TSEM

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management is pivoting from technology development to commercial execution, driven by the urgent need to solve AI interconnect bottlenecks where copper reaches practical limits. The company expanded its pipeline to five Stage 3 customers, including a new Fortune Global 500 partner focused on scale-across transceivers using coherent modulation. Strategic positioning centers on Perkinamine electro-optic polymers, designed to enhance existing silicon photonics platforms without requiring entirely new manufacturing systems. Foundry engagement has matured to four active partners, including GlobalFoundries and Tower Semiconductor, to provide customers with manufacturing flexibility and supply chain redundancy. Performance attribution for the quarter reflects a deliberate shift toward engineering prototypes and back-end-of-line processing rather than just lab-based requirements gathering. Operational growth is being managed through a 25% sequential increase in headcount, specifically targeting manufacturing scale-up, test engineering, and commercial development. Management expects the fourth quarter of 2026 to be a critical technical window as foundry-built devices are tested against specific customer requirements. A new commercial agreement is currently being negotiated with the lead customer, targeting the commencement of volume production in the second half of 2027. The company is preparing for a dedicated run with a fourth unnamed foundry partner, with a tape-out expected later in 2026. Operational readiness for the 2027 ramp includes expanding Perkinamine production in Denver through new equipment commissioning and increased batch sizes. Future revenue growth is dependent on moving programs from prototype runs to qualification and ultimately into volume manufacturing agreements. The company maintains $95.9 million in cash and marketable securities, which management believes provides sufficient flexibility for the current organic growth strategy. Research and development expenses increased to $3.9 million from $2.6 million year-over-year, reflecting intensified investment in device reliability and integration. Deferred revenue of approximately $100,000 is tied to specific milestones under an existing joint development agreement. Capital expenditures of $1.5 million were primarily directed toward production readiness and strengthening IT infrastructure to support future commercial scale. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Foundries are facing pressure from high demand, the transition to 300-millimeter wafers, and the integration of novel materials like electro-optic polymers. Lightwave Logic is currently performing back-end-of-line (BEOL) processing in-house but is working with a lead customer to outsource this for high-volume production. Management declined to provide specific dollar values, noting that agreements will include material pricing, licensing fees, and royalties. Long-term value is tied to the customers' ability to win market share with hyperscalers and AI networking companies. The transition depends on the results of ongoing foundry wafer runs, which increase customer confidence in specific manufacturing paths. Management has intentionally focused technical resources on lead customers to ensure execution on the most advanced programs. Management acknowledged fierce competition but highlighted Perkinamine's unique combination of ultra-fast bandwidth, compact size, and low power. The material is being tested across all three critical AI networking architectures: scale-up, scale-out, and scale-across.

Image source: The Motley Fool. Tuesday, Aug. 4, 2026 at 8:30 a.m. ET Chief Executive Officer - Russell Ellwanger Chief Financial Officer - Oren Shirazi Operator: Good day, and thank you for standing by. Welcome to the Tower Semiconductor Second Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Noit Levy. Please go ahead. Noit Levi-Karoubi: Thank you. Hello, everyone, and thank you for joining us. Welcome to Tower Semiconductor's Second Quarter of 2026 Financial Results Conference Call. With us today are Mr. Russell Ellwanger, Chief Executive Officer; and Mr. Oren Shirazi, Chief Financial Officer. Before we begin, please note that certain statements made during today's call may be forward-looking and are subject to risks and uncertainties that could cause actual results to differ materially. These risks are detailed in our SEC filings, Form 20-F and 6-K as well as filings with the Israeli Securities Authority, all available on our website. Tower assumes no obligation to update forward-looking statements. Our second quarter 2026 results are prepared in accordance with U.S. GAAP. Some data presented may include non-GAAP financial measures as defined under SEC Regulation G. Reconciliation to GAAP figures and full explanations are provided in today's press release and financial tables. For your reference, a supporting slide deck is available on our website and integrated into this webcast. With that, I'd like to turn the call over to our CEO, Mr. Russell Ellwanger. Russell? Russell Ellwanger: Hello, everyone. Thank you for joining our call today. I'm truly excited to share with you the status, progress and future outlook potentials for Tower. The second quarter was quite significant, setting substantial company records across all key metrics. These results continue to validate the growing value of our technology portfolio and the powerful operating leverage embedded in our business model. Our revenue is on a fervent growth trajectory with an accelerated flow through into earnings. Second quarter revenue was $460 million, with a particularly positive profitability, 30% gross margin, 20% operating margin and 20% net margin, all being company records, excluding nonrecurring accounting items and representing, respectively, 58%, 55% and 55% quarter-over-quarter contribution from the increased revenue. These results stand as the first step of continual margin expansion we expect over the next years, driven by market-leading customer partnerships, which dictate a very rich product mix backed by strong operational execution. Looking ahead, we guide the third quarter of 2026 midrange revenue to be $520 million, representing an annualized revenue run rate of above $2 billion. We began the year stating that Tower will have a very strong second half as the previously announced capacity investments become qualified and converted into shipments. Beginning the second half of 2026 with a $2 billion run rate turns the page into multiple new exciting chapters for the company. The strength of our customer demand our growing partnerships, our proven execution capabilities and the strategic investments that we have and still continue to announce provide a powerful catalyst to accelerate our short, mid- and long-term growth. Due to direct and growing customer demand representing the scale of the market opportunity and more importantly, our ability to capture it, we have updated our 2028 model to be $3.6 billion in revenues, $1.63 billion in gross profit or 45% gross profit margin and $1.2 billion in net profit or 33% net profit margin. Please see Slides 4 and 5. Very important, the profitability gains we delivered in the second quarter are not a one-time achievement, but rather just an initial step towards profitability expansion and cash generation as represented in our updated 2028 model. Equally important, as can be seen in Slides 4 and 5, this growth is accompanied by even greater efficiency. Today, we operate at about a 10 percentage point difference between gross margin and operating margin, a highly efficient structure for a company investing strongly in future growth. As revenue expands, we drive greater efficiency with operating expenses as a percentage of revenue, lowering to approximately 7%, 30% lower than current levels. This improvement is not the result of limiting investment in R&D. To the exact opposite. The model includes an increase of R&D investment by over 40% against present levels. Rather, this improvement reflects the enhanced efficiency achieved through our support functions as we grow scale. Speed and execution are one of the primary differentiators for high-tech success. We must continue to invest in R&D. This is a core capability. But as well, there must be a focus to streamline context, all of the SG&A functions. We are doing this and likely with numbers that rival or exceed the otherwise best in the industry, efficiency, driving the speed of execution, of course, yields strong margins. But more importantly, it enables sustained business success through the speed of execution. 3 weeks ago, we announced a dual-track 300-millimeter capacity strategic expansion in Japan for our silicon photonics, silicon germanium and advanced optical packaging capabilities, having gained the support of the Government of Japan through the Ministry of Economics, Trade and Industry, METI. By combining Tower's specialized technology leadership and our best of the best worldwide workforce into Japan's unparalleled manufacturing expertise and quality output, its world-class research institutions and deeply committed workforce, we are building a strategic platform that will drive innovation, economic growth and Semiconductor leadership for decades to come. Track 1 of this dual track add significant new 300-millimeter silicon photonics capacity with full production readiness expected during the fourth quarter of 2027. It consists of repurposing the Arai facility, formerly Fab 6, for 300-millimeter silicon photonics capacity and advanced packaging capabilities and as well as maximizing the company's Fab 7, 300-millimeter output in Uozu. This Track 1 is the driver for updating the 2028 business model. Track 2 will commence in parallel with the first track and consists of constructing an additional 300-millimeter manufacturing facility adjacent to Fab 7. This facility is expected to provide a 4x increase in our Japanese 300-millimeter manufacturing output, focusing on silicon photonics, silicon germanium and related advanced optical packaging, positioning Tower to continue to support our accelerating customer demand for emerging AI and data center applications, driving next-generation optical connectivity requirements and is planned to provide a seamless path for Tower and our customers for continued growth post 2028. Moving to our businesses. Please refer to Slide 6 as referenced for Q2 revenue breakdown. Our RF infrastructure revenues for the second quarter represented 49% of corporate revenue with approximately 43% of quarter-over-quarter growth and over 140% year-over-year growth. Silicon photonics revenue itself increased by over 60% quarter-over-quarter and over 270% year-over-year, hitting a Q2 annualized run rate of over $680 million, targeting a $1 billion run rate in Q4 '26 as the previously announced capacity expansion continues to be qualified. The full ramp of wafer starts in these investments is anticipated to occur within the fourth quarter of 2026, creating a wafer start capacity over 3x higher than the second quarter silicon photonics revenue shipments with full financial effect anticipated to be in the second quarter of 2027. After kicking off the year with several breakthrough technology milestones, the second quarter was about further propelling Tower's leadership position in silicon photonics as an added foundation to the next phase of growth. We focus on expanding capacity, advancing our technology capabilities and deepening our engagements with strategic customers aligned to their long-term road maps. The data center industry is undergoing a fundamental transformation as AI performance is no longer defined solely by compute. It is increasingly determined by how efficiently data moves between processors. High bandwidth, low latency, energy-efficient optical connects have become a critical enabler of AI infrastructure. While geographically distributed deployment has become equally important to hyperscalers and the communities, these trends align directly with Tower's core strengths. As AI clusters scale from thousands to hundreds of thousands of XPUs, electrical interconnects are rapidly approaching their practical limits. Silicon photonics has emerged as a leading platform for 800G and 1.6T pluggable optical interconnects, which have, for the most part, already replaced copper for scale-out connections outside the rack. The next frontier