Tower (TSEM) Q2 2026 Earnings Report

The call presents a strongly positive operational and financial picture: record revenue, materially improved margins and EPS, rapid silicon photonics growth with large customer contracts, an aggressive but funded CapEx expansion plan (including METI-backed Japan projects), and a robust balance sheet. The primary risks are execution and timing of the large Track 2 expansion, model assumptions (selling prices, tool qualification timing, utilization), and near-term transitional impacts in RFSOI and certain fabs. These risks are significant but appear manageable given strong customer commitments, prepayments, supplier agreements, and cash position.

Tower guided Q3 midrange revenue of $520 million (implying an annualized run rate above $2.0 billion) and updated its 2028 model to $3.6 billion in revenue with $1.63 billion gross profit (45% gross margin), $1.38 billion operating profit (38% operating margin) and $1.2 billion net profit (33% net margin) — a $760 million (27%) revenue upgrade versus the February model that adds $510M of gross profit (+67% on the incremental revenue), $480M of operating profit (+63%) and $450M of net profit (+59%). Key assumptions include ~85% fab utilization after CapEx qualifications, a $920 million CapEx plan (~50% paid to date), operating expenses falling to ~7% of revenue while R&D increases >40%, SiPho Q2 annualized run rate >$680M targeting $1.0B in Q4'26 with wafer-start capacity >3x Q2 levels (full financial effect by Q2'27), ~ $1.3B of SiPho 2027 customer contracts, Track 1 production readiness by Q4'27 and Track 2 delivering a >4x increase in Japanese 300mm output (targeting installation/functioning by Q4'28).