DAQO New Energy Q2 Earnings Call Highlights

Key Points

• Second-quarter results improved sequentially as revenue rose to $62.7 million and the net loss narrowed to $81 million, supported by resumed polysilicon sales and higher volume. However, the average selling price of $4.04 per kilogram remained below the $5.95 per kilogram production cost.
• Industry oversupply continues to pressure prices: polysilicon inventories were estimated at 500,000–600,000 tons, although Chinese policies targeting below-cost sales and inefficient capacity could improve pricing discipline. Daqo expects a stronger market environment in 2027.
• Daqo maintained substantial liquidity with no debt and approximately $1.8 billion in cash, investments and deposits. It is also investing in AIDC power infrastructure and semiconductor-grade polysilicon, with potential AIDC revenue growth expected from 2028 to 2030.

DAQO New Energy NYSE: DQ reported a narrower second-quarter loss as it resumed normal polysilicon sales in June, though pricing remained below production costs amid weak solar demand and elevated industry inventories.

Revenue for the second quarter of 2026 was $62.7 million, up from $26.7 million in the first quarter, primarily reflecting higher sales volume. Revenue was down from $75 million in the year-ago period. Net loss attributable to shareholders narrowed sequentially to $81 million, or $1.20 per basic ADS, from $88 million, or $1.31 per ADS, in the first quarter. The company reported a net loss of $76.5 million, or $1.14 per ADS, in the second quarter of 2025.

Sales Resumption Supports Sequential Improvement

Chairman and CEO Xiang Xu, whose remarks were translated by Deputy CEO Anita Zhu, said cautious sentiment across the solar photovoltaic industry persisted during the quarter because of soft domestic demand and high inventories. Those conditions pushed prices lower throughout the solar supply chain.

Daqo resumed sales in June after initially avoiding below-cost transactions under Chinese industry self-regulation guidelines. The company changed to a more market-oriented sales and pricing approach after what management described as an extended period without clear policy updates.

Polysilicon sales volume rose to 15,190 metric tons from 4,482 metric tons in the prior quarter. However, the average selling price declined to $4.04 per kilogram, below the company’s reported production cost of $5.95 per kilogram. Cash cost edged down 0.4% sequentially to $4.57 per kilogram.

Second-quarter polysilicon production totaled 43,675 metric tons, exceeding the company’s guidance range of 35,000 to 40,000 metric tons. Nameplate capacity utilization was approximately 57% across its two polysilicon facilities.

The company projected third-quarter polysilicon production of 40,000 to 45,000 metric tons and full-year output of 160,000 to 180,000 metric tons.

Losses Narrow as Inventory Charges Decline

CFO Ming Yang said gross loss was $82.7 million, compared with a gross loss of $139 million in the first quarter. Gross margin improved to negative 132% from negative 520% sequentially, aided by lower inventory impairment provisions.

Inventory impairment provisions were $55.7 million during the second quarter, down from $98.9 million in the prior quarter. Operating loss narrowed to $98 million from $160.8 million, while EBITDA improved to a negative $29 million from a negative $83 million.

Research and development expense increased to $1.6 million from $800,000 in the first quarter, which Yang said was primarily related to the development of next-generation energy solutions for artificial intelligence data center, or AIDC, power infrastructure.

As of June 30, the company reported $555 million in cash and cash equivalents, $215 million in short-term investments, $71.7 million in notes receivable, $51 million in held-to-maturity investments and $928.9 million in fixed-term deposits within one year. Management emphasized that the company maintained zero debt and substantial liquidity during the downturn.

Management Sees Policy Support for Pricing Discipline

Management said polysilicon prices fell from roughly RMB35 to RMB37 per kilogram at the end of the first quarter to RMB31 to RMB34 per kilogram at the end of the second quarter. Xu said the industry held an estimated 500,000 to 600,000 tons of polysilicon inventory, which could delay a broader recovery.

Still, executives pointed to Chinese measures intended to curb low-price competition and remove inefficient capacity. New energy-consumption standards for polysilicon will take effect Jan. 1, 2027, requiring manufacturers exceeding 6.3 kilograms of coal equivalent per kilogram of output to complete corrective improvements or risk shutdowns.

Daqo and seven other polysilicon manufacturers signed an Aug. 6 initiative to eliminate below-cost sales and comply with energy-consumption standards. Management said spot prices had stabilized and forward prices had risen more than 10% from recent lows. During the question-and-answer session, Yang said some low-volume transactions were occurring around RMB40 per kilogram, while the industry’s average production cost under a China Photovoltaic Industry Association model was estimated near RMB50 per kilogram.

Xu said Daqo’s priority is to avoid selling below cost while seeking reasonable sales prices. He said the company expects higher-cost producers and companies with weaker cash positions to face pressure over the next six to 18 months, and management expects a better market environment in 2027.

AIDC Expansion and Semiconductor Polysilicon Plans

Daqo is also pursuing AIDC power infrastructure as a second growth area beyond solar polysilicon. The company announced an investment agreement in June for a manufacturing base focused on energy storage systems, solid-state transformers and solid-state circuit breakers, including equipment supporting high-voltage direct-current architectures such as 800V DC systems.

Management said the project contemplates RMB6 billion of total investment, but only the first RMB2 billion phase is currently committed. The company expects to spend roughly $30 million to $40 million this year, with the remaining first-phase investment occurring over the following two years.

Executives said an R&D team has been established in Shanghai and that an initial product prototype is expected by year-end. Management characterized 2026 and 2027 as preparation and market-introduction years, with a potential revenue ramp from 2028 through 2030.

Xu also provided an update on the company’s semiconductor polysilicon initiative, for which it has invested approximately RMB1.2 billion including land, equipment and facilities. Customer qualification has taken longer than expected, management said, but the company remains engaged in trial production and qualification efforts.

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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