is enabling optical interconnects for scale up, either within a single rack or across multiple racks and once again, silicon photonics with Tower is well positioned to lead this transition with several near package optics, NPO deployments planned over the next year and many more in design. NPO delivers much greater bandwidth density and reduced energy per bit compared to pluggable optics, and yet it leverages the same established ecosystem as pluggable overcoming the reservation from hyperscalers and data center operators about reliability, serviceability or multisource flexibility. We announced customer contracts representing approximately $1.3 billion of silicon photonics revenue for 2027 with even higher growth for 2028. With what we've stated about Track 1 investment, substantial additional 300-millimeter capacity will be added throughout 2027. This added 300-millimeter capacity is already requested by and committed to several lead customers, reflecting their confidence in Tower's ability not only to scale manufacturing capacity rapidly but to continue to execute on highly differentiated technology road maps required for future networking architectures. To support the long-term growing demand, we announced the Track 2, a most significant expansion of our manufacturing footprint in Japan, which is expected to more than quadruple its 300-millimeter capacity, positioning tower well to support not only today's workhorse pluggable optics and our rapidly growing near package optics, but also the additional future market for co-packaged optics. Capacity alone, however, is not enough. Our future growth will also be driven by the next generation of enabling technologies that are already moving through development pipeline. Over the next 1 to 2 years, we expect several of these technologies to transition into high-volume manufacturing, including and especially heterogeneous integration of III-V materials on silicon photonics for integrated lasers, advanced modulators and optical signal processing. In support of this road map, we entered into a multiyear epitaxial wafer supply agreement with IQE securing a strategic supply of III-V epitaxial material while continuing to internalize key manufacturing steps that enhance both performance and supply chain control. Our long-standing collaboration with Marvell reached an important milestone as the number of SiPho-based coherent optical modules crossed over into multimillion. This achievement demonstrates Tower's ability to manufacture some of the industry's most complex silicon photonics ICs at high-volume production scale. Looking ahead, coherent photonics is expected to play an increasingly important role in scale across AI architectures where multiple data center campuses operate as a single AI factory while distributing power, cooling and infrastructure requirements across geographically diverse locations. Our silicon germanium business continues to benefit from growing demand for low latency, low power efficient analog drivers and transimpedance amplifiers across traditional pluggables as well as linear pluggable optics and linear receive optics architectures. Our 100G per lane and 200G per lane products are in high-volume production across all three 200-millimeter fabs as we advance towards near package optics as well as 400G per lane solutions requiring tighter electrical IC, photonics IC integration and codesign. We're also seeing strong customer pull for our next-generation 300-millimeter silicon germanium platforms. Our RF mobile revenue represented 12% of our second quarter corporate revenues. As we discussed last quarter, our RFSOI business is undergoing a strategic transition from 200-millimeter to 300-millimeter manufacturing, enabling higher performance, greater integration and stronger value for our customers. In addition, we are consolidating 300-millimeter RFSOI manufacturing to Fab 7, freeing up -- I'm sorry, to Fab 10, freeing up Fab 7 capacity for a rapidly growing SiPho and silicon germanium business. These factors resulted in a 14% decrease in our 300-millimeter year-over-year RFSOI revenues. Looking forward, we have realized a very strong design win momentum for our 300-millimeter platform, particularly for premium smartphones. A road map replete with best-in-industry figures of merit has gained market excitement and engagement, driving an expected 3x RFSOI increase and 300-millimeter wafer starts by mid-2027 against the Q2 '26 shipments. Tower management revenue for the second quarter represented 14% of corporate revenues with year-over-year revenue growth and strong demand for both our 200-millimeter and 300-millimeter BCD offerings. Our technology focus on power delivery for high-performance computing, gives us a leadership position in load gate charge and low RDSon LDMOS devices. Our latest generation power technology enables our customers to develop high frequency, high efficiency, DC to DC converters for a variety of growth segments. During this quarter, we experienced increased demand from existing customers and also saw very strong new customer acquisitions across our power portfolio. This momentum is primarily driven by growth sectors where power density and thermal efficiency are mission-critical. Through close collaboration with our lead customers, we continue to advance our next-generation power management road map. Sensor display for the second quarter represented 12% of our corporate revenue in our image sensor business year-over-year revenue is predominantly flat. However, we're seeing a sharp surge in demand, particularly in the machine vision market for high-end, high-resolution sensors used in semiconductor inspection, driven by the accelerated build-out of DDR and HBM memory assembly lines. And as well in the automotive industry, especially for EV battery inspection. This strong demand is expected to continue to grow over the next 2 years. We are well positioned to support it with a range of products. Our lead customers have developed on our state-of-the-art global shutter 300-millimeter platform. Looking at utilization. During a period of high capacity ramp, Fab 2, Fab 3 and Fab 9, 200-millimeter fab operated utilization rates between 80% and 85%. Fab 5 in Japan was at 75% utilization. Fab 7 continues to be fully utilized, well above our 85% utilization model. Now I'd like to turn the call to our CFO, Mr. Oren Shirazi. Please, Oren. Thank you. Oren Shirazi: Thank you. Hello, everyone. Earlier today, we released our financial results for the second quarter of 2026. I will now review the highlights of these results as well as the balance sheet, CapEx investments and our updated business model. First, looking into the P&L. Revenue for the second quarter of 2026 was $460 million, a record in the company's history, representing 11% quarter-over-quarter growth compared to $414 million in the first quarter of 2026 and 24% year-over-year growth compared to $372 million in the second quarter of 2025. Gross profit for the second quarter of 2026 was a record $138 million, reflecting a 30% gross margin and an increase of 72% compared to $80 million in the second quarter of 2025. Operating profit for the second quarter of 2026 was $90 million, 2.26x the operating profit in the second quarter of 2025. Net profit for the second quarter of 2026 was $91 million, reflecting a 20% net margin and an increase of 95% or $44 million compared to net profit of $47 million in the second quarter of 2025. Earnings per share for the second quarter of 2026 were $0.80 per share basic and $0.79 diluted, almost double the $0.49 basic and $0.41 diluted in the second quarter of 2025. Moving to our balance sheet. As we previously announced, we received $290 million in prepayments from SiPho customers in the first quarter of 2026, mostly towards 2027 capacity reservation. These customer prepayments are included in the balance sheet as of the end of June 2026 as liabilities under short- and long-term customer advances and are included in the cash flow report for Q1 '26 and for H1 '26 as cash from operating activities. Our balance sheet continues to be strong, evidenced by the following indicators and financial ratios. As of the end of June 2026, our assets totaled $3.8 billion, primarily comprised of $1.6 billion in net fixed assets, predominantly fab machinery and $2 billion of current assets. Our current ratio remains very strong at about 4.9x, while shareholders' equity reached a record of $3.1 billion at the end of June 2026. Hedging, I would like now to describe our currency hedging activities. Regarding the Japanese yen, since the majority of TPSCo's revenue is denominated in yen and the vast majority of TPSCo's costs are also in yen, we have a natural hedge over most of our Japanese business and operations. To mitigate part of the remaining yen exposure, we execute zero-cost cylinder transactions to hedge currency fluctuations. Hence, while the yen exchange rate against the dollar may fluctuate, there is limited impact on our margin. Regarding the Israeli shekel, while we have no revenue in this currency, a portion of our cost in Israel is denominated in shekel. So we also hedge a large portion of that currency risk by entering into zero-cost cylinder transactions to mitigate this exposure. And while the shekel exchange rate against the U.S. dollar may fluctuate, the impact on our margin is limited as seen over the past few quarters during which the shekel appreciated strongly against the U.S. dollar. Now moving to our CapEx investment plan. As previously announced, in order to support the increasing SiPho and 5G demand, we are executing a $920 million investment plan to expand capacity and capability of SiGe and SiPho equipment across our 8-inch fabs in Israel, Newport Beach and Texas as well as our 12-inch Uozu fab in Japan. This investment is on track in terms of purchase orders issued, technology and process qualification, equipment arrivals and ramp plans. Approximately 50% of this $920 million CapEx investment has been paid to date and is included in our cash flow for investing activities for the reporting period through the second quarter of 2026, while the remaining 50% is expected to be paid during H2 '26 and full year 2027. Business model. As recently announced and presented earlier today by Russell, the company updated its business model, which now includes the planned investment in the Arai facility, formerly Fab 6, to repurpose it for 12-inch type of wafer manufacturing, thereby maximizing the company's 12-inch wafer output in Japan, supported by METI, Japan's Ministry of Economic Trade and Industry. The model is based on forward-looking operational business and financial assumptions, including the assumption that all fabs will operate at 85% utilization post the full installation and qualification of the $920 million in SiPho and SiPho CapEx investment. We continue to execute to ramp up SiPho, SiGe capacity and capability in our Fab 2, 3, 5 and 7 and post the planned repurposing of the Arai facility, the and qualification of the new equipment tools to be installed there. Another assumption is the assumption regarding forward-looking wafer selling prices for existing and future products and growth and an assumption -- forward-looking assumptions regarding cost and completion date for the successful qualification of tools to be installed, process technologies to be qualified and customer products to be qualified and ordered from the company. Under the updated model, we target $3.6 billion in annual revenue, which is $760 million higher than the February model target, reflecting 27% revenue increase. $1.63 billion annual gross profit, resulting in a 45% gross margin as compared to 39% in the prior model. This annual gross profit is $510 million higher than the prior February 2026 model, representing 67% incremental gross profit derived from the incremental $760 million revenue, reflecting our enhanced product mix. $1.38 billion of annual operating profit, resulting in a 38% operating margin as compared to 32% in the prior model. This annual operating profit is $480 million higher than the prior February 2026 model, representing 63% incremental operating profit derived from the incremental $760 million revenue, again, reflecting our enhanced product mix. And lastly, $1.2 billion in annual net profit, resulting in a 33% net margin as compared to 26% in the prior model and as compared to 20% in the second quarter of 2026. The final net profit is $450 million higher than the prior February 2026 model, representing 59% incremental net profit derived from the incremental $760 million of additional revenue, reflecting our enhanced product mix. That concludes my prepared remarks. Now I'd like to turn the call back to the operator so we can take your questions. Operator: [Operator Instructions] And now we're going to take our first question, and it comes from the line of Cody Acree from Benchmark StoneX. Cody Grant Acree: Congrats on another great quarter and just great execution. Congrats, everybody. Just a point of clarification and then a couple of quick questions. Did you update the SiPho bookings number for '27, the $1.3 billion? Would you give a new version of that? Russell Ellwanger: No, no, I did not. I stated in the script that the Q4 start rate, which would be fully realized in Q2 '27 revenue was 3x higher than the Q2 shipment. So that number is... Oren Shirazi: Yes, this can be 680 times 3, but this is capacity. While the $1.3 billion is on customer committed prepayments or on customer committed contracts. Russell Ellwanger: Although the -- yes, as stated additionally, the capacity growth is spoken for. Is it all booked? No, but it's spoken for. Cody Grant Acree: Is it fair to -- I mean, a touch-up? Russell Ellwanger: No, I was just going to state that I think there was no update given on the contracts and the bookings, but there was an update given pretty much on what is started or will be started for shipments. Cody Grant Acree: Okay. Excellent. And then just with that level of visibility, you've been able to put up some record sequential and annual growth rates both on a percentage and on a dollar basis, it's been pretty impressive. With this level of visibility, can you maybe just handicap the likelihood of being able to sustain this kind of growth rate or even accelerate from here? Russell Ellwanger: Well, we gave the 2028 financial model and stated that it is our expectation to reach those numbers at a minimum by run rate nominally in the full year in 2028. So I think you could estimate what the growth rate is off of a $3.6 billion 2028 revenue level. Cody Grant Acree: Okay. And then lastly, Russell. Maybe, if you can just help me to get a scale on the Japanese projects, the Track 1 and Track 2. I'm trying to understand the wafer volumes or the revenue support that ultimately will be available out of Japan, not so much Track 1. I think that's clear in your fiscal '28 model that, that is assuming full utilization of that Track 1 build-out. Is that the right way to think about it? Russell Ellwanger: Yes, at 85% utilization, correct. Cody Grant Acree: Okay. And so then how do we think about the scale of Track 2? Russell Ellwanger: We stated that the Track 2 would quadruple the 300-millimeter capacity and that is predominantly for SiPho and SiGe. We didn't give specific numbers. Part of the reason for not giving numbers is that we're in final negotiations, strong negotiations, not on the pricing part of it, just on the timing part to complete the facility and complete the facilitization of the facility and then the negotiations with the suppliers on the equipment itself. So budgets, everything is approved, everything is there. We're focused on covering everything with internal cash creation. So it sits nicely in our hands. We're not looking at anything being gated or leveraged by a fundraising event or anything of that sort. There's no dilution within the plans. But we don't yet, at this point, have the final schedule of tool installations and tool qualification. Our target is that everything is installed and functioning by Q4 2028. And as stated in the script, that it then provides a seamless growth trajectory into 2029, having reached the full potential of the Track 1 development in 2028. So our target would be to have that grow from there. The exact numbers of how much we would get from that, that we haven't said, and it's not necessarily our desire to give quarterly updates and financial models. But you could expect that within the first quarters as we get into 2027 that we'll update our long-term financial model, depending upon how it actually turns out on the final build-out of the factory and the amount of tools that we can fit into the built-out factory. So some of that, even some of the building plan is not yet finalized. Cody Grant Acree: Okay. Excellent. And then just to be clear, the 4x quadrupling of the capacity of Track 2, that is just the Uozu facility? Or is that quadrupling accounting Fab 6? Russell Ellwanger: We're including Fab 6 in that 4x number. So whatever we would be doing incrementally in Fab 6, which predominantly we'll be using as an epi center and also for specialty packaging tools. But yes, the Fab 6 incremental that you see in Track 1 is included into the 4x. Operator: Now we're going to take our next question, and the question comes from the line of Mehdi Hosseini from SIG. Mehdi Hosseini: Yes. I do have a couple. Russell, I just wanted to better understand the evolving end market demand. As we look into next year, and NPO becomes material, does that give you ability to increase your content per given transceiver? Russell Ellwanger: To the extent I understand your question, I would say no. It basically would be -- we would be selling an NPO in those cases rather than selling pluggable, and in many instances, most likely be selling both. But the content itself, no, at least to the extent that I understand your question. Mehdi Hosseini: Sure. I'm trying to better understand if there is synergy here, especially as you -- I'm under assumption that at some point, the PIC itself will require a stacking of SiGe and SiPho. And that's where the question is originating from, if we have more of a heterogeneous structure, a PIC-based structure, would that -- I imagine that would be more positive for you, and I just want to see if I'm in the right frame of mind. Russell Ellwanger: I think you're in the correct frame of mind, and I think the answer is yes. But I believe that, that focus is more not on NPO, but on next generation. So when we talked about the advanced packaging, a good amount of the advanced packaging that we're putting in place is die-to-wafer and wafer-to-wafer bonding. Mehdi Hosseini: Okay. And I imagine that would also require you to increase SiGe capacity and that's already embedded in the Phase 1 of the capacity expansion, right? Russell Ellwanger: To some extent, it's mainly embedded into the Phase 2. I'm sorry, Phase 1 is focused very, very strong directly on SiPho expansion where we, as stated, all of that growth that we're doing in Phase 1 is already spoken for. Mehdi Hosseini: Okay. Great. And then second question, regarding your manufacturing footprint, given your emphasis in Japan and how you have this Phase 1 and Phase 2. Should I assume that majority of your U.S.-based customers would be supported through facilities in Japan or U.S. would -- or is there another area where you eventually have to increase capacity? Russell Ellwanger: We have and we continue to increase capacity in both Newport Beach and in San Antonio, and we're still planning to increase further capacity in both sites. But one of the reasons for having chosen Japan, sorry, is its geopolitical neutrality. There's no issues for somebody to be supplied out of Japan. So it's a very good place to grow. I mean there's multiple reasons to one that we chose Japan. We have truly a remarkable workforce there. Most of the R&D that we have in Japan was a derivative of Panasonic hires back when Panasonic was the creme de la creme. I mean a top 3 Japanese company and hiring their choice of people, predominantly from Tokyo University. So we still have an extremely, extremely capable core workforce as far as R&D. Additionally, anybody in the world that's ever been around Japanese manufacturing, the quality of it is just outstanding. It's part of a Japanese mentality. I mean, ancillary here, but we lived in Japan for a number of years when our youngest daughter was going through kindergarten. And it's a very, very interesting thing. Already at 3.5, 4 years of age, when a kindergarten student goes to school, part of their uniform is a plastic container with a washcloth in it called an Oshibori, and the school day starts by taking out that washcloth and wiping down their desk. And the school day ends by taking out that wash cloth and wiping down their desk. The honoring of the workplace is a very, very big, big thing in Japan. And that culture when you started 3.5, 4 years of age, learning to honor the workplace, that stays with you forever. I mean I did a film once, so it's kind of funny, just about the procedure of returning your tray and dishes after lunch. And the activities in Japan, it's more or less of an assembly line. There's absolutely no degradation of a quality mentality versus when they're in the regular factory. So when it deals with very, very high-quality manufacturing, I think Japan is really the best of the best. So those are multiple reasons for going there. It was the taxonomy that we have of workforce is fantastic. Quality culture in Japan is fantastic. Education in Japan is amazingly good. And it's geopolitically neutral. Mehdi Hosseini: Got it. And just a very quick follow-up. When should RF mobile revenue stabilize? Your prepared remarks suggest that you're continuing to consolidate move manufacturing to 300-millimeter. Would those changes in your manufacturing footprint stabilize into the second half? Or is this something that is going to carry on into '27? Russell Ellwanger: I wouldn't use the term stabilize, stabilize would mean going into an area where you're not having incremental growth. But I believe I had stated that from the tape-outs activity, the design activity that we've already won that we would see Q2, Q3 of next year, having the largest 300-millimeter manufacturing that we've ever done for RFSOI. But I wouldn't say stabilizing, it's just getting to a point of continued growth and then additional plans, how do we grow it beyond that. But yes, I would think that for the Fab 10 factory where we're manufacturing, it will be very, very full come second, third quarter of next year. Operator: And now we're going to take our next question, and the question comes from the line of Richard Shannon from Craig-Hallum Capital Group LLC. Richard Shannon: Excellent. Congratulations on wonderful results. Keep up the good work here. My first question is going to be a follow-on from a couple of Cody's questions here and trying to think about the ultimate silicon photonics and SiGe 300-millimeter capacity after you finish Track 2 and you use the statements of 4x increase in capacity, I think, at least 4x capacity. So it seems like we need to understand and characterize how much of the capacity to that point is 200-millimeter versus 300-millimeter. So I was wondering if you could answer that quantitatively or at least qualitatively to help us think about that more specifically. Russell Ellwanger: Honestly, I'm not sure I understand the question. Could you just restate it, please? Richard Shannon: Sure. You've said that after Track 2, you're going to -- it's going to increase your 300-millimeter silicon photonics and SiGe 5G capacity by -- or quadruple. So in order for us to quantify this, I think we need to understand what that position -- what that mix of capacity between 200 millimeter and 300 millimeter would be at that point before starting that capacity increase. So trying to figure out -- I wonder if you could answer what that split of capacity is at that point, so we can try to calculate that. Russell Ellwanger: Yes. I just have to grab my notebook real quick, sorry. I'll be right back. One second, sorry. Sorry, Richard. I would say that, to begin with, after I would say, '27 mid '28, all of the growth that we have in SiGe and SiPho, and definitely in SiPho, will be in 300 millimeter. The 4x increase in capacity in Japan, the agreement with METI is really focused on optics and it's on the silicon photonics and silicon germanium. So as a minimum, we would intend to be adding 20,000, 25,000 wafer per month silicon photonics capacity, that can go much, much higher than that. And that's the desire of the company -- I mean, the country. So if you multiply that by 2.25, you're dealing with very, very big amount of wafer capacity versus 200-millimeter. So although I'm not sure why it's so important for you to know that ratio to model