Tower Semiconductor Ltd. (NASDAQ:TSEM) topped fourth-quarter estimates on revenue and earnings as margins surged and demand for silicon photonics accelerated.
The company reported quarterly revenue growth of 14% year-over-year (Y/Y) to $440.21 million, beating the analyst consensus estimate of $439.81 million.
The Israel-based contract chipmaker’s adjusted EPS of 78 cents beat the analyst consensus estimate of 68 cents.
Profits And Margins
Gross profit rose by 35.4% Y/Y to $117.61 million. The margin expanded to 26.7% from 22.4% Y/Y.
Operating profit of $70.83 million increased 52.6% Y/Y.
During the quarter, the company generated $40 million in operating cash flow (considering the inclusion of the previously announced $105 million Fab3 Newport Beach, California lease extension prepayment). In the third quarter of 2025, cash flow generated from operating activities was $139 million.
The company held $1.15 billion in cash and equivalents as of December 31, 2025.
Total Silicon Photonics Investment Swells To $920M
Rising silicon photonics (SiPho) and silicon germanium (SiGe) demand is pushing the company to deepen alignment with key customers and expand beyond its previously announced $650 million capex plan.
It is now executing an additional $270 million equipment investment to boost SiPho capacity and support next-generation capabilities, bringing total SiPho and SiGe spending to $920 million.
The company aims to install and fully qualify all of this capex by the fourth quarter of 2026, setting up full production starts in 2027.
Management expects the expanded buildout to deliver more than five times the annualized wafer shipment run-rate from the fourth quarter of 2025. The company says customers have already reserved—or are in the process of reserving—more than 70% of the total SiPho capacity through 2028, supported by customer prepayments.
According to a Reuters report, surging demand for Tower's silicon photonics technology, which uses light to transmit data at ultra-high speeds, has positioned the company as a key supplier to data center operators racing to build infrastructure capable of supporting increasingly complex AI workloads.
Intel Deal Hits Mediation
Intel Corp. (NASDAQ:INTC) signed an agreement with Tower in September 2023 to produce 300mm wafers for Tower’s customers at Intel’s New Mexico facility.
More recently, Intel indicated it does not plan to move forward with the contract, and the two companies have entered mediation.
The production flows that had already transferred—or were in the process of transferring—were initially qualified at Tower’s Fab7 site in Japan. Tower is now redirecting customers back to Fab7 for continued support.
Outlook
Tower Semiconductor expects first-quarter revenue of $391.400 million-$432.600 million compared to the $408.381 million analyst consensus estimate.
TSEM Price Action: Tower Semiconductor shares were down 3.19% at $132.22 at the time of publication on Wednesday, according to Benzinga Pro data.
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