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    ENTG
    Earnings call· Mar 2026(Q1 FY26)

    ENTEGRIS Q1 FY26 earnings call ENTG

    Apr 30, 2026 Source

    Executive summary

    Entegris Q1 FY26 — Strong Start to Year with Improving Industry Environment and Deleveraging Progress

    Entegris delivered a solid Q1 FY26, exceeding guidance on key profitability metrics and demonstrating strong free cash flow generation, which enabled accelerated deleveraging. The company is benefiting from an improving semiconductor industry environment, particularly in advanced logic and DRAM driven by AI, and is focused on structural gross margin expansion and operational efficiency. While CapEx-driven revenue saw a modest Q1 decline due to prior-year tariff pull-ins and mainstream logic remains mixed, management anticipates CapEx revenue to increase throughout the year and expects to reduce net leverage to approximately 3x by year-end.

    Highlights

    5

    • Revenue increased 5% year-over-year, slightly above the midpoint of guidance.

    • Adjusted gross margin, EBITDA margin, and non-GAAP EPS all exceeded the guidance range.

    • Free cash flow was strong at $144 million, representing 18% of sales.

    • Reduced term loan by $50 million, accelerating deleveraging and targeting ~3x net leverage by year-end.

    • Liquid filtration posted its third consecutive record quarter, contributing to 7% YoY growth in the APS segment.

    Concerns

    5

    • CapEx-driven revenue decreased modestly year-over-year in Q1 due to accelerating order patterns in the prior year quarter in response to tariff actions.

    • Mainstream logic recovery remains mixed with tempered MSI growth expected through 2026.

    • KSP (Taiwan) and Colorado facilities are expected to be dilutive in 2026, with KSP breaking even by year-end and Colorado ramping revenue in 2027.

    • China revenue was modestly down in Q1, largely driven by CapEx-related businesses.

    • Early cost pressure on raw materials, specifically noble gases and resins, due to the Iran Middle East conflict.

    Guidance & targets

    19
    CategoryTargetConfidence
    Q2 Sales
    $815 million to $845 million
    high materiality
    High
    Q2 Gross Margin (GAAP & Non-GAAP)
    46.25% and 47.25%
    medium materiality
    High
    Q2 GAAP Operating Expenses
    approximately $241 million
    medium materiality
    High
    Q2 Non-GAAP Operating Expenses
    approximately $194 million
    medium materiality
    High
    Q2 EBITDA Margin
    27.5%
    medium materiality
    High
    Q2 Net Interest Expense
    approximately $46 million
    medium materiality
    High
    Q2 Non-GAAP Tax Rate
    approximately 15%
    medium materiality
    High
    Q2 GAAP EPS
    $0.53 and $0.61 per share
    high materiality
    High
    Q2 Non-GAAP EPS
    $0.76 and $0.84 per share
    high materiality
    High
    Q2 Diluted Share Count
    approximately 154 million
    low materiality
    High
    Q3 Revenue Growth
    approximately 5% sequential improvement
    high materiality
    Medium
    FY26 Net Interest Expense
    slightly below $190 million
    medium materiality
    High
    FY26 Non-GAAP Tax Rate
    approximately 15%
    medium materiality
    High
    FY26 Diluted Share Count
    approximately 154 million
    low materiality
    High
    FY26 Capital Expenditure
    $250 million
    medium materiality
    High
    FY26 Depreciation
    approximately $140 million
    low materiality
    High
    Net Leverage Ratio
    approximately 3x
    high materiality
    High
    Industry MSI Growth
    mid- to high single-digit
    high materiality
    High
    Industry Fab Construction Growth
    high single digits
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Material Solutions (MS)
    Year-over-year growth was led by double-digit increases in advanced deposition materials and selective etch chemistries, along with continued strength in CMP consumables. Adjusted operating margin was in line with the prior year period and increased approximately 100 basis points sequentially.
    Advanced deposition materials: double-digit increaseSelective etch chemistries: double-digit increaseCMP consumables: continued strength
    		$351 million3%—22%
    Advanced Purity Solutions (APS)
    Results were driven by continued strong demand across the portfolio, including the third consecutive record quarter in liquid filtration, a 3-year revenue high in FOUPs, and growth in gas filtration. Adjusted operating margin expanded both year-over-year and sequentially, reflecting strong operational execution, productivity, favorable product mix, and the majority of the favorability from the useful life change.
    Liquid filtration: third consecutive record quarterFOUPs: 3-year revenue highGas filtration: growth
    		$464 million7%—29.1%