something. The growth in silicon photonics is quite big and the predominant portion coming out of Track 1, almost 100% of it will be silicon photonics. You have the delta numbers in revenue from the previous model to the present model. And then when we go into the 300-millimeter facility, the actual split, we've not yet announced, but the predominant portion of everything of that 4x growth will be in silicon photonics. And on the next biggest portion of it will be in silicon germanium. Richard Shannon: Okay. I'll just state also, I think everyone is trying to figure out what the next update on the business model looks like. I think you said you'll update us kind of earlier or some point next year here. So we're all trying to do that work ahead of time. So we'll look forward to more detail when you're able to give it. My follow-on -- one of my follow-on questions here is on NPO. And I'd love to get a sense of the degree to which this will be a meaningful contributor in SiPho revenues in 2027. Is this going to be -- how would you characterize the size either quantitatively or qualitatively, please? Russell Ellwanger: I think it will be significant. The exact percent, I don't yet know. But I would think it will be in the -- not in the single digits, but in the tens of the percentage of what we'll be shipping, especially in the second half of the year. Richard Shannon: Okay. Great. That's very helpful. And then my last question is on advanced packaging here. I think there's a little bit of contribution in the Track 1 investments in Japan, but I think a bigger part of Track 2. So I'm going to ask a little bit longer term question here, Russell, which is I think of the fullness of time here, after everything is built and how you think the market is going to evolve, how much of your silicon photonics revenues are going to be packaging related? Russell Ellwanger: That's a very good question. I'm not sure how much of it necessarily is packaging related versus being packaging enabled. So even right now for the integrated laser, for an indium phosphide laser, we would see next year several tens of millions of revenue from integrated laser. The integrated laser is a chip-to-wafer bonding. That's packaging. It's right now outsourced, but we'll be bringing that in-house. So it's not that we're getting paid per se for packaging, and we're not trying to compete with packaging houses. We're bringing more capability in-house that we have control over the end result and certainly much more control over the start to ship time of wafers rather than to depend on the supplier no matter how good they are. But we are not looking at per se competing in packaging. We're looking at packaging being an enabler to grow our core business at the highest quality, best speed to production of any supplier that there would be. Hopefully, that answers your question, Richard. We're not going to separate a packaging revenue. We're not focused on it as a packaging revenue rather than as an enabler for our silicon photonics platform. Operator: And now we'll go and take our next question, and the question comes from Cody Acree from Benchmark StoneX. Cody Grant Acree: Quick follow-up. Russell, with all the capacity additions that have been happening around the industry from some of your peers at the GlobalFoundries. Russell Ellwanger: I broke up on the first part. I apologize. Could you start the question? Cody Grant Acree: It's fine. With all the capacity additions around the industry from some of your peers, GlobalFoundries, STMicro, Samsung have all made announcements about planned capacity additions. If you can look out 12, 18, 24 months, can you maybe just frame your opinion of the supply/demand health of the industry with all of these different tranches coming in line? Russell Ellwanger: Supply is certainly increasing. We have a definite benefit of anyone right now in that we're qualified at the lead customers worldwide with very strong contracts lasting through '28. And at this point, given additional capacity coming online, strong interactions and discussions to maintain contracts well beyond that, I don't necessarily have too good of a feeling for how much added capacity will be coming into the market. I've honestly not followed up on that so strongly. Our focus has really just been how we maintain full share or majority share of our lead customers, and we're in very good shape there. The most important thing is something I talked about within the script, and that is speed. So as long as -- we have programs going on for not just next generation, but generation plus 2 in many cases, generation plus 3. Those programs always enable you to come to the market faster, stronger than anyone else. Tied to that, what's very, very real from a business standpoint, if we're working with a very large customer, and we're putting substantial resources into next-generation or multiple generation of future developments, there's typically exclusivity agreements on both sides. And we would enable a lead customer to have a head start, especially for any module that's joint developed and we would request 100% market share. So I don't -- again, for part of your question, I can't -- I don't really have a good feel for how much capacity is additionally coming into the market. What I think we have a much better feel on is the market share that we'll be maintaining with our lead customers and we believe that will stay extremely high. Cody Grant Acree: And Russell, is there -- just for my own edification, a figure of merit stratification, I guess, that you can point us to that would be a good reference point so we can just keep an eye on your continued leadership in the industry? Russell Ellwanger: The figure of merit that you're referring to is what? I mean, typically, a figure of merit is a technical achievement. What are you looking for? You're looking for something to measure our leadership? Cody Grant Acree: No, I guess I'm just trying to gauge some of the industry rhetoric about differing capabilities from your different competitors around the industry. And I'm just trying to see if there's something you can help us with to help us better understand where it is that Tower really differentiates. Russell Ellwanger: Sorry, I don't want this to sound facetious, but we differentiate in figure of merit. Insertion loss is probably one of the biggest things that one could look for. And if you have at this point a best-in-breed insertion loss, you really help the integrator, number one, by not needing to buy more expensive CW lasers because of greater output, but also the ability to reduce the amount of lasers that's in the package. We have press released before. It was a press release with InnoLight about our insertion loss being an enabler to have the amount of CW lasers that they need in the package. So those are -- I believe was having it. I have to go back to the PRs a couple of years ago. But that becomes really the biggest differentiator that we can have is to lead the industry a figure of merit. If you're looking at next-generation modulators at the OFC conference, we did a joint PR with Coherent about being able to have done a 400G modulator in silicon. And there is no secret that we and maybe some others are working with thin film lithium niobate. We also are working with indium phosphide for a modulator. So the best way that one could be looking at maintaining market share is, how close are you in working with the next generation and/or 2 generations out? And how is your performance in those areas. So does that answer your question, Cody? Hopefully, it does. Cody Grant Acree: It does. That was very helpful. And then lastly, you did mention InnoLight. I don't know if you've had a chance, I know you're busy this morning, but to see some of the press reports that the administration is maybe looking to limit exports of Chinese technology into the U.S. from an optical standpoint. Just wondering if you have any thoughts there? Russell Ellwanger: Many thoughts, but nothing that I would want to say publicly. Operator: And we're going to take our final question for today, give us a moment and the question comes from the line of Lisa Thompson from Zacks Investment Research. Lisa Thompson: I just have a couple of -- two questions. First off, are you experiencing any shortages or supply chain issues for your own production? I know you were worked on the indium phosphide issue. Russell Ellwanger: Big picture, no. We're in very good position on across the board with starting materials and with what we would call variable materials that are needed to manufacture. We were under somewhat of a crunch for indium phosphide starting material. And we believe that we have addressed that very nicely with the contract with IQE. But other than indium phosphide, which we had several ways that we went after to increase the amount of substrates during a difficult period. And I think that, that we've gotten resolved as well. No, we're in very good shape on supply. Lisa Thompson: Okay. And then my last question is if we're going to do, say, an error analysis on your business model, where do you think the most variability of outcomes is? Is it going to be expenses or timing or the prices you forecast you'll get for your products? Where is the risk? Oren Shirazi: Yes. I think I addressed it in my prepared remarks that we are based on a few assumptions which are important. One of them is the selling price per wafer. The second is the cost assumptions, the time of installation and qualification. And the third one is that we will utilize 85% of the Fab. And this is the basic assumptions for the model, I can say. Lisa Thompson: Which has the biggest range of outcome, which has the biggest range of outcome that could be the most important to look at? Oren Shirazi: Usually per wafer because if you have more or less quantity, so you have more or less variable costs associated with that. But if the price goes up, it goes all the way to the bottom line and vice versa. So maybe usually, but it's a general statement. So usually, the selling price is just 100% reflection over the margin. Operator: Dear speakers, there are no further questions for today. I would now like to hand the conference over to Russell Ellwanger for any closing remarks. Russell Ellwanger: Firstly, as I started the call, I'll end it with the same statement. I am extremely excited with where we're at, what we're doing, our future prospects, enjoyed being able to share them with you. One of the most exciting things about being involved in high-tech business and maybe in particular, being in management or the CEO is the fact that in high-tech, nominally, you're interfacing interacting with groupings of people that are from any statistical standpoint in the upper end of intelligence. And that's a wonderful thing, a wonderful place to be dealing with. When you couple that with people with very high character, it becomes fantastic, and it's wonderful, wonderful interaction. I can really state that if I look at across the board in business, but right now, specifically on silicon photonics, every one of our customers that we have there with really out exception are just outstanding people that we deal with. And every interaction, it's more than joyful, it's a partnership to where you have open communication, you work with each other. And off of that, you go into the next generation. We've had a very good call the other day with a big customer with regard to having now announced -- well, not announced, but having a very strong additional 300-millimeter capability. And the partnership feeling the way that we're growing together, it's really an amazing place to be. And one of my really greatest joys about leading Tower is the ability that I have daily inside the company to be dealing with very smart people that are of high character and being able to interact with customers that are very smart, of high character and seeing the integration of both together towards making new things. We've talked multiple times and it was in the script as well, not just of Tower's growth, but of Tower and our customers' growth. And looking at things in that regard in that respect, it's a fantastic way to be. So I truly -- if we look at the financial model, if we look at achieving a 33% net profit, just very, very thrilled about where we're at, where we're going. And all of these opportunities in front of us. The really an extremely wonderful adventure that we're entering into Japan to build out hub of optical excellence for the SiPho, for the silicon germanium. We're really at an amazing place that everyone, not that we haven't in the past, but people come to work now even more excited than they did before. There's so much happening. And that's an amazing place to be. So in stating that, my invitation to everyone that's an investor, reach out, we'd love to talk to you. We'd love to have as much interaction as we can, help you better understand what we're doing, where we're at, and be able to share with you the strong results that we're having in the company. That being said, we look forward to engaging with the investment community at the upcoming Jefferies conference. August 25, 26 in Chicago, and at the Benchmark StoneX Annual Conference in New York on September 10. The invitation for interactions with investors, it's real. And the better you understand our story, the better you understand where we're at, where we're going, we think the best for everybody. So with that, I'd like to close and just thank you for your interest and for your support. Thank you. Bye-bye. Before you buy stock in Tower Semiconductor, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Tower Semiconductor wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $411,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,335,252!