Vishay ((VSH)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Vishay Intertechnology presented a cautiously optimistic outlook, reflecting significant revenue growth and strategic investments, particularly in the automotive and industrial segments. Despite these positive developments, the company is facing challenges such as gross margin pressure due to rising metal prices and currency fluctuations. The sentiment expressed during the call suggests that while there are hurdles, the company is actively addressing them with a strategic focus on growth areas.
Revenue Growth
Vishay reported a sequential revenue growth of 4%, reaching $791 million, which exceeded the midpoint of their guidance by 2%. This growth was notably driven by the automotive, industrial, computer, and medical segments, showcasing the company’s strong performance in these key areas.
Positive Book-to-Bill Ratio
The company highlighted a positive book-to-bill ratio for October, standing at 1.15. This indicates improving market conditions, particularly in automotive, smart grid infrastructure, aerospace defense, and AI-related power requirements, suggesting a promising outlook for these sectors.
Automotive Segment Growth
The automotive segment experienced a 7% revenue increase compared to the second quarter, attributed to higher volumes in the Americas and Europe. Vishay’s increased engagements with automotive OEMs and Tier 1 customers have been pivotal in driving this growth.
Industrial and AI Demand
Revenue from the industrial segment rose by 2%, fueled by demand for capacitors in smart grid projects. Additionally, there is a growing demand for AI servers and associated power components, indicating a robust market for these technologies.
Strategic Investment in Capacity
Vishay has invested $179 million in capacity year-to-date, with plans to spend between $300 million and $350 million for the year. A significant 70% of this investment is focused on expansion projects, underscoring the company’s commitment to scaling its operations.
Gross Margin Pressure
The company faced gross margin pressure, which was slightly below guidance at 19.5%. This was primarily due to elevated metal prices and currency headwinds, with the Newport facility negatively impacting the margin by 150 basis points.
Book-to-Bill Ratio Below Parity in Q3
For the third quarter, the book-to-bill ratio was slightly below parity at 0.97, reflecting some market challenges. However, improvements in October’s run rate offer a more optimistic outlook.
Aerospace and Defense Revenue Decline
Revenue in the aerospace defense segment saw a 2% decline quarter-over-quarter, attributed to slow funding releases from the U.S. Department of Defense, highlighting a challenge in this area.
EMS Channel Revenue Decline
Sales to the EMS channel fell by 7%, with reductions across all regions. This decline reflects a mix impact and poses a challenge for the company.
Challenges with Metal Costs
Increases in metal prices, particularly gold and silver, have presented challenges, negatively impacting profitability and contributing to gross margin pressure.
Forward-Looking Guidance
Looking ahead to Q4 2025, Vishay expects revenues of $790 million, plus or minus $20 million, with a gross margin of 19.5%, plus or minus 50 basis points. The Newport facility is anticipated to continue impacting gross margins negatively. SG&A expenses are projected to be $138 million, plus or minus $2 million. The company also expects a meaningful tax expense due to changes in tax laws. Despite these challenges, increasing demand from automotive, AI server, smart grid infrastructure, and industrial sectors are seen as positive indicators for future growth.
In summary, Vishay’s earnings call reflects a cautiously optimistic sentiment, with significant revenue growth and strategic investments in key segments. While challenges such as gross margin pressure and declines in certain channels persist, the company is actively addressing these issues and remains focused on leveraging growth opportunities in the automotive, industrial, and AI sectors.