Strong Top-Line Growth
Q1 2026 revenue of $414.0M, up 15% year-over-year from $358.0M; company guides Q2 2026 mid-range revenue of $455M ±5% (highest revenue in company history), implying +22% YoY and ~+10% quarter-over-quarter growth.
Tower
· TSEM
May 13th, 2026
Summary
- Earnings Call Date:
- 2026-05-13
- Change Since:
- -0.33%
- Next Earnings Date:
- 2026-08-04
Earnings Call Sentiment
PositiveThe call presents a strong positive operational and financial performance in Q1 2026: top-line growth (+15% YoY), significant margin and profit expansion (gross profit +52% YoY; net profit +62% YoY), robust SiPho momentum (3x YoY growth) and meaningful forward visibility with $1.3B contractual 2027 commitments and $290M in prepayments. Strategic wins, multiple technology breakthroughs, capacity expansion plans and a solid balance sheet (S&P rating reaffirmed with positive outlook) further support a favorable outlook. Near-term headwinds include RF mobile softness during the 200mm→300mm transition, some fab qualification-driven utilization drag, supply constraints (indium phosphide starting material), and a higher normalized tax rate (15%–18%) after a one-time Q1 benefit. Management expects continued quarter-over-quarter revenue and margin growth and has a multi‑year CapEx plan to scale SiPho/SiGe capacity. Overall, highlights materially outweigh the lowlights, with clear revenue visibility and technology leadership balanced against manageable timing and supply risks.
Company Guidance
Management guided Q2 2026 to a mid‑range revenue of $455M ±5% (≈$432M–$478M), calling it the highest‑ever quarter and implying +22% YoY and +10% QoQ growth, and reiterated a goal of sequential revenue and margin expansion through 2026. That outlook is supported by Q1 results: revenue $414M (+15% YoY), gross profit $111M (~27% gross margin, +52% YoY), operating profit $65M (+96% YoY), net profit $65M (+62% YoY) and net margin 16% (vs. 11% in Q1‑2025), EPS $0.58 basic/$0.57 diluted. Visibility includes $1.3B of contracted SiPho revenue for 2027 (larger 2028 contracts) with ~$290M in customer prepayments, a $920M SiGe/SiPho CapEx plan (≈40% paid, remainder in 2026–27), long‑term targets of $2.8B revenue / $1.12B gross profit / $900M operating profit / $750M net profit, and a strong balance sheet (assets $3.7B, current ratio ~5.6x, equity ~$3.0B); normalized tax rate expected ~15–18%.
Material Profitability Improvement
Gross profit of $111M in Q1 2026, +52% YoY; operating profit of $65M, +96% YoY; net profit $65M, +62% YoY; net margin improved to 16% from 11% in Q1 2025.
Earnings Per Share Expansion
Q1 2026 EPS: $0.58 basic (+61% YoY) and $0.57 diluted (+63% YoY), reflecting strong bottom-line leverage to revenue and margin expansion.
Silicon Photonics Surge and Visibility
Silicon photonics (SiPho) revenue grew 3x YoY; company reports contractual customer commitments representing $1.3B in revenue for 2027 (wafers delivered in 2027) and indicates significantly larger contracted/expected volumes for 2028; $290M of SiPho customer prepayments already received and recorded as customer advances.
Technology & Product Breakthroughs and Partnerships
Multiple technology milestones achieved in Q1: all-silicon 400Gbps-per-lane Mach-Zehnder modulator (Coherent), 400Gbps-per-lane indium phosphide EAM (OpenLight), progress on thin-film lithium niobate, partnerships with Lightwave Logic, NLM Photonics, Salience Labs, Oriole Networks, and SCINTIL Photonics—demonstrating leadership across XPO/NPO/CPO and next-gen modulators.
Capacity Ramps, Yields and Utilization Strengths
First flow cycle revenue shipments from Fab 2 and Fab 7; Fab 7 achieved ~95% yield for first SiPho wafers. SiPho capacity targeted to grow ~5x from Q4 2025 wafer revenue by end of 2026. Several fabs running at healthy utilizations: Fab3 80%, Fab5 75%, Fab7 fully utilized (well above 85%), Fab9 80%.
Robust Balance Sheet and Credit Outlook
Total assets $3.7B; net fixed assets $1.5B; current assets ~$2.0B and current assets ratio ~5.6x; shareholders' equity at record $3.0B. S&P Maalot reaffirmed ilAA rating and upgraded outlook to positive (May 5, 2026).
Committed CapEx and Longer-Term Financial Targets
Announced $920M CapEx plan to expand SiPho and SiGe capacity across Israel, Newport Beach (TX) and Uozu (Japan); ~40% of CapEx already paid, remaining 60% expected through 2026–2027. Long-term model targets: $2.8B revenue, $1.12B gross profit, $900M operating profit, $750M net profit (model under active review).
Pricing and Product Mix Benefits
Company reports higher-margin mix and product pricing actions (e.g., 13% price increase on 200mm BCD), contributing to gross margin expansion (quarter moved from 20% a year ago to ~27% this quarter with a long-term model target ~39%).
Operator
Good day, and thank you for standing by. Welcome to the Tower Semiconductor First Quarter 2026 Results Conference Call. [Operator Instructions] Please be advised that this conference is being recorded. I would now like to hand the conference over to your first speaker today, Noit Levy. Please go ahead.
Noit Levi-Karoubi
Thank you. Hi, everyone, and thank you for joining us today. Welcome to Tower Semiconductor's First Quarter of 2026 Financial Results Conference Call. With us today are Mr. Russell Ellwanger, our Chief Executive Officer; and Mr. Oren Shirazi, our Chief Financial Officer. Before we begin, please note that certain statements made during today's call may be forward-looking and are subject to risks and uncertainties that could cause actual results to differ materially. These risks are detailed in our SEC filings, Form 20-F and 6-K as well as filings with the Israeli Securities Authority, all available on our website.
Tower assumes no obligation to update any such forward-looking statements. Our first quarter 2026 results are prepared in accordance with U.S. GAAP. Some that are presented may include non-GAAP financial measures as defined under SEC Regulation G. Reconciliations to GAAP figures and full explanations are provided in today's press release and financial tables. For your reference, a supporting slide deck is available on our website and integrated into this webcast. With that, I'd like to turn the call over to our CEO, Mr. Russell Ellwanger.
Russell?
Russell Ellwanger
Thank you, Noit. Hello, everybody. Thank you for joining our call today. The first quarter of 2026 was solid, providing a ...
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