* That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of August 11, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Tower Semiconductor (TSEM) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Find winning stocks in any market cycle. Join 7 million investors using Simply Wall St's investing ideas for FREE. Tower Semiconductor stock has delivered very strong returns over the past few years, yet on the current checks it still screens as expensive rather than a clear bargain. After such a powerful move, investors now have to weigh rich valuation signals against confidence in the company’s growth ambitions. Over the last 5 years Tower Semiconductor has returned roughly 7.9x, which puts recent valuation concerns into the context of a very powerful longer term rally. The company is leaning on expectations of continued revenue growth and profitability improvements to support today’s price, while the risk is that any slowdown against those ambitions could make the current valuation harder to justify. Tower Semiconductor only passes 1 of 6 valuation checks, which suggests the stock leans expensive on the broader assessment rather than standing out as a clear value opportunity, according to our 1/6 valuation score. The issue now is whether Tower Semiconductor’s current share price fairly reflects those growth expectations or already builds in too much optimism. Tower Semiconductor delivered 423.5% returns over the last year. See how this stacks up to the rest of the Semiconductor industry. The P/E ratio is a useful way to judge how much you are paying today for each dollar of Tower Semiconductor earnings. For a profitable chip manufacturer, it captures how strongly the market prices the current earnings base. Tower Semiconductor currently trades on a P/E of about 98.3x. This is well above the semiconductor industry average of roughly 52.6x and sits ahead of the peer group average of about 51.3x. A fair P/E based on its profile is estimated at around 56.2x, so the current multiple implies a large premium to what that framework would suggest is reasonable. Despite the recent record Q2 2026 results and higher 2028 targets, the market is paying a steep price for Tower Semiconductor earnings today. On this P/E yardstick, Tower Semiconductor stock appears expensive compared with both its industry and an adjusted fair multiple estimate. See what the numbers say about this price — find out in our valuation breakdown. Simply Wall St Narratives for Tower Semiconductor aim to connect the current valuation puzzle to clear future scenarios on growth, margins and earnings. Each narrative spells out what would need to happen in Tower Semiconductor's business for the stock to be worth materially more or less than today's price, and ties that view to a specific path for growth, profitability and risks that you can revisit on the Community page as new information emerges. One of the top community narratives on Tower Semiconductor: 20% undervalued Read one of the top narratives on Tower Semiconductor Do you think there's more to the story for Tower Semiconductor? Head over to our Community to see what others are saying! Tower Semiconductor now carries an overvalued label on market multiples, with a P/E far ahead of sector and peer averages. That points to a market that is already pricing in ambitious growth and margin progress rather than leaving much room for disappointment. The low broader value score reinforces that only a narrow set of checks supports the current price. The key question from here is whether Tower Semiconductor can deliver on those growth and profitability expectations strongly enough for today’s rich multiple to hold. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include TSEM. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

This article first appeared on GuruFocus. Revenue: $460 million, a record, up 11% quarter over quarter and 24% year over year. Gross Profit: $138 million, a record, reflecting a 30% gross margin, up 72% year over year. Operating Profit: $90 million, 2.26 times the operating profit in the second quarter of 2025. Net Profit: $91 million, reflecting a 20% net margin, up 95% year over year. Earnings Per Share: $0.80 basic and $0.79 diluted, nearly double the prior year's $0.49 basic and $0.41 diluted. Q3 2026 Revenue Guidance: Mid-range revenue of $520 million, representing an annualized run rate above $2 billion. 2028 Business Model Update: Targeting $3.6 billion in revenues, $1.63 billion in gross profit (45% gross margin), and $1.2 billion in net profit (33% net margin). Silicon Photonics Revenue: Increased over 60% quarter over quarter and over 270% year over year, hitting a Q2 annualized run rate of over $680 million, targeting a $1 billion run rate in Q4 2026. RF Infrastructure Revenue: Represented 49% of corporate revenue, with approximately 43% quarter over quarter growth and over 140% year over year growth. RF Mobile Revenue: Represented 12% of corporate revenue, with RFSOI revenues down 14% year over year due to strategic transition. Power Management Revenue: Represented 14% of corporate revenue with year over year revenue growth. Sensor & Display Revenue: Represented 12% of corporate revenue, with year over year revenue predominantly flat. Warning! GuruFocus has detected 1 Warning Sign with TSEM. Is TSEM fairly valued? Test your thesis with our free DCF calculator. Release Date: August 04, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Record Q2 2026 revenue of $460 million, up 24% year-over-year, with record gross margin of 30%, operating margin of 20%, and net margin of 20%. Strong growth in silicon photonics revenue, up over 60% quarter-over-quarter and over 270% year-over-year, reaching an annualized run rate of over $680 million. Updated 2028 business model targets $3.6 billion in revenue, 45% gross margin, and 33% net margin, reflecting enhanced product mix and operational leverage. Customer contracts for silicon photonics revenue of approximately $1.3 billion for 2027, with even higher growth expected for 2028. Strategic expansion in Japan with METI support, including repurposing Fab 6 and building a new 300mm facility, to quadruple 300mm capacity for silicon photonics and SiGe. Strong balance sheet with $3.1 billion in shareholders' equity, a current ratio of 4.9, and $290 million in customer prepayments for 2027 capacity reservations. Continued R&D investment, with plans to increase R&D spending by over 40% while reducing operating expenses as a percentage of revenue to approximately 7%. RF Mobile revenue declined 14% year-over-year due to the strategic transition from 200mm to 300mm manufacturing and consolidation to Fab 7. Utilization rates for 200mm fabs (Fab 2, Fab 3, Fab 9) are only 80-85%, and Fab 5 is at 75%, below the 85% model assumption. The company faces execution risks related to the timely qualification of new capacity and tools, which could impact revenue growth. The updated 2028 model relies on assumptions of 85% utilization and forward-looking wafer selling prices, which may not be achieved. Potential geopolitical and supply chain risks, including exposure to Chinese technology export restrictions and indium phosphide supply constraints. The company has not provided specific financial guidance for Track 2 expansion, creating uncertainty about post-2028 growth and capital allocation. Q: Can you clarify the updated silicon photonics bookings for 2027 and the capacity expansion?A: Russell Ellwanger (CEO) clarified that while the $1.3 billion in customer contracts for 2027 silicon photonics revenue remains unchanged, the company provided an update on capacity. The wafer start capacity in Q4 2026 will be over 3 times higher than Q2 2026 shipment levels, with the full financial effect anticipated in Q2 2027. Oren Shirazi (CFO) added that this 3x figure refers to capacity, while the $1.3 billion represents customer-committed contracts. Ellwanger noted that while not all capacity is booked, it is "spoken for" by lead customers. Q: With the strong visibility you have, can you handicap the likelihood of sustaining or accelerating current growth rates?A: Russell Ellwanger (CEO) pointed to the updated 2028 financial model, which targets $3.6 billion in annual revenue, $1.63 billion in gross profit (45% margin), and $1.2 billion in net profit (33% margin). He stated that the company expects to reach these numbers at a minimum by run rate in 2028, allowing investors to estimate the implied growth rate from the current $2 billion annualized run rate. Q: Can you provide scale on the Japanese Track 1 and Track 2 projects, and how should we think about the capacity they will add?A: Russell Ellwanger (CEO) confirmed that the 2028 model assumes 85% utilization of the Track 1 build-out (repurposing the Arrai facility/Fab 6). For Track 2, the new adjacent facility will quadruple 300mm capacity, predominantly for silicon photonics and SiGe. He noted that final negotiations are ongoing regarding timing and equipment, with a target for everything to be installed and functioning by Q4 2028. The company expects to update its long-term financial model in 2027 as the build-out plan finalizes. Ellwanger emphasized the expansion will be funded through internal cash creation with no dilution. Q: As NPO (near package optics) becomes material next year, does it increase your content per transceiver, especially with heterogeneous integration of SiGe and SiPho?A: Russell Ellwanger (CEO) initially said no for NPO specifically, as it would be selling an NPO rather than a pluggable. However, he affirmed that for next-generation architectures requiring heterogeneous integration of III-V materials on silicon photonics (for integrated lasers and advanced modulators), the answer is yes. This is where the advanced packaging capabilities, including die-to-wafer and wafer-to-wafer bonding, become critical. He noted that SiGe capacity expansion is mainly embedded in Phase 2 (Track 2) rather than Phase 1, which is focused directly on SiPho expansion. Q: Given your emphasis on Japan, will U.S.