0001140361-26-009004
SEC filingRevenue grew 6.1% YoY to $225.1M, driven by high-end IC demand in Asia; gross margin stable at 35.0%.
In Q1 FY26, Photronics reported revenue of $225.1 million, up 4.3% sequentially and 6.1% year-over-year. Gross profit rose to $78.7 million, with gross margin stable at 35.0% QoQ but down 60 bps from 35.6% in Q1 FY25, primarily due to changes in product mix leading to higher material costs. Operating income was $54.8 million (24.4% of revenue), compared to $54.5 million (24.6%) in the prior year quarter. Net income attributable to Photronics shareholders was $42.9 million ($0.74 diluted EPS), versus $42.9 million ($0.68) a year ago, with the effective tax rate declining to 19.3% from 24.5% due to an investment tax credit. Operating cash flow increased to $97.3 million from $78.5 million, driven by working capital improvements.
IC revenue grew 5.0% QoQ and 7.4% YoY to $165.3 million, fueled by high-end products (28nm and below) which rose 18.6% YoY to $71.3 million, driven by accelerated demand in Asia ahead of Chinese New Year. Mainstream IC increased slightly by 0.2% YoY. FPD revenue increased 2.5% QoQ and 2.7% YoY to $59.8 million, with mainstream FPD surging 50.8% YoY to $12.8 million on China IT display demand, while high-end FPD declined 5.5% YoY to $46.9 million. Geographically, growth was led by China (+17.1% YoY), South Korea (+2.1%), and Taiwan (+1.8%), while the US declined 14.1% QoQ but was flat YoY.
Management expects capital expenditures of approximately $330 million for fiscal 2026, primarily in Asia and the US, targeting high-end and mainstream capacity to support customer demands. As of February 1, 2026, the company had $190.6 million in outstanding capital commitments and $29.3 million in accrued liabilities. The company also has $27.6 million remaining under its share repurchase authorization. While no formal revenue guidance is provided, management notes seasonal impacts from holiday periods and remains focused on advancing technology and cost reduction. The effective tax rate is sensitive to jurisdictional mix and includes impacts from the One Big Beautiful Bill Act (OBBBA) enacted in July 2025.
Photronics ended Q1 FY2026 with a robust cash position of $544.1M, complemented by $92.7M in short-term investments, totaling $636.9M in cash and marketable securities. The company carries virtually no debt ($21k total), providing significant financial flexibility. Shareholders' equity stands at $1.211B, and total equity including noncontrolling interests is $1.650B.
The Notes do not disclose any material purchase commitments or contractual obligations beyond routine warranty provisions. The company's backlog is short (1-2 weeks for IC, 2-3 weeks for FPD), and it has elected not to disclose remaining performance obligations for contracts under one year. Contract liabilities (deferred revenue) are $26.9M.
Photronics has a share repurchase program with $27.6M remaining authorization as of Feb 1, 2026. No shares were repurchased during the quarter. The board authorized an additional $25M in June 2025. No dividends are paid. Capital expenditures are not discussed in the Notes but are visible in the cash flow statement ($47.6M in Q1); however, per scope limitations, only Notes-level data is used here.
The company operates as a single reportable segment, with revenue disaggregated by product type and geography. IC photomasks contributed $165.3M (73.4% of total), while FPD contributed $59.8M. High-end IC grew 18.6% YoY to $71.3M. Geographically, Taiwan ($74.3M), China ($62.7M), and South Korea ($41.1M) led, with the U.S. at $37.4M. Revenue recognized over time represents 97% of total.
Operating cash flow of $97.3M exceeded net income of $60.2M, indicating strong cash generation from operations, largely due to favorable working capital changes (accounts payable and accrued liabilities increased by $20.1M). Capex of $47.6M was 49% of CFO, a moderate intensity, but the company remained free cash flow positive (CFO minus capex = $49.6M). The company did not repurchase shares in the current quarter, returning $0.7M through share-based arrangements, while prior year saw $4.6M in buybacks. Investing activities used $40.3M, including $47.6M in capex partially offset by proceeds from short-term investments. Financing activities provided $0.7M, compared to a use of $20.5M in the prior year. Overall, cash and equivalents increased by $51.8M to $544.1M. The cash conversion cycle appears healthy, with no apparent anomalies.