What Entegris (ENTG) Said on Its Q3 Earnings Call

Key Points

• Record growth: Entegris reported third-quarter revenue of $1.006 billion, up 25% year over year, driven by AI infrastructure investment, semiconductor complexity and stronger demand across logic, memory and capital-equipment markets.
• Profitability and balance sheet improved: Adjusted gross margin expanded to 48.9%, adjusted EPS rose 71% to $1.23, and strong cash flow enabled the company to repay its 2029 term loan early and reduce net leverage to 2.9 times.
• Positive outlook: Entegris expects fourth-quarter revenue of $1.025 billion to $1.055 billion, with adjusted EBITDA margin near 31%, and said bookings and backlog indicate continued strength in a multiyear semiconductor investment cycle.

Entegris NASDAQ: ENTG reported record third-quarter 2026 revenue of $1.006 billion, up 25% from a year earlier and 14% sequentially, as demand strengthened across advanced logic, advanced memory and semiconductor capital-equipment markets.

CEO Dave Reeder said the company benefited from continued investment in artificial-intelligence infrastructure, increasing semiconductor process complexity and improved internal execution. He said Entegris increased manufacturing output and converted more backlog into revenue than expected during the quarter.

“Demand was strong,” Reeder said on the company’s earnings call. “The teams increased production and throughput really beyond our expectations, which allowed us to convert more demand to backlog into revenue.”

Entegris said unit-driven revenue growth accelerated to 20% in the third quarter from about 6% in the first quarter. The company expects wafer starts to grow approximately 8% in 2026, while its capital-expenditure-related businesses grew more than 35% in the third quarter, driven particularly by wafer fab equipment demand.

Margins Expand as Volume and Productivity Improve

GAAP net income totaled $158 million in the quarter, while non-GAAP net income was $190 million, an increase of 73% year over year. GAAP diluted earnings per share were $1.03, and non-GAAP EPS rose 71% to $1.23.

GAAP gross margin reached 49.7%, while adjusted gross margin was 48.9%, improving 130 basis points sequentially and 530 basis points from a year earlier. Adjusted EBITDA was $303 million, or 30.2% of sales, compared with 27.3% in the prior-year quarter.

CFO Sukhi Nagesh attributed the margin improvement to higher volumes, factory absorption, yield gains, productivity initiatives and lower inventory scrap and rework. The gains offset a 30% year-over-year increase in direct factory headcount, along with higher incentive compensation and other spending to support customer demand.

Reeder said the company’s gross-margin improvement was achieved without a material pricing benefit. Entegris said it evaluates pricing at the product and customer level, but Nagesh said the company had not included material pricing actions in either third-quarter results or fourth-quarter guidance.

Segment Growth Broadens

Materials Solutions, or MS, generated third-quarter revenue of $404 million, up 16% year over year and 9% sequentially. The segment’s adjusted operating margin was about 20.4%. Entegris cited growth across CMP consumables, advanced deposition materials, specialty gases and coatings.

Advanced Planarization Solutions, or APS, posted record quarterly sales of $605 million, up 31% year over year and 18% sequentially. APS adjusted operating margin was 34.4%, supported by higher production volumes, productivity improvements and favorable mix.

Regionally, growth was strongest in markets investing at the leading edge. Reeder said Taiwan was the company’s largest growth contributor, with additional momentum in Korea, Southeast Asia and North America. In response to an analyst question, he said China was flat year over year in the third quarter and up approximately 6% sequentially.

The company also highlighted new customer wins, including a significant extreme ultraviolet filtration application at the 2-nanometer node, an advanced-materials plan of record with a major smartphone and technology provider, and multiple CMP plans of record with memory manufacturers.

Book-to-bill remained “significantly above one,” according to Reeder. Backlog increased more than 35% sequentially and more than doubled from a year earlier. The company said customers are providing longer planning horizons and increased visibility into future capacity ramps.

Capacity, Cash Flow and Debt Reduction

Entegris reported record operating cash flow and free cash flow of $224 million, equal to 22.2% of sales. The company said the result reflected higher earnings, lower capital spending and working-capital improvements.

During the quarter, Entegris fully repaid its 2029 term loan ahead of schedule, reducing net leverage to 2.9 times at the end of the quarter. Nagesh said the company now expects to end 2026 with leverage of approximately 2.7 times, more than one turn lower than at the start of the year.

Management said it has substantial capacity within its existing manufacturing network and expects to address potential bottlenecks through selective spending, network optimization, procurement centralization, yield improvements and productivity programs. Reeder said the company had more capacity at the end of the quarter than it had entering the year, despite closing three dilutive facilities.

The company said its KSP South facility reached gross-profit breakeven in the third quarter. Management expects KSP to remain dilutive to enterprise gross margins through most of 2027 before becoming roughly neutral as that year ends. The Colorado facility is producing customer samples and is expected to begin generating revenue in 2027.

Fourth-Quarter Outlook

For the fourth quarter, Entegris forecast revenue of $1.025 billion to $1.055 billion. At the midpoint, the outlook represents approximately 26% year-over-year growth. The company expects gross margin of 49.2% to 49.7% on both a GAAP and non-GAAP basis.

• GAAP EPS outlook: $1.09 to $1.17 per share
• Non-GAAP EPS outlook: $1.32 to $1.40 per share
• Expected adjusted EBITDA margin at midpoint: about 31%
• Expected 2026 capital expenditures: about $200 million

Looking into the first quarter of 2027, Entegris expects revenue to decline by a mid-single-digit percentage sequentially due to fewer selling days and typical seasonal patterns, while increasing more than 20% from a year earlier. Management said both the MS and APS segments are expected to post double-digit year-over-year growth in the fourth quarter and first quarter.

Reeder said Entegris expects semiconductor capital spending to remain strong in 2027, with the company viewing the industry as still being in the earlier stages of a multiyear investment cycle. Entegris plans to discuss its long-term growth framework, AI-native strategy and financial targets at its Capital Markets Day on Nov. 9.

About Entegris (NASDAQ:ENTG)

Entegris, Inc is a materials science and process technology company that supplies products and solutions used in the manufacture of semiconductors and other advanced technology products. Its offerings help chipmakers manage contamination, handle sensitive materials, and improve process control across the semiconductor production cycle.

The company's products include specialty chemicals and gases, filtration and purification systems, wafer and substrate handling products, fluid-management components, and advanced materials used in semiconductor fabrication.

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