-based customers be supported through Japanese facilities, or will you need to increase capacity elsewhere?A: Russell Ellwanger (CEO) stated that Tower continues to increase capacity in both Newport Beach and San Antonio, with further expansion planned. However, Japan was chosen for its geopolitical neutrality, making it an ideal supply source for any customer globally. He also highlighted Japan's exceptional workforce quality, R&D capabilities (derived from former Panasonic top engineers), and the country's strong manufacturing culture and education system as key reasons for the strategic investment. Q: When should RF mobile revenue stabilize given the transition from 200mm to 300mm manufacturing?A: Russell Ellwanger (CEO) avoided the term "stabilize," stating that based on design wins and tape-outs, the company expects Q2-Q3 of next year (2027) to see the largest 300mm manufacturing volumes ever for RFSOI. He indicated that Fab 10, where the 300mm RFSOI manufacturing is consolidated, will be "very, very full" by the second or third quarter of next year, positioning the company for continued growth rather than stabilization. Q: Can you quantify the 200mm versus 300mm capacity split for silicon photonics and SiGe after Track 2 is complete?A: Russell Ellwanger (CEO) stated that by mid-2028, all growth in SiGe and SiPho will be in 300mm. The agreement with METI is focused on optics, with plans to add at least 20,000-25,000 wafers per month of silicon photonics capacity, which could go much higher. He noted that the predominant portion of the 4x growth from Track 2 will be in silicon photonics, with the next largest portion in silicon germanium, though exact splits have not been announced. Q: How significant will NPO (near package optics) be as a contributor to SiPho revenues in 2027?A: Russell Ellwanger (CEO) indicated that NPO will be significant, estimating it will be in the "tens of the percentage" of what the company will be shipping, especially in the second half of 2027. This reflects the transition from pluggable optics to NPO deployments planned over the next year, with many more in design. Q: How much of your silicon photonics revenues will be packaging-related in the long term?A: Russell Ellwanger (CEO) clarified that Tower is not competing with packaging houses or separating packaging revenue. Instead, packaging is an enabler for the core silicon photonics platform. For example, integrated laser revenue (via chip-to-wafer bonding) could reach several tens of millions next year, and bringing this capability in-house provides better control over quality and start-to-ship times. The focus is on packaging as a means to grow the core business at the highest quality and speed. Q: With capacity additions from peers like GLOBALFOUNDRIES, STMicro, and Samsung, how do you view the supply/demand health of the industry over the next 12-24 months?A: Russell Ellwanger (CEO) stated that Tower has a definite advantage as it is qualified at lead customers worldwide with strong contracts lasting through 2028. The company maintains very high market share with lead customers through speed of execution and next-generation development programs. He emphasized that joint development with lead customers often includes exclusivity agreements, enabling Tower to maintain 100% market share on co-developed modules. He noted he hasn't closely tracked competitors' For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved record profitability with 30% gross and 20% net margins, driven by a rich product mix and powerful operating leverage as capacity investments began qualifying. Silicon photonics revenue surged 270% year-over-year, reaching an annualized run rate of $680 million, fueled by the fundamental shift in AI infrastructure where optical interconnects are replacing copper. Announced a dual-track 300mm capacity expansion in Japan, supported by the Ministry of Economics, Trade and Industry (METI), to establish a global hub for silicon photonics and advanced optical packaging. Strategic transition of RF mobile business from 200mm to 300mm is underway, consolidating manufacturing to optimize fab utilization for higher-margin optical products. Operational efficiency is improving through scale, with management targeting a reduction in total operating expenses to approximately 7% of revenue while simultaneously increasing R&D investment by 40%. Power management segment saw strong new customer acquisitions driven by mission-critical demand for power density and thermal efficiency in high-performance computing. Updated 2028 financial model targets $3.6 billion in revenue and a 33% net profit margin, assuming 85% utilization across all fabs post-expansion. Guidance for Q3 2026 projects a $520 million revenue midrange, representing an annualized run rate exceeding $2 billion as new capacity ramps. Track 1 of the Japan expansion expects full production readiness by Q4 2027, focusing on repurposing the Arai facility for 300mm silicon photonics. Track 2 expansion aims to quadruple 300mm manufacturing output in Japan by late 2028, providing a seamless growth path for next-generation AI and data center applications. Anticipate a 3x increase in 300mm RFSOI wafer starts by mid-2027 compared to current levels, driven by strong design win momentum in premium smartphones. Executing a $920 million CapEx plan for SiGe and SiPho equipment, with 50% already paid and the remainder scheduled through 2027. Secured $290 million in customer prepayments during Q1 2026, primarily for 2027 capacity reservations, strengthening the balance sheet for internal funding of expansions. Entered a multiyear epitaxial wafer supply agreement with IQE to secure III-V materials, internalizing key manufacturing steps for integrated lasers and modulators. Management highlighted geopolitical neutrality and the high-quality manufacturing culture in Japan as primary strategic reasons for concentrated investment in the region. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management confirmed the expansion will quadruple 300mm capacity, including the Fab 6 repurposing, with a target for full functionality by Q4 2028. The project will be funded entirely through internal cash creation, avoiding any equity dilution or external fundraising events. NPO is expected to be a significant contributor by 2027, likely representing double-digit percentages of total shipments in the second half of that year. While NPO may not increase content per transceiver, Advanced packaging capabilities, including die-to-wafer and wafer-to-wafer bonding, are being implemented as part of the company's strategic expansion and serve as a critical enabler for next-generation technology developments. Tower differentiates through technical 'figures of merit,' specifically leading the industry in low insertion loss, which reduces the need for expensive lasers. Management relies on deep R&D partnerships and exclusivity agreements for future generations (Gen+2 and Gen+3) to maintain majority market share with lead customers. The most sensitive variable in the long-term model is the average selling price (ASP) per wafer, as price fluctuations flow directly to the bottom line. Other critical assumptions include the timing of tool qualifications and maintaining the targeted 85% utilization rate across the expanded footprint.

$460 million second quarter revenue, 24% year-over-year growth; Guiding third quarter revenue of $520 million, 31% year-over-year growth MIGDAL HAEMEK, Israel, Aug. 04, 2026 (GLOBE NEWSWIRE) -- Tower Semiconductor (NASDAQ/TASE: TSEM) reports today its results for the second quarter ended June 30, 2026. Second Quarter of 2026 Results OverviewRevenue for the second quarter of 2026 was a record of $460 million, representing revenue growth of 24% year over year. Gross profit for the second quarter of 2026 was a record of $138 million, 72% higher than $80 million in the second quarter of 2025. Operating profit for the second quarter of 2026 was $90 million, record operating profit (excluding non-recurring items), and 2.3X of the $40 million operating profit for the second quarter of 2025. Net profit for the second quarter of 2026 was a record $91 million (excluding non-recurring items), representing 20% net margin and reflecting $0.80 basic and $0.79 diluted earnings per share. Compared to the second quarter of 2025, net profit is 95% higher than $47 million net profit that reflected $0.42 basic and $0.41 diluted earnings per share. Cash from operating activities in the second quarter of 2026 was $177 million and investments in property and equipment, net, were $187 million. In the second quarter of 2025, cash flow generated from operating activities was $123 million and investments in property and equipment, net, were $111 million. Business OutlookThe Company provides revenue guidance of $520 million for the third quarter of 2026, a Company record, with an upward or downward range of 5%. Mid-range revenue guidance represents an increase of 31% year-over-year and 13% quarter-over-quarter. Russell Ellwanger, Chief Executive Officer of Tower Semiconductor, said: “Amidst a powerful demand momentum across Tower’s key business units, we achieved record revenue and record profitability, whilst simultaneously strengthening our technology leadership and greatly expanding manufacturing capacity throughout 2026. Moreover, we recently announced additional substantial capacity expansions, in direct support of our strong growing customer demand. SiPho presented triple digit year over year revenue increase to $680 million annual run rate in the second quarter of 2026 from $180 million annual run rate in the second quarter of 2025. We plan to cross the $1 billion of SiPho revenue annual run rate in the fourth quarter of 2026, with continued significant growth throughout 2027.” Ellwanger further added: “We are raising our 2028 target business model to $3.6 billion of revenue with $1.2 billion net profit, being fully spoken for by our customers. Deep strategic customer engagements provide exciting sustainable growth for our customers, and for Tower, thus enabling growing shareholders’ value.” Teleconference and Webcast Tower Semiconductor will host an investor conference call today, Tuesday, August 4, 2026, at 10:00 a.m. Eastern time (9:00 a.m. Central time, 8:00 a.m. Mountain time, 7:00 a.m. Pacific time and 5:00 p.m. Israel time) to discuss the Company’s financial results for the second quarter of 2026 and its business outlook. The call will be webcast and available through the Investor Relations section of Tower Semiconductor’s website at ir.towersemi.com. The pre-registration form required for dial-in participation is accessible here. Upon completing the registration, participants will receive the dial-in details, a unique PIN, and a confirmation email with all necessary information. To access the webcast, click here. The teleconference will be available for replay for 90 days. Non-GAAP Financial Measures The Company presents its financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). The financial information included in the tables below includes unaudited condensed financial data. Some of the financial information, which may be used and/or presented in this release and/or prior earnings related filings and/or in related public disclosures or filings with respect to the financial statements and/or results of the Company, which we may describe as adjusted financial measures and/or reconciled financial measures, are non-GAAP financial measures as defined in Regulation G and related reporting requirements promulgated by the Securities and Exchange Commission (the “SEC”) as they apply to our Company. These adjusted financial measures are calculated excluding the following: (i) amortization of acquired intangible assets as included in our costs and expenses, and (ii) compensation expenses in respect of equity grants to directors, officers, and employees as included in our costs and expenses. These adjusted financial measures should be evaluated in conjunction with, and are not a substitute for, GAAP financial measures. The tables also present the GAAP financial measures, which are most comparable to the adjusted financial measures used and/or presented in this release, as well as a reconciliation between the adjusted financial measures and the comparable GAAP financial measures. As used and/or presented in this release and/or prior earnings related filings and/or in related public disclosures or filings with respect to the financial statements and/or results of the Company, as well as may be included and calculated in the tables herein, the term Earnings Before Interest Taxes, Depreciation and Amortization which we define as EBITDA consists of operating profit in accordance with GAAP, excluding (i) depreciation expenses, which include depreciation recorded in cost of revenue and in operating cost and expenses lines (e.g., research and development related equipment and/or fixed other assets depreciation), (ii) stock-based compensation expense, and (iii) amortization of acquired intangible assets. EBITDA is reconciled in the tables below and/or prior earnings-related filings and/or in related public disclosures or filings with respect to the financial statements and/or results of the Company from GAAP operating profit. EBITDA and the adjusted financial information presented herein and/or prior earnings-related filings and/or in related public disclosures or filings with respect to the financial statements and/or results of the Company, are not a required GAAP