Photronics (NASDAQ:PLAB) executives said accelerating demand that began in fiscal fourth quarter 2025 continued through the company’s fiscal first quarter 2026, driving results that exceeded expectations and prompting management to reiterate its focus on operational improvements and capacity expansions.
Quarterly performance and demand trends
Chairman and CEO George Macricostas said fiscal first-quarter sales rose 4% sequentially to $225 million, which he said exceeded expectations. Management attributed the strength in part to robust high-end demand in Asia ahead of the Chinese New Year holiday, which helped push the company’s high-end integrated circuit (IC) business to a second consecutive quarterly record.
IC business: High-end growth and capacity planning
In the IC segment, Photronics reported revenue of $165 million, up 7% year-over-year. The company’s high-end IC revenue reached $71 million, an increase of 19%, while mainstream IC revenue was $94 million and flat year-over-year.
Management cited demand for masks supporting areas such as AI-driven chip packaging applications and High-NA EUV development projects. Macricostas said order demand remained healthy and should partially mitigate seasonality following Chinese New Year, though the full holiday effect would be reflected in fiscal second-quarter revenue.
Executives also discussed how regionalization trends and customers’ outsourcing strategies are shaping Photronics’ roadmap and investments. Macricostas said the company’s expansion projects in the U.S. and Korea are expected to enter volume production in 2027. In the U.S., he said customer qualification activity remained healthy across advanced logic and memory technologies, with support for high-volume manufacturing at 12 nm and 14 nm and qualification work extending to 8 nm and below. For advanced DRAM, he said the company is engaged in qualification activity using new IP processes with a multi-beam mask writer for patterns below 20 nm.
During the Q&A session, executives provided additional detail on the company’s Allen facility. Management said the clean room expansion is complete, tools have been delivered, and installations are in progress. Customer qualification is expected to be completed in the second half of the year. Executives said Allen is expected to contribute primarily to mid-range mainstream work and to support the company’s Boise high-end facility by taking on some middle- and lower-end mask layers, freeing Boise capacity for high-end demand. Separately, Frank Lee, head of Asia operations, said Photronics is working with customers to qualify a multi-beam writer at Boise to increase throughput and alleviate what he characterized as a capacity constraint on the high-end side.
In China, Macricostas said Photronics’ competitive positioning remains strong and that the company is emphasizing higher-end nodes “where competitive intensity is lower.” In response to a question about new entrants, management said newer competitors are more focused on mainstream segments, while high-end qualification requirements and customer resource constraints create a high barrier to entry. Lee added that many high-end customers typically maintain only one or two suppliers and are not eager to qualify additional vendors. He also said Photronics’ local facility in Xiamen is focused on high-end business and that the company expects newcomers to have more impact on mainstream than on high-end work.
FPD business: Mainstream strength and AMOLED investment
Flat panel display (FPD) revenue was $60 million, up 3% year-over-year. CFO Eric Rivera said the quarter included a “mixed shift” with strong demand in the mainstream category targeted at the China IT display market, including larger screen projects that he said align with Photronics’ strengths.
On the high end of FPD, Macricostas highlighted technology advantages in producing more complex and larger mask sizes. He said the company recently took delivery in Korea of what he described as the most advanced mask writer for the FPD market, which is expected to improve resolution and accuracy while maintaining high throughput. He said Photronics expects to extend its technology leadership in AMOLED photomasks, including G8.6 mask size, which he said improves screen quality for consumer electronics. Management characterized G8.6 AMOLED as an early-stage market, with adoption expected to broaden later in the year. Lee said Photronics has received a first set of G8.6 photomasks from Korean customers and is seeing Chinese customers developing G8.6 AMOLED programs.
Margins, cash flow, and capital spending
Rivera said gross margin came in at 35%, at the high end of expectations, aided by higher revenue levels and a richer mix of high-end IC revenue. Operating margin was 24%.
The company generated $97 million in operating cash flow, which Rivera called the second-highest quarter in company history and equal to 43% of revenue. Capital expenditures were $48 million, primarily for equipment aimed at extending Photronics’ technical leadership in FPD.
Photronics reiterated fiscal 2026 capital spending guidance of $330 million, describing the current environment as a period of elevated investment. Rivera said the planned CapEx is focused on special project investments in the U.S. and Korea and accelerated end-of-life tool upgrades. Total cash and short-term investments rose $49 million sequentially to $637 million, including $459 million held in joint ventures where Photronics has a 50.01% ownership interest. Rivera also noted the company repurchased 5 million shares in fiscal 2025 for $97 million at an average price of $19.52.
Asked about whether margins could be temporarily elevated, Rivera said management did not expect fiscal second-quarter product mix to be much different than the first quarter, while noting that increased depreciation will accompany new tools as CapEx projects come online. He said margins could fluctuate primarily due to mix, but management does not expect margins to “fall off a cliff.” Lee added that increasing high-end capacity and throughput—especially via multi-beam writer qualification—could support gross margin given the contribution from high-end output.
Second-quarter outlook and Chinese New Year impact
For fiscal second quarter 2026, Photronics guided revenue to $212 million to $220 million, reflecting what management described as the seasonal impact of the Chinese New Year holiday in mid-February. The company projected operating margin of 22% to 24% and non-GAAP diluted EPS of $0.49 to $0.55 per share.
In response to questions about the sequential decline implied by guidance, management attributed the expected softness primarily to holiday-related slowdowns in customer tape-outs and output, with activity expected to resume in early March. Executives said they did not see a major change in the market environment and noted that design starts remained healthy and supportive of full-year growth expectations.
About Photronics (NASDAQ:PLAB)
Photronics, Inc is a leading global supplier of photomask products used in the manufacture of integrated circuits, flat panel displays, microelectromechanical systems (MEMS), and advanced packaging applications. Photomasks, also known as reticles, are critical templates that carry the precise circuit patterns required for semiconductor lithography processes. The company offers a comprehensive range of mask solutions, including binary masks, attenuated phase-shift masks, reticles for micro-optics, and specialized products for high‐resolution applications.
Founded in 1969 and headquartered in Brookfield, Connecticut, Photronics has grown through organic expansion and strategic investments in high‐end lithography technology.