    Operational metrics

    12
    Non-GAAP Gross Margin
    46.9%240 bps sequential improvement
    Q1 FY26

    Above the high end of guidance range. Includes approximately 50 basis points of one-time items not expected to recur at similar levels. Sequential improvement driven by productivity, efficiency, favorable product mix, and useful life accounting change.

    Adjusted EBITDA
    $226 million
    Q1 FY26

    Also above guidance range.

    Non-GAAP EPS
    $0.86
    Q1 FY26

    Exceeded guidance range.

    Net Debt
    $3.3 billion
    Q1 FY26

    Balance at quarter end.

    Net Leverage
    3.6x
    Q1 FY26

    Ratio at quarter end.

    Non-GAAP Tax Rate
    8%
    Q1 FY26

    Includes an unforecasted release of a tax reserve.

    Unit-driven revenue growth
    7%YoY
    Q1 FY26

    Correlated to MSI, driven by growth in liquid filtration, advanced deposition, and selective etch.

    CapEx-driven revenue growth
    decreased modestlyYoY
    Q1 FY26

    Mostly driven by accelerating order patterns in the prior year quarter in response to tariff actions.

    R&D as % of Revenue
    ~10%
    Target

    Roughly 10% of revenue is a good benchmark for reinvestment into R&D.

    China In-Region Revenue Qualification
    85%
    Q1 FY26

    Percentage of revenue from in-region for China. Expect to reach over 90% by end of 2026, but not 100% due to low volume products.

    Mainstream Logic Capacity Utilization
    75-80%
    Q1 FY26

    Some foundries have broken 80% for the first time since 2022 peak.

    Term Loan Reduction
    $50 million
    Q1 FY26

    Reduced term loan in Q1, building on prior reductions. Remaining term loan is the only variable rate debt.

    Industry KPIs

    9
    MetricValueDetails
    Backlog order book—
    Ai data center revenue—
    Fab capacity utilization75-80%%
    Bookings net order intake—
    Wfe industry spend outlookHigh single digits%
    Design wins socket pipeline—
    Inventory channel inventory—
    Node platform ramp schedule—
    End market segment revenue mixAdvanced logic: 40% of total revenue; Memory: 30% of total revenue; Mainstream logic: ~33% of total business%

    Risks & headwinds

    4
    Mainstream Logic Market Mixedthrough 2026

    Tempered MSI growth through 2026

    Mitigation: Offset by power management, data center, and other AI-related strength; improving channel inventory and some manufacturers breaching 80% utilization.

    Dilutive Facilities (KSP, Colorado)2026

    KSP is dilutive, Colorado is fully dilutive

    Mitigation: KSP expected to break even on P&L by end of 2026 and be less dilutive in 2027; Colorado focused on qualification in 2026, ramping revenue in early 2027.

    China CapEx Revenue DeclineQ1 FY26, first half of 2026

    Modestly down in Q1

    Mitigation: Largely driven by prior-year tariff-related order patterns; expecting a solid second half of 2026; increasing in-region product qualification to >90% by year-end.

    Raw Material Cost Pressuretemporary

    Some early cost pressure on noble gases and resins

    Mitigation: Absorbed in P&L for now; will evaluate increasing pricing in the future if pressure persists.