financial measure and may not be comparable to a similarly titled measure employed by other companies. EBITDA and the adjusted financial information presented herein and/or prior earnings-related filings and/or in related public disclosures or filings with respect to the financial statements and/or results of the Company, should not be considered in isolation or as a substitute for operating profit, net profit or loss, cash flows provided by operating, investing and financing activities, per share data or other profit or cash flow statement data prepared in accordance with GAAP. The term Net Cash, as may be used and/or presented in this release and/or prior earnings-related filings and/or in related public disclosures or filings with respect to the financial statements and/or results of the Company, is comprised of cash, cash equivalents and short-term deposits less debt amounts as presented in the balance sheets included herein. The term Net Cash is not a required GAAP financial measure, may not be comparable to a similarly titled measure employed by other companies and should not be considered in isolation or as a substitute for cash, debt, operating profit, net profit or loss, cash flows provided by operating, investing and financing activities, per share data or other profit or cash flow statement data prepared in accordance with GAAP. The term Free Cash Flow, as used and/or presented in this release and/or prior earnings related filings and/or in related public disclosures or filings with respect to the financial statements and/or results of the Company, is calculated to be net cash provided by operating activities (in the amounts of: $177 million for the three months period ended June 30, 2026;  $510 million for the three months period ended March 31, 2026 that includes $285 million increase in customers’ advances, net; $123 million for the three months period ended June 30, 2025;  $687 million for the six months period ended June 30, 2026 that includes $283 million increase in customers’ advances, net; $217 million for the six months period ended June 30, 2025) less cash used for investments in property and equipment, net (in the amounts of $187 million, $156 million and $111 million for the three months periods ended June 30, 2026, March 31, 2026 and June 30, 2025, respectively and in the amounts of $343 million and $222 million for the six months periods ended June 30, 2026 and June 30, 2025, respectively). The term Free Cash Flow is not a required GAAP financial measure, may not be comparable to a similarly titled measure employed by other companies and should not be considered in isolation or as a substitute for operating profit, net profit or loss, cash flows provided by operating, investing, and financing activities, per share data or other profit or cash flow statement data prepared in accordance with GAAP. About Tower Semiconductor      Tower Semiconductor Ltd. (NASDAQ/TASE: TSEM), the leading foundry of high-value analog semiconductor solutions, provides technology, development, and process platforms for its customers in growing markets such as consumer, industrial, automotive, mobile, infrastructure, medical and aerospace and defense. Tower Semiconductor focuses on creating a positive and sustainable impact on the world through long-term partnerships and its advanced and innovative analog technology offering, comprised of a broad range of customizable process platforms such as SiPho, SiGe, BiCMOS, mixed-signal/CMOS, RF CMOS, CMOS image sensor, non-imaging sensors, displays, integrated power management (BCD and 700V), and MEMS. Tower Semiconductor also provides world-class design enablement for a quick and accurate design cycle as well as process transfer services including development, transfer, and optimization, to IDMs and fabless companies. To provide multi-fab sourcing and extended capacity for its customers, Tower Semiconductor currently owns one operating facility in Israel (200mm), two in the U.S. (200mm), and two in Japan (200mm and 300mm) which it owns through its 51% holdings in TPSCo and shares a 300mm facility in Agrate, Italy with STMicroelectronics. For more information, please visit: www.towersemi.com. CONTACT: Liat Avraham | Investor Relations | +972-4-6506154 | [email protected] Forward-Looking Statements This release, as well as other statements and reports filed, stated and published, include certain “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, among others, projections and statements with respect to our future business, financial performance and activities. The use of words such as “projects”, “expects”, “may”, “targets”, “plans”, “forecast”, “intends”, “committed to”, “tracking”, or variations or words of similar import, may identify a statement as “forward-looking.” However, the absence of these words does not mean that a statement is not forward-looking.  Actual results may vary from those projected or implied by such forward-looking statements and you should not unduly rely on such forward-looking statements, which speak only as of the date of this release. Factors that could cause actual results to differ materially from those projected or implied by such forward-looking statements include, without limitation, risks and uncertainties associated with: (i) fluctuating demand in our customers’ end markets and/or SiPho, SiGe and other customer demand may not increase to the levels currently forecasted by the Company, (ii) reliance on acquisitions, establishing new fabs and/or gaining additional capacity for growth, (iii) difficulties in achieving acceptable operational metrics and indices as a result of operational, technological or process-related problems, (iv) identifying and negotiating with third-party buyers for the sale of any excess and/or unused equipment, inventory and/or other assets, (v) maintaining current key customers and attracting new key customers, (vi) over demand for our foundry services and/ or products that may result in operational bottlenecks, extend cycle times, reduce yield, delay delivery schedules, that may result in compensation, penalties and/ or prepayment repayments, loss of customers, revenues, profits and/ or reputation, including with respect to SiPho customer prepayments received for certain minimum capacity commitments, due to inability to fulfill, in whole or in part, all such demand and commitments in a timely manner or at all,  (vii) fluctuation of our financial results from quarter to quarter, (viii) the additional 300mm manufacturing facility the Company plans to establish adjacent to Fab 7 and maximization of the Company’s Fab 7 300mm output (including risks associated with the repurposing of the Arai facility), including risks associated with delays in construction period and cost, obtaining necessary equipment and/ or obtaining necessary permits, Government of Japan and/or METI grants terms and covenants relating thereto (which may result in loss of a portion or all of the grant funds), and/ or other consents required, and the negotiation of definitive agreements with vendors and others, that may result in lower profitability than currently expected and/ or added costs and losses, longer return on investment period, including risks associated with the ability to obtain any financing required to fund the establishment, facilities and machinery cost net investments on favorable terms, or at all, (ix) our debt and other liabilities may impact our financial position and operations, (x) our ability to successfully execute acquisitions, integrate them into our business, utilize our expanded capacity and find new business, (xi) fluctuations in cash flow, (xii) our ability to satisfy the covenants stipulated in our agreements with our debt holders and/ or possible incurrence of additional indebtedness, (xiii) pending litigation, (xiv) meeting the conditions set in approval certificates and other regulations under which we received grants and/or royalties and/or any type of funding from the Israeli, US and/or Japan governmental agencies, (xv) receipt of orders that are lower than the customer purchase commitments or forecast and/or failure to receive customer orders currently expected,  (xvi) the effects of global recession, credit crisis and/or unfavorable macro-economic conditions, such as the imposition of regulatory requirements, tariffs, import and export restrictions and other trade barriers and restrictions, including the timing and availability of export licenses and permits, (xvii) our ability to accurately forecast financial performance, which is affected by limited order backlog and lengthy sales cycles which may cause financial results to fluctuate from quarter to quarter, (xviii) possible situations of obsolete inventory or overcapacity if forecasted demand exceeds actual demand when we create inventory before receipt of customer orders, (xix) the cyclical nature of the semiconductor industry and the resulting periodic overcapacity, fluctuations in operating results and future average selling price erosion, (xx) capacity and capability expansion and acquisition related transactions in our existing fabrications, strategic and/or other in-organic capacity and/ or capability growth and/ or M&A transactions and opportunities, and/ or the acquisition of and/ or the establishment of a new factory or factories, including the additional 300mm manufacturing facility the Company plans to establish adjacent to Fab 7 and maximization of the Company’s Fab 7 300mm output (including risks associated with the repurposing of the Arai facility), which could require funding needs beyond our existing cash, the availability of which cannot be assured on favorable terms, if at all, and which may have adverse impact on the market value of the Company and the price of the Company’s ordinary shares,  (xxi) operating our facilities at sufficient utilization rates necessary to generate and maintain positive and sustainable gross, operating and net profit, (xxii) the purchase of equipment and/or raw material (including purchases under committed contracts), the timely completion of the equipment installation, technology transfer and raising the funds therefor, (xxiii) product returns and defective products, (xxiv) our ability to maintain and develop our technology processes and services to keep pace with new technology, including artificial intelligence, evolving standards, changing customer and end-user requirements, new product introductions and short product life cycles, (xxv) competing effectively, (xxvi) our dependence on increased use of outsourced foundry services for specialty process technologies, (xxvii) our dependence on intellectual property rights of others, our ability to operate our business without infringing others’ intellectual property rights and our ability to enforce our intellectual property against infringement, including risks and uncertainties associated with the infringement claims that the Company is currently party to, brought by GlobalFoundries and certain affiliate alleging infringement of certain of its patents, (xxviii) Fab 3 landlord’s alleged claims regarding noise abatement and request for judicial declaration of material non-curable breach of the Fab3 lease, and in addition, alleged claims by a third-party with whom the landlord is engaged pertaining to the Fab3 site, where such third party requests judicial declaration to enforce certain rights with respect to the lease extension, (xxix) retention of key employees and recruitment and retention of skilled qualified personnel, (xxx) exposure to inflation, currency rates (mainly the Israeli Shekel and the Japanese Yen) and interest rate fluctuations and risks associated with doing business locally and internationally, as well as fluctuations in the market price of our traded securities, (xxxi) meeting regulatory requirements worldwide, including export, environmental and governmental regulations, as well as risks related to international operations, (xxxii) engagements for fab establishment, joint venture and/or capital lease transactions for capacity enhancement in advanced technologies, including risks and uncertainties associated with the Agrate fab, such as its qualification schedule, technology, equipment and process qualification, facility operational ramp-up, customer engagements, cost structure, required investments and other terms, which may require additional funding to cover significant capacity investment needs and other payments, (xxxiii) potential