Key Highlights

  • TSEM reported record third quarter 2026 Revenue of $526 million, up from $396 million a year earlier and $460 million in the second quarter.
  • Gross profit rose 92% to a record $179 million, and operating profit of $127 million was 2.5 times the prior-year level.
  • Net profit was $120 million, a 23% margin, or $1.05 per diluted share versus $0.47 a year ago.
  • Silicon photonics contributed about $240 million of third quarter revenue, with year-end capacity expected to reach about double the level behind that figure.
  • Fourth quarter revenue guidance is centered on $600 million, implying full-year 2026 revenue of about $2 billion versus $1.57 billion in 2025.

Record $526 Million Quarter and a 2.2-Fold Jump in Net Profit

Tower Semiconductor (NASDAQ:TSEM) reported record results for the third quarter of 2026 on Nov 2, 2026. Revenue was $526 million, up about 33% (calculated) from $396 million in the third quarter of 2025 and 14% above the $460 million of the second quarter. Figures are in US dollars.

The company makes differentiated analog semiconductors for data center, mobile, automotive and imaging customers, and operates fabs in Israel, the United States, Japan and Italy. Gross Profit climbed 92% to $179 million, and operating profit reached $127 million, 2.5 times the year-earlier figure.

Net profit was $120 million, a 23% net Margin compared with 14% a year ago and more than double the $54 million earned in the prior-year quarter. Diluted Earnings per Share were $1.05, against $0.47. Incremental gross margin was about 62%, and management expects 55% to 58% over time.

Silicon Photonics Capacity to Double by Year-End on a $920 Million Build-Out

Silicon photonics revenue was about $240 million in the quarter. Management said year-end capacity should be roughly twice the level that supported that revenue, rising to about triple with a 300-millimeter expansion in Japan targeted for full production in the third quarter of 2027.

Customer commitments for this capacity now extend through 2029, and expansion is to be self-funded. About 65% of the $920 million Investment plan has been paid, with the rest due in the fourth quarter of 2026 and the first half of 2027. Management expects a full return on that outlay within one year.

The company is prototyping near-package optics products with more than 10 top customers. Demand for its BCD technologies grew about 10% year over year, and long-term agreements imply roughly 20% higher blended prices in 2027 versus 2026.

Balance Sheet Strength Behind the Expansion

At the end of September 2026, total Assets were $4 billion, with $2 billion in current assets. Shareholders' Equity reached a record $3.2 billion, or 80% of total assets, and the current ratio was about 3.7.

Prepayments from silicon photonics customers, including the previously announced $290 million received in the first quarter of 2026, are recorded as customer advances and counted in operating cash flow. The 200-millimeter fabs ran at 85% to 90% utilization.

Fourth Quarter Guidance of $600 Million and a $3.6 Billion Target Model

Fourth quarter revenue guidance is centered on $600 million, which would bring 2026 revenue to about $2 billion. Management said the first quarter of 2027 should start above a $2.4 billion annual run rate, more than 45% above the first quarter of 2026, with no typical seasonal dip expected.

The updated long-term model targets $3.6 billion of annual revenue, $760 million above the February model, with 45% gross margin, 38% Operating Margin and $1.2 billion of net profit. The next reported milestone is the fourth quarter 2026 result.