Ichor (NASDAQ:ICHR) reported third-quarter revenue growth and margin expansion as demand for semiconductor equipment systems remained strong, while the company continued to manage supply-chain constraints affecting advanced etch and deposition applications.
Revenue for the third quarter was $328.7 million, up 12% sequentially and 37% from a year earlier. Chief Executive Officer Phil Barros said year-to-date third-quarter revenue represented nearly a 50% increase from the company’s fourth-quarter revenue trough, describing the increase as an unprecedented demand ramp over three quarters.
Component Mix Supports Margin Expansion
Management attributed the margin performance partly to a product mix that favored higher-margin component sales. Barros said Ichor has expanded component deliveries into portions of semiconductor tools outside of gas-delivery systems, securing new component wins across six tool platforms during the third quarter.
“While components carry lower ASPs than complete systems, they deliver a stronger earnings contribution per dollar of revenue,” Barros said. He added that the company’s broader component strategy provided a favorable product-mix tailwind during the quarter.
Ichor’s proprietary content within the gas systems it sells exceeded 30% at the end of the third quarter, compared with 25% in the second quarter. The company expects proprietary content to reach roughly 35% exiting the fourth quarter and has a near-term goal of 40%, according to Barros.
The company said sales of proprietary components outside gas-delivery systems grew 250% from the first quarter to the fourth-quarter outlook period, though Barros noted the business was growing from a small base. Management expects these external component sales to continue increasing into the fourth quarter and first quarter of 2027.
- Third-quarter revenue: $328.7 million, up 12% sequentially and 37% year over year.
- Non-GAAP gross margin: 16%, up 190 basis points sequentially.
- Non-GAAP operating margin: 8.6%, versus 5.5% in the second quarter.
- Non-GAAP EPS: $0.63 on 38.2 million diluted shares.
- Adjusted EBITDA: $33.9 million.
Supply Constraints Remain, but Visibility Improves
Barros said supply limitations continue to affect high-end etch and deposition applications that require precise gas delivery. The constrained categories include valves, fittings, substrates and, eventually, flow-control products. However, he said the company’s revenue linearity in the current quarter was “significantly higher” than in the prior quarter, indicating that constraints are beginning to ease.
Management said supply-chain constraints are fully reflected in its outlook. Barros also said roughly half of a $10 million reduction in fourth-quarter revenue was attributable to the company’s commercial space business and semiconductor component constraints. The commercial-space impact was primarily related to launch schedule delays, rather than the company’s competitive position, he said.
Chief Financial Officer Greg Swyt said Ichor can, with customer authorization, ship certain systems without a specified component such as a mass flow controller. In most cases, the company recognizes full revenue on those shipments, although terms depend on the customer arrangement.
Ichor also said customers have increasingly been backstopping inventory positions. Barros said customers are seeking to ensure that inventory purchased and purchase orders placed by Ichor will move, with agreements providing that customers own the inventory if it does not move after a specified period.
Capacity Investments and 2027 Outlook
The company is working to scale capacity to support as much as $3 billion in revenue within its existing manufacturing footprint. Ichor said machining and welding operations in Malaysia have been qualified by its two largest customers, while planned moves to Mexico have been completed.
Ichor has completed planned clean-room capacity intended to support 2027 demand and said all equipment needed to support 2027 is on order, with installation expected within the next six months. The company also expanded welding capacity by nearly two times and said that capacity should support internal and external needs through 2027.
Manufacturing headcount increased 40% through the third quarter, including 320 hires during the quarter. Management said additional hiring will continue over the next several quarters as the company prepares for expected demand.
For the fourth quarter, Ichor forecast revenue of $345 million to $365 million, which would represent 8% sequential growth at the midpoint. The company expects gross margin of 16.5%, plus or minus 50 basis points, and EPS of $0.65 to $0.75. At the midpoint of its revenue guidance, Ichor expects full-year 2026 revenue growth of about 30%.
Looking into 2027, Swyt said current customer plans support sequential revenue growth in every quarter. The company expects continued gross-margin expansion based on an incremental gross-margin model of at least 25%, while full-year operating expenses are expected to rise about 15% as Ichor invests in research and development and staffing.
Management reiterated a long-term gross-margin target of 20% at revenue levels between $2 billion and $3 billion, supported by incremental flow-through of 25% to 30%. Barros said additional component sales could raise the margin ceiling, while flow control is expected to become a revenue contributor in 2027.
Ichor ended the quarter with $213.5 million in cash and equivalents and $119 million in total debt. Capital expenditures totaled $10.7 million in the third quarter, and the company expects capital spending to remain within 3% to 4% of revenue in 2027.
About Ichor (NASDAQ:ICHR)
Ichor Holdings, Ltd. (NASDAQ: ICHR) is a supplier to the semiconductor equipment industry. The company designs, engineers and manufactures critical fluid-delivery subsystems used in semiconductor fabrication equipment, including systems that deliver and control gases and chemicals during the wafer-manufacturing process.
Ichor’s products and services include gas and chemical delivery systems, precision-machined components, weldments, fluid-management assemblies and related engineering and manufacturing services.
