotics & Automation Index were expected in early June to see 4.6% sales growth and 6.8% EPS growth in 2024. This would ramp up to 10.1% sales and 23.4% EPS growth in 2025.
AI is leveling up the ability to train robots across increasingly complex tasks. The timeline for home robots is still a ways out. However, we’ll start to see more next-gen “iRobots” coming from big tech, private markets, or crossover JVs and collaborations between traditional robotics companies.
Strong Services Robot Market
The Services Robots Market has the potential to eclipse the entire existing industrial robotics segment. This presents a massive total addressable market (TAM) lift:
- Diverse Applications: Service robots are designed to assist and interact with humans in many settings. This includes healthcare, hospitality, retail, education, and entertainment. As these industries continue to adopt automation and seek ways to enhance efficiency and customer experience, the demand for service robots will likely skyrocket.
- Demographic Shifts: Aging populations in developed countries will drive the need for service robots in healthcare and eldercare. These robots can assist with tasks such as medication reminders, mobility support, and companionship, allowing older adults to maintain their independence and quality of life.
While there are not many pure-play companies in this newer area, traditional robotics companies like Fanuc and Teradyne are well-positioned. Both are constituents in the robotics index. Teradyne also has exposure to the chip market through specialized chip testing products and services around quality and performance standards.
A Global Robotics Story
While the U.S. market remains critical, robotics is also becoming a more global story now. The trend is diversifying well beyond China into India, Vietnam, Mexico, and other countries.
For some perspective – over 400 million people worldwide work in manufacturing, accounting for 10-12% of GDP. We think companies that are helping bridge newer technologies and help orchestrate workflows and design, like Rockwell Automation and ABB, are in an interesting position right now to help transition to a more sustainable path forward across industrials and logistics. The ROBO Global Robotics & Automation Index is tracked by the ROBO Global Robotics & Automation ETF (ROBO ). ROBO was the first robotics ETF and currently has $1.2 billion in assets.
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