DAQO New Energy NYSE: DQ reported first-quarter 2026 results amid what management described as continued industry weakness, with seasonal softness, high inventory levels, and sustained overcapacity pressuring polysilicon pricing.
Management cites cautious demand, overcapacity and below-cost market pricing
Deputy CEO Anita Zhu said sentiment across the solar PV industry “remained cautious” in the first quarter due to seasonal factors and elevated inventories, and was “further exacerbated by rising module prices” linked to higher silver, aluminum and glass costs. She added that geopolitical tensions in the Middle East also weighed on demand in that region.
Zhu said persistent industry overcapacity continued to push polysilicon prices lower, contributing to quarterly operating and net losses. She noted that Daqo maintained “a robust and healthy balance sheet with zero debt.”
Liquidity and operations: 57% utilization, production above guidance, sales curtailed
Zhu highlighted the company’s liquidity position as of March 31, 2026, including cash, investments and deposits that she said totaled about $2.0 billion in assets convertible to cash. She listed the components as: cash balance of $559.4 million, short-term investments of $288.3 million, bank notes receivable of $20.8 million, held-to-maturity investments of $50.3 million, and fixed-term bank deposits of $1.1 billion.
Operationally, Zhu said Daqo ran its main capacity utilization rate at approximately 57% during the quarter. Total production from its two polysilicon facilities was 43,402 metric tons, above the company’s guidance range of 35,000 to 40,000 metric tons.
With market prices falling below production cost, Zhu said the company followed Chinese authority self-regulation guidelines and “declin[ed] to engage in below-cost sales,” taking a “disciplined wait-and-see approach” while awaiting further implementation of national anti-monopoly policies previously discussed.
As a result, sales volume fell to 4,482 metric tons, while average selling price increased 2.3% sequentially to $5.96 per kilogram, according to Zhu.
Pricing and policy watch: authorities signal stronger governance, June timeline discussed
Zhu said N-type polysilicon prices fell from RMB 48–RMB 55 per kilogram at the end of 2025 to RMB 35–RMB 37 per kilogram by the end of the first quarter. She added that prices entering the second quarter were showing signs of “bottoming out,” with weekly declines easing.
She also pointed to April 17, when multiple Chinese agencies—including the Ministry of Industry and Information Technology, the National Development and Reform Commission, the State Administration for Market Regulation, and the National Energy Administration—held a symposium focused on regulating competition in the solar PV sector. Zhu said the meeting reinforced the need to address “irrational competition” and curb “destructive involution,” and that authorities were required to deploy measures spanning capacity regulation, standards guidance, innovation-driven development, price law enforcement, quality supervision, M&A, and intellectual property protection.
During Q&A, CFO Ming Yang said the government was working on a new cost model “consistent across all the manufacturers,” covering inputs such as materials, depreciation, and labor. He said the company’s understanding was that a new round of cost determination could come out “in the next two months or so,” and later added, “Our understanding, it should be around June.” Yang said an updated price guidance could follow once the cost determination is completed.
Asked what enforcement could look like, Yang said penalties could be “fairly significant,” and added that in a worst-case scenario authorities “could revoke your manufacturing license, or shut down your electricity,” though he emphasized the company had not yet seen enforcement actions take place.
Yang also discussed potential price scenarios. Without enforcement, he said the cash price range could be RMB 35–RMB 40 per kilogram, while with price guidance it “should be in the range of RMB 40–RMB 45 or maybe even higher,” noting those figures were inclusive of VAT.
Financial results: revenue dropped sharply, inventory impairment weighed on margins
CFO Ming Yang reported revenue of RMB 26.7 million, down from RMB 221.7 million in the fourth quarter of 2025 and RMB 124.0 million in the first quarter of 2025. He attributed the sequential decline primarily to lower sales volume as the company reduced sales “in light of the relatively low selling prices.”
Gross loss was RMB 139.4 million, compared with gross profit of RMB 15.4 million in the prior quarter and gross loss of RMB 81.5 million a year earlier. Gross margin was -521%, compared with 7% in the fourth quarter of 2025 and -65.8% in the first quarter of 2025. Yang said the sequential decline was mainly due to a higher provision for inventory impairment.
Cost of revenue included RMB 98.4 million of inventory impairment provisions, which Yang said was driven by end-of-quarter market polysilicon pricing below production cost.
- SG&A: RMB 12.2 million, down from RMB 18.7 million in Q4 2025 and RMB 35.0 million in Q1 2025. Yang said the year-over-year decline reflected, in part, RMB 18.6 million of non-cash share-based compensation recorded in Q1 2025.
- R&D: RMB 0.8 million, compared with RMB 0.7 million in Q4 2025 and RMB 0.5 million in Q1 2025.
- Operating loss: RMB 150.8 million, versus RMB 20.9 million in Q4 2025 and RMB 114.0 million in Q1 2025.
- Net loss attributable to shareholders: RMB 88.4 million, versus RMB 7.3 million in Q4 2025 and RMB 71.8 million in Q1 2025.
- Loss per basic ADS: RMB 1.31, versus RMB 0.11 in Q4 2025 and RMB 1.07 in Q1 2025.
- EBITDA: RMB -83.0 million, compared with RMB 52.5 million in Q4 2025 and RMB -48.0 million in Q1 2025.
Guidance and strategy: production outlook maintained; utilization tied to policy enforcement
For the second quarter of 2026, Zhu said the company expects total polysilicon production of approximately 35,000 to 40,000 metric tons. For full-year 2026, she said Daqo expects production volume to remain in the range of 140,000 to 170,000 metric tons.
On utilization, Yang told analysts the company planned to operate at roughly 50% to 55% in the near term, saying Daqo was maintaining utilization because it was running at a relatively optimal operating condition for quality and cost. However, he said the approach could change depending on whether authorities enforce the price law.
In a scenario where policy enforcement does not materialize and manufacturers continue selling below cost, Yang said Daqo would lower utilization and “start to sell at close to market pricing,” adding that the company’s balance sheet position could allow it to endure a prolonged downturn. Conversely, if government enforcement leads manufacturers to sell above cost, he said Daqo would be positioned to maintain utilization and regain market share.
On costs, Yang said the company expected cash costs in the second quarter to be in line in renminbi terms and “trending slightly lower over the next quarters,” describing a “fairly steady cost structure.”
About DAQO New Energy NYSE: DQ
DAQO New Energy Corp. operates as a leading manufacturer of high-purity polysilicon and monocrystalline silicon wafers for the global solar photovoltaic industry. The company focuses on serving module makers and integrated solar producers with critical upstream materials, applying proprietary technologies and optimized processes to achieve high product purity and consistently low production costs. Its core offerings include solar-grade polysilicon—used in the ingot casting and wafer slicing stages—and premium mono-silicon wafers, which are a key input for high-efficiency solar cell production.
Founded in the late 2000s and listed on the New York Stock Exchange in 2010, DAQO New Energy established its first polysilicon facility in China's Xinjiang Uygur Autonomous Region.
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