Photronics, Inc.

Photronics reported fiscal Q2 revenue of $210 million, roughly flat year over year, with IC revenue down 5% year over year to $148 million and FPD revenue up 13% year over year to $62 million. Gross margin was 31%, operating margin was 20%, diluted GAAP EPS was $0.54, and non-GAAP diluted EPS was $0.42 excluding foreign exchange impacts. Operating cash flow was $47 million, capex was $46 million, and total cash and short-term investments were $638 million, including $477 million held in joint ventures. For fiscal Q3, management guided revenue to $207 million to $215 million, operating margin to 18% to 20%, and non-GAAP diluted EPS to $0.39 to $0.45 per share. Full-year fiscal 2026 capex guidance remains $330 million.

George Macricostas emphasized that long-term demand for leading-edge memory and logic chips for AI remains exceptionally strong, and said Photronics is positioning itself to benefit from a multiyear growth opportunity. He framed the current softness as temporary, driven by delayed design releases rather than weak end demand, and highlighted strategic investments in the U.S. and Korea to expand capabilities into more advanced nodes and more geographically diverse revenue streams. His tone was constructive and patient, with repeated emphasis on regionalization, outsourcing opportunities and higher-ASP advanced geometries.

Eric Rivera focused on the quarter’s mix of strong display performance and softer IC timing. He cited 31% gross margin, 20% operating margin, $0.54 GAAP EPS and $0.42 non-GAAP EPS, plus $47 million of operating cash flow and $46 million of capex. He reiterated that most costs are fixed, so there are very few levers to offset weaker utilization, and said the company is maintaining $330 million of fiscal 2026 capex while keeping $638 million in cash and short-term investments. He also said revenue from the U.S. and Korea investments is expected to start at the end of 2026 and 2027, respectively.

Analysts pressed on when visibility worsened, and management said the slowdown became more pronounced when the U.S.-Iran conflict began and fab utilization remained high; Frank Lee added that the post-Chinese New Year slowdown was longer than usual and was felt around the end of February. On customer behavior, management said the delays are mainly at the design-house/tape-out stage rather than in the pipeline, though they saw some recovery at the start of Q3 with more tape-outs in early May. On margins, Eric Rivera said there are very few variable-cost levers because the business has a large fixed-cost base, while management said Allen’s qualification work is on schedule and should not materially depress returns this year or next. They also said the memory shortage and price surge are hurting low-end consumer products mainly in Asia, especially Taiwan and China.