liabilities, cost and other impact due to reorganization and consolidation of fabrication facilities, or cessation of operations, (xxxiv) potential security, cyber and privacy breaches, (xxxv) workforce that is not unionized which may become unionized, and/or workforce that is unionized and may take action such as strikes that may create increased cost and operational risks, (xxxvi) the issuance of ordinary shares as a result of exercise and/or vesting of any of our employee equity, as well as any sale of shares by any of our shareholders, or any market expectation thereof, as well as the issuance of additional employees’ restricted stock units, or any market expectation thereof, which may depress the market value of the Company and the price of the Company’s ordinary shares, and in addition may impair our ability to raise future capital, (xxxvii) the dispute resolution process in relation to Intel’s determination not to perform its agreement to build a capacity corridor to enable Intel to manufacture wafers for Tower’s customers, which process may be costly and/ or may result in losses and/or other  adverse impact, (xxxviii) Pillar Two tax rules and regulations previously released by the OECD, which require a minimum effective corporate income tax rate of 15% applicable in every jurisdiction in which the company operates, which will result in additional income tax expenses for the years 2026 and beyond, mainly with respect to the Company’s Israeli operations in which the Company was subject to 7.5% preferred tax rate until 2025 under Israeli laws, and (xxxix) climate change, business interruptions due to floods, fires, pandemics, earthquakes and other natural disasters, the security situation in Israel and global trade “war”, including the potential inability to continue uninterrupted operations of the Israeli fab, impact on global supply chain to and from the Israeli fab, delays in the delivery, installation and qualification of equipment, power interruptions, chemicals or other leaks or damages as a result therefrom, absence of workforce due to military service as well as risk that certain countries will restrict doing business with Israeli companies, including imposing restrictions due to hostilities in Israel or political instability in the region that may continue or exacerbate, and other events beyond our control. Due to hostilities and instability in neighboring states, Israel could be subject to additional political, economic, and military confines, and our Israeli facility’s operations could be materially adversely affected. Any current or future hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners, or a significant downturn in the economic or financial condition of Israel, could have a material adverse effect on our business, financial condition and results of operations. A more complete discussion of risks and uncertainties that may affect the forward-looking statements included in this release or which may otherwise affect our business is included under the heading "Risk Factors" in the Company’s most recent filings on Forms 20-F and 6-K, as were filed with the SEC and the Israel Securities Authority. Future results may differ materially from those previously reported. The Company does not intend to update and expressly disclaims any obligation to update or revise any forward-looking information contained in this release to reflect any changes in expectations with regard thereto, or any change in events, conditions or circumstances on which any such statement is based. (Financial tables follow)

Interested in Tower Semiconductor Ltd.? Here are five stocks we like better. Record results: Tower Semiconductor’s second-quarter 2026 revenue rose 24% year over year to $460 million, while net profit nearly doubled to $91 million. The company expects third-quarter revenue of about $520 million. Higher 2028 targets: Tower raised its 2028 model to $3.6 billion in revenue, with a 45% gross margin and $1.38 billion in operating profit, citing stronger product mix and operating leverage. Silicon photonics expansion: AI data-center demand drove silicon photonics revenue up more than 270% year over year. Tower is expanding 300-millimeter capacity in Japan and targets a $1 billion silicon photonics annualized run rate in the fourth quarter of 2026. Tower Semiconductor’s AI Rally Is Built on a Light-Speed Bet Tower Semiconductor (NASDAQ:TSEM) reported record second-quarter 2026 revenue and profitability, citing accelerating demand for silicon photonics and related data-center connectivity products. The company also raised its 2028 financial model and detailed a two-track expansion plan in Japan intended to increase 300-millimeter manufacturing capacity for silicon photonics, silicon germanium and advanced optical packaging. Second-quarter revenue reached $460 million, up 11% from $414 million in the first quarter and 24% from $372 million a year earlier. Chief Executive Officer Russell Ellwanger said the quarter established company records across key financial measures, excluding non-recurring accounting items. → SpaceX’s First Earnings Report Could Decide Whether Shorts or Bulls Have Control Aeluma’s Market Is Laser-Focused on Fresh Highs—Here’s Why Gross profit was $138 million, producing a 30% gross margin, while operating profit totaled $90 million. Net profit was $91 million, or a 20% net margin, compared with $47 million in the prior-year quarter. Diluted earnings per share were $0.79, compared with $0.41 a year earlier. Chief Financial Officer Oren Shirazi said the company’s second-quarter gross profit increased 72% year over year, while operating profit was 2.26 times the year-earlier level. Tower ended June with $3.8 billion in assets, including $1.6 billion of net fixed assets and $2 billion of current assets. Shareholders’ equity reached $3.1 billion, and the current ratio was approximately 4.9 times. → Financials Hit Record Highs as the AI Trade Unravels—Can They Keep Leading? 4 deep values for opportunistic investing Tower forecast third-quarter 2026 revenue of approximately $520 million at the midpoint of its guidance range. Ellwanger said that outlook would represent an annualized revenue run rate above $2 billion. The company updated its 2028 model to target $3.6 billion in annual revenue, $1.63 billion in gross profit and a 45% gross margin. The model also calls for $1.38 billion in operating profit, representing a 38% operating margin, and $1.2 billion in net profit, or a 33% net margin. → Why Rare Earth Processing Could Be the Real 2027 Opportunity Shirazi said the revised revenue target is $760 million above Tower’s February 2026 model, while the projected gross profit is $510 million higher. The company attributed the increase to an enhanced product mix and expected operating leverage as revenue grows. The model assumes all fabs operate at 85% utilization after equipment installation and qualification, as well as assumptions regarding wafer selling prices, costs, completion dates for equipment and process qualifications, and customer product qualifications and orders. During the question-and-answer session, Shirazi said wafer selling prices typically carry the greatest potential variability because changes in selling prices flow directly to margin. Tower recently announced a dual-track 300-millimeter capacity expansion in Japan, supported by Japan’s Ministry of Economy, Trade and Industry, or METI. The first track involves repurposing the Arai facility, formerly Fab 6, for 300-millimeter silicon photonics production and advanced packaging capabilities, while maximizing output at the company’s Fab 7 facility in Uozu. Full production readiness for Track 1 is expected in the fourth quarter of 2027. Ellwanger said the project is a driver of the company’s updated 2028 model and will add substantial capacity during 2027. Track 2 involves constructing an additional 300-millimeter facility adjacent to Fab 7. Tower said this project is expected to more than quadruple its Japanese 300-millimeter manufacturing output, including the incremental capacity from the Arai project. The facility is intended to support silicon photonics, silicon germanium and related advanced optical packaging applications. Ellwanger said the company’s target is for the Track 2 facility and equipment to be installed and operational by the fourth quarter of 2028, providing a growth path beyond that year. He added that the precise equipment installation schedule remains under negotiation, though budgets have been approved and Tower intends to fund the project through internally generated cash rather than a capital raise. RF infrastructure accounted for 49% of second-quarter revenue and grew approximately 43% sequentially and more than 140% year over year. Within that segment, silicon photonics revenue increased more than 60% from the prior quarter and more than 270% from a year earlier, reaching an annualized second-quarter run rate above $680 million. Tower is targeting a $1 billion silicon photonics run rate in the fourth quarter of 2026 as previously announced capacity expansion is qualified. The company expects the full ramp of wafer starts from those investments during the fourth quarter, with the full financial impact expected in the second quarter of 2027. Ellwanger said Tower has announced customer contracts representing approximately $1.3 billion in silicon photonics revenue for 2027, with higher growth expected in 2028. He said additional capacity planned through Track 1 has been requested and committed by several lead customers, though not all of it is formally booked. The company said demand is being supported by AI data-center infrastructure, where optical connectivity is increasingly required to move data among processors. Tower highlighted near-packaged optics, or NPO, as an emerging opportunity and said several NPO deployments are planned over the next year. Ellwanger said NPO could represent a significant, rather than single-digit, percentage of silicon photonics shipments by the second half of 2027. Tower also entered a multiyear epitaxial wafer supply agreement with IQE for III-V materials used in its silicon photonics roadmap. The company said its long-standing collaboration with Marvell reached a milestone in which the number of silicon-photonics-based coherent optical modules exceeded several million. RF mobile represented 12% of second-quarter revenue. Revenue from 300-millimeter RF silicon-on-insulator products declined 14% year over year as Tower transitions manufacturing and consolidates production. However, Ellwanger said the company has secured design-win momentum in premium smartphones and expects 300-millimeter RF SOI wafer starts to be three times second-quarter 2026 shipment levels by mid-2027. Power management accounted for 14% of revenue, with year-over-year growth driven by demand for 200-millimeter and 300-millimeter BCD offerings. Sensor display represented another 12% of revenue. Image-sensor revenue was largely flat year over year, though Tower reported increased demand for high-resolution machine-vision sensors used in semiconductor and EV battery inspection. The company is executing a $920 million capital expenditure program to expand silicon photonics and silicon germanium capacity across fabs in Israel, Newport Beach, Texas and Japan. Approximately half of that investment had been paid through the second quarter, with the remainder expected to be paid during the second half of 2026 and throughout 2027. Tower Semiconductor, traded on NASDAQ under the symbol TSEM, is a specialty foundry company that provides analog and mixed-signal semiconductor manufacturing services to a broad array of customers worldwide. The company focuses on delivering tailored process technologies for high-growth markets, including radio frequency (RF), power management, imaging, automotive electronics, and Internet of Things (IoT) applications. By combining deep process know-how with flexible manufacturing capabilities, Tower Semiconductor supports the development and volume production of advanced semiconductor devices for fabless and integrated device manufacturer customers. The company's technology portfolio spans standard and specialty processes such as CMOS, BiCMOS, high-voltage, radio frequency, silicon photonics, micro-electromechanical systems (MEMS) and image sensor production. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Tower Semiconductor Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.