Ichor NASDAQ: ICHR reported second-quarter revenue of $294.8 million, up 15% sequentially, as demand strengthened across semiconductor equipment markets and the company continued efforts to expand internal manufacturing and improve margins.
The company said isolated part shortages late in the quarter delayed recognition of some revenue until shortly after the June 26 quarter-end. Ichor said it surpassed $300 million in revenue for the 13 weeks ended July 3 and has since resolved the shortages.
Phil Barros said the company now expects a steeper demand ramp in the second half of 2026 than it forecast three months earlier. Ichor expects sequential revenue growth of more than 10% in each of the next two quarters and second-half revenue volumes at least 25% above first-half levels.
“Our confidence in both the magnitude and the duration of this growth cycle is higher today than at any point during this year,” Barros said, citing investments in advanced etch and deposition applications for AI infrastructure, gate-all-around chip architectures, advanced memory and leading-edge process technologies.
Margins and Earnings Improve
All profit and loss measures discussed by the company on the call were non-GAAP measures, according to Chief Financial Officer Greg Swyt. The measures exclude items including share-based compensation, acquired-intangible amortization, non-recurring charges and certain tax items.
Second-quarter gross margin rose 130 basis points sequentially to 14.1%, exceeding the high end of Ichor’s guidance range. Swyt attributed the gain to progress in the company’s machining strategy and a more favorable product mix.
Operating expenses were $25.3 million, while operating margin exceeded 5.5%. Earnings per share reached $0.34 on 36.3 million diluted shares, representing the company’s highest quarterly earnings in three years, according to management.
EBITDA increased more than 50% sequentially to more than $21 million. However, cash from operations was a use of $15.9 million as the company increased inventory to support anticipated customer demand. Swyt said inventory investment would continue in the near term, with inventory turns expected to begin improving in the first half of 2027.
Ichor said it remains on track to improve gross margin by roughly 100 basis points per quarter through the balance of 2026. For the third quarter, it projected gross margin of 14.5% to 15.5%.
Capacity, Internal Content and Malaysia Ramp
Management highlighted the company’s manufacturing footprint realignment and its effort to increase the proportion of proprietary Ichor-made content in the systems it builds. Barros said internal content was at about a 25% run rate at the end of the second quarter and is expected to reach about 30% by the end of the third quarter and about 35% by the end of the fourth quarter.
The company said manufacturing transitions remain on schedule, including qualifications at its high-volume Malaysian manufacturing site. During the quarter, Ichor received qualifications from its two major customers for machining and welding operations in Malaysia, according to Barros.
Management said customers are seeking additional internal supply options as they address supply-chain risks. The company said faster-than-normal product qualifications indicate customers are working to reduce those risks.
Ichor said it currently has capacity to support $500 million in quarterly revenue, or roughly $2 billion annually. With targeted investment, including additional clean-room space and machining capacity, management said it believes it can expand capacity within its existing footprint to more than $3 billion annually. Barros clarified that current manufacturing capacity is not a constraint on customer demand.
Capital expenditures totaled $7.8 million in the second quarter. The company expects capital spending to rise in the second half as it accelerates investments in factory clean rooms and machining capacity, while remaining near its target of approximately 3% of revenue.
Liquidity and Third-Quarter Outlook
Cash and equivalents totaled $256 million at quarter-end, up $167 million from the first quarter. During the quarter, Ichor completed its $200 million at-the-market equity offering, issuing 2.48 million shares at an average price of $80.70 per share and generating approximately $195 million in net proceeds.
Total debt was $120.6 million at the end of the quarter. Days sales outstanding remained at 32 days and inventory turns were 3.7 times, both similar to the prior quarter.
- Third-quarter revenue guidance: $315 million to $345 million.
- Revenue growth at the midpoint: 12% sequentially and 38% year over year in revenue volumes.
- Third-quarter EPS guidance: $0.40 to $0.50.
- Expected third-quarter operating expenses: approximately $25.5 million.
Swyt said Ichor expects full-year 2026 operating expenses to rise about 6% from 2025, with nearly all of the increase in research and development. The company expects annual revenue growth of at least 30% from 2025, aligning with what management described as the high end of wafer-fab-equipment market expectations.
Management also pointed to growth in its non-semiconductor operations, particularly commercial space. Barros said the commercial space business grew significantly in the second quarter and is expected to continue growing in the second half following a qualification for a particular part family. He also said aerospace and defense activity was growing, though commercial space was the larger driver.
About Ichor (NASDAQ:ICHR)
Ichor Holdings Ltd. is a global supplier of critical subsystems used in the fabrication of semiconductor devices. The company specializes in the design, engineering and manufacturing of gas delivery systems, vacuum pumps and abatement solutions that manage process gases and by-products in wafer-processing tools. Its modular subsystems are designed to integrate with lithography, etch, deposition and cleaning equipment, helping to ensure precise control of gas flow, pressure and purity throughout the chip-manufacturing cycle.
Founded in the mid-1980s and headquartered in Fremont, California, Ichor has expanded its footprint across Asia, Europe and North America.
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