    What to watch in Q2 FY26

    5

    Net Leverage Ratio

    By end of 2026
    Current3.6x
    TargetCloser to 3x

    Why it matters

    Demonstrates progress on deleveraging commitment, which impacts future capital allocation decisions (M&A, shareholder returns).

    At quarter end, our net debt was $3.3 billion and net leverage was 3.6x. As Dave articulated, we expect to improve our net leverage ratio to approximately 3x by the end of 2026, underscoring our commitment to deleveraging.

    Q&A highlights

    7

    Can you provide more color on non-AI markets, specifically consumer electronics and fab utilization, given the mixed demand signals?

    Management views the mainstream market as mixed, with capacity utilization between 75% and 80%. While memory availability and pricing impact price-sensitive consumer products, this is offset by strength in power management, data center, and other AI-related areas. Some foundries have broken the 80% utilization barrier for the first time since 2022.

    “We view capacity utilization right now in mainstream as being somewhere between 75% and 80%. There have been some foundries that have reported that have broken that 80% barrier for the first time in several years since 2022 peak.”

    asked by Melissa Weathers · answered by David Reeder

    2 min read6 chapters

    Detailed Narrative

    01

    Operational Efficiency & Margin Expansion

    Entegris is actively optimizing its manufacturing network, having closed a subscale facility in Chandler, Arizona, during Q1. These efforts, combined with productivity actions and favorable product mix, contributed to a 240 bps sequential improvement in Q1 non-GAAP gross margin (46.9%), with 100 bps from a useful life accounting change and 140 bps from operational improvements. The company expects continued structural gross margin expansion, balancing optimization with demand fulfillment, though incremental production staffing costs are embedded in the Q2 guide.

    02

    Deleveraging & Capital Structure

    The company generated strong free cash flow of $144 million (18% of sales) in Q1, enabling a $50 million reduction in its term loan. This follows a $300 million reduction in 2025. Net debt stands at $3.3 billion with a net leverage of 3.6x at quarter-end. Management is committed to further deleveraging, targeting approximately 3x net leverage by the end of 2026, positioning the company to consider shareholder returns or other market opportunities in 2027.

    03

    Semiconductor Market Outlook

    Entegris observes an improving demand landscape, with industry MSI growth now expected in the mid-to-high single digits for the remainder of 2026, an increase from previous low-to-mid single-digit expectations. Fab construction growth forecasts have also improved significantly from low to high single digits. This positive shift is primarily driven by advanced logic and DRAM, fueled by AI-enabled applications, while mainstream logic remains mixed.

    04

    End-Market Dynamics

    Advanced logic (40% of revenue) remains well-positioned for strong growth in 2026 due to accelerating demand for leading-edge compute and the 2nm technology ramp. The memory market (30% of revenue) sees accelerating DRAM demand from AI workloads, with capital investments expected to continue. NAND demand is also increasing, driven by layer scaling and AI-driven storage, which is expected to result in double-digit increases in Entegris content per wafer. Mainstream logic (approximately one-third of the business) remains mixed, with utilization rates improving but still impacted by memory availability.

    05

    CapEx-Driven Business

    Approximately 25% of Entegris' revenue is CapEx-related, split between one-third WFE and two-thirds fab construction. The company benefits in three waves: fab construction products (gas purification, fluid management) 9-12 months post-groundbreaking, WFE-related products (gas filtration, AMC, LMC bulk filtration) 12-18 months post-groundbreaking, and unit-driven business ~24 months post-groundbreaking. Memory (DRAM) is currently in wave 1, while advanced logic is in waves 2 and 3 of this cycle.

    06

    China Market Performance & Strategy

    China revenue was modestly down in Q1, primarily due to CapEx-related businesses reflecting dislocated order patterns from prior-year tariff pull-ins. Entegris expects to increase its in-region product qualification for China from approximately 85% to over 90% by year-end, aiming to derisk the market. The company anticipates a solid second half of 2026 in China, maintaining a strong competitive position in franchise product lines like filtration and slurries.

    AI-generated summary of the company’s earnings call. Not investment advice.