Photronics NASDAQ: PLAB reported fiscal third-quarter revenue of $216 million, up 3% from a year earlier and 3% sequentially, exceeding the high end of its prior guidance range as delayed semiconductor design releases began moving into production.
Chairman and Chief Executive Officer George Macricostas said the quarter benefited from a gradual recovery in design releases that had been postponed from the company’s fiscal second quarter. The recovery began in May and continued through the remainder of the third quarter, he said.
Management said the industry conditions that contributed to earlier delays—including elevated wafer-fab utilization, tight memory conditions and geopolitical uncertainty—remain in place. However, some semiconductor customers have resumed design releases, particularly as fabs prioritize higher-margin projects and expand capacity at more advanced technology nodes.
High-End IC Revenue Reaches Record Mix
Integrated circuit revenue totaled $155 million, increasing nearly 5% both year over year and sequentially and representing 72% of company revenue. High-end IC business accounted for a record 44% of IC revenue, according to Macricostas.
The company said node migration at 28-nanometer, 22-nanometer and 14-nanometer technologies supported demand across customers and geographies. Eric Rivera, Photronics’ president and chief financial officer, said migration from mainstream nodes into higher-end applications is favorable for the company because advanced mask sets generally carry higher average selling prices.
Mainstream IC revenue declined to $86 million during the quarter, partly because of the node-migration trend. Rivera said Photronics expects its mainstream U.S. business to increase in fiscal 2027 as its Allen, Texas, expansion is completed and begins serving higher-end mainstream demand.
In response to analyst questions, Rivera said the Allen facility’s additional capacity will support the company in two ways: expanding service at the higher end of the mainstream market and allowing its Boise operation to place greater emphasis on high-end work. He said the company is not disclosing the facility’s potential revenue capacity.
Macricostas said the Allen facility remains on track for initial revenue late in the current fiscal quarter, with the broader geographic diversification contribution expected to be reflected in fiscal 2027 and beyond.
Display Business Remains Near Highs
Flat-panel display revenue was $61 million, declining modestly sequentially but remaining near all-time highs. Management cited strong Korean customer activity for high-end consumer electronics, including flagship and premium smartphones expected to launch in developed markets in coming months.
Macricostas said demand for high-end FPD masks is expected to continue through the fiscal fourth quarter and beyond. The company also received additional G8.6 AMOLED orders from a growing customer base, which management said indicates that market demand is broadening.
Those trends are expected to be partly offset by demand tied to consumer electronics in emerging markets, where tight memory availability has disrupted some product launches. Rivera said Chinese demand was affected by the timing of certain releases for emerging markets.
Photronics’ newest and most advanced FPD writer entered mass production during the quarter. Macricostas said the tool has received strong market traction and is expected to remain an important asset in the company’s high-end display-mask operations.
Margins, Cash Flow and Capital Spending
Gross margin was 33%, improving sequentially on revenue growth, product mix and associated operating leverage. Operating margin was 21%.
GAAP diluted earnings attributable to Photronics shareholders were $0.49 per share. Non-GAAP diluted earnings, excluding foreign-exchange impacts, were $0.50 per share.
Operating cash flow totaled $76 million, or 35% of revenue, while capital expenditures were $37 million in the quarter. Year-to-date capital expenditures were $130 million.
The company reduced its fiscal 2026 capital-expenditure guidance to a range of $255 million to $305 million from prior guidance of $330 million. Rivera said Photronics remains committed to the projects and timelines underlying its earlier plan, but timing of tool orders and vendor deliveries can shift spending between fiscal years. Some planned expenditures may move into fiscal 2027, and Rivera said the peak in end-of-life tool upgrade spending could occur in 2027 rather than 2026.
Total cash and short-term investments increased by $35 million during the quarter to $673 million, including $504 million held within joint ventures in which Photronics holds a 50.01% ownership interest. Rivera said the company may supplement its liquidity with borrowing to support planned investments, including its EUV strategy.
EUV Strategy and Fourth-Quarter Outlook
Management said its partnerships with industry participants are specifically related to extreme ultraviolet, or EUV, mask capabilities. Macricostas said Photronics is supplying EUV research-and-development masks and related solutions through partnerships while monitoring the development of a broader merchant market for full turnkey EUV services.
Rivera said a full internal EUV capability would require significant capital expenditures, and the company intends to wait until it sees an appropriate expected return before making major investments. Management plans to expand EUV capabilities as business opportunities develop.
For the fiscal fourth quarter, Photronics forecast revenue of $207 million to $227 million, operating margin of 19% to 24%, and non-GAAP diluted earnings per share of $0.40 to $0.56. The company widened its revenue outlook range, citing continued uncertainty surrounding fab utilization, memory costs and geopolitical conditions.
Macricostas added that high-end mask sets can carry sizable dollar values, meaning that even a single order can shift quarterly revenue by several million dollars. Management said this dynamic, combined with variable design-release timing across regions, could make results less predictable until market conditions stabilize.
About Photronics (NASDAQ:PLAB)
Photronics, Inc is a leading global supplier of photomask products used in the manufacture of integrated circuits, flat panel displays, microelectromechanical systems (MEMS), and advanced packaging applications. Photomasks, also known as reticles, are critical templates that carry the precise circuit patterns required for semiconductor lithography processes. The company offers a comprehensive range of mask solutions, including binary masks, attenuated phase-shift masks, reticles for micro-optics, and specialized products for high‐resolution applications.
Founded in 1969 and headquartered in Brookfield, Connecticut, Photronics has grown through organic expansion and strategic investments in high‐end lithography technology.
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