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    ENTG
    Earnings call· Jun 2026(Q2 FY26)

    ENTEGRIS Q2 FY26 earnings call ENTG

    Aug 4, 2026 Source

    Executive summary

    Entegris Q2 FY26 — Strong Performance Driven by AI Demand and Operational Execution

    Entegris delivered a strong Q2 FY26, surpassing guidance across all key metrics, fueled by accelerating AI-driven demand and strategic investments in core semiconductor businesses. The company is proactively scaling capacity and optimizing its footprint to capitalize on the early stages of a broader semiconductor investment cycle. Management expressed confidence in continued growth and margin expansion, driven by technology leadership and disciplined execution.

    Highlights

    5

    • Revenue of $883 million, an increase of 11% year-over-year, exceeding guidance.

    • Adjusted net income of $143 million, up 42% from a year ago, above guidance.

    • Adjusted gross margin reached 47.6%, its highest level since early 2022, reflecting operational improvements.

    • Free cash flow of $120 million (14% of sales), driven by higher earnings and disciplined working capital management.

    • Net leverage reduced to 3.4x, with an expectation to end the year in the high 2x range.

    Concerns

    1

    • Mainstream logic market remains mixed, despite modest improvement, continuing to lag leading-edge markets.

    Guidance & targets

    18
    CategoryTargetConfidence
    Q3 Sales
    $905M-$935M
    high materiality
    High
    Q3 Gross Margin
    47.5%-48.5%
    medium materiality
    High
    Q3 GAAP Operating Expenses
    ~$260M
    low materiality
    High
    Q3 Non-GAAP Operating Expenses
    ~$215M
    low materiality
    High
    Q3 EBITDA Margin
    28.5%
    medium materiality
    High
    Q3 Net Interest Expense
    ~$43M
    low materiality
    High
    Q3 Non-GAAP Tax Rate
    ~15%
    low materiality
    High
    Q3 GAAP EPS
    $0.75-$0.83
    high materiality
    High
    Q3 Non-GAAP EPS
    $0.96-$1.04
    high materiality
    High
    Q3 Depreciation
    ~$34M
    low materiality
    High
    Q4 Revenue Sequential Growth
    ~4%
    high materiality
    Medium
    FY26 Net Leverage
    High 2x range
    high materiality
    High
    FY26 MSI Growth
    7%-8%
    high materiality
    High
    FY26 Net Interest Expense
    ~$180M
    low materiality
    High
    FY26 Non-GAAP Tax Rate
    ~14%
    low materiality
    High
    FY26 Diluted Share Count
    ~154M
    low materiality
    High
    FY26 CapEx
    $250M
    medium materiality
    High
    Incremental Flow-Through Gross Margin
    60% range
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Material Solutions (MS)
    Growth driven by advanced deposition materials, selective etch chemistries, and CMP. Operating margin in line with prior year, with higher raw material/logistics costs and planned investments offset by improved manufacturing performance and productivity.
    YoY growth acceleration from Q1Expected double-digit YoY growth in H2 2026
    		$371M5%—20.9%
    Advanced Planarization Solutions (APS)
    Strength across both unit-driven and CapEx-related demand. Operating margin expanded both YoY and sequentially, reflecting volume growth, favorable mix, and improved operational execution.
    Liquid Filtration: 4th consecutive record quarterMicroenvironments (FOUPs): Strongest performance in >3 yearsDemand strong in Taiwan due to leading-edge logic and advanced packaging expansionsReturn to YoY growth in North America
    		$515M17%—30.3%
    Advanced Logic
    Significant growth opportunity as demand for leading-edge compute accelerates technology migrations. Double-digit growth in Taiwan driven by advanced node capacity expansions and higher production volumes.
    Represents ~40% of total revenueIncreased photo filtration wins tied to EUV lithographyStrong demand for FOUPs
    		—double-digit growth in Taiwan——
    Memory
    Compelling growth opportunity driven by AI-related demand and favorable technology road maps. Increasing complexity and performance requirements drive need for high purity materials. Increased investment activity in DRAM and technology transitions in NAND support demand.
    Represents ~30% of total revenueHBM4 and TSV CMP winsMolybdenum precursor demand: ~2x YoY growth
    		————
    Mainstream Logic
    Remains mixed but modestly improved compared to last quarter, still lagging leading-edge markets. Consumer-related markets (e.g., mobile) tempered by memory pressure. Direction of travel seems modestly higher.
    Foundry utilization: 80%-85%
    		————

    Operational metrics

    23
    Non-GAAP EPS
    $0.93
    Q2 FY26

    Above guidance range.

    Non-GAAP operating margin
    23%
    Q2 FY26

    Non-GAAP operating expenses as a percentage of sales.

    Non-GAAP gross margin
    47.6%sequential improvement
    Q2 FY26

    Reflects continued progress in operations and investments for growth.

    Cash and investments balance
    —
    Q2 FY26

    Enhanced balance sheet and financial flexibility due to strong free cash flow generation.

    Free cash flow margin
    14%
    Q2 FY26

    Free cash flow of $120 million.

    Adjusted EBITDA
    $251M
    Q2 FY26

    Above guidance range, benefiting from higher gross profits.

    Unit-driven revenues growth
    10%YoY
    Q2 FY26

    Part of overall revenue growth.

    CapEx-related revenue growth
    15%YoY
    Q2 FY26

    Driven by FOUPs and broad-based strength in gas filtration and purification solutions.

    Net leverage
    3.4xreduced
    Q2 FY26

    Reduced from prior period due to debt repayment.

    Cash conversion cycle
    reduced by ~20 daysYoY
    Q2 FY26

    Driven by disciplined working capital management.

    GAAP Net Income
    $94M
    Q2 FY26
    Adjusted Net Income
    $143M42% YoY
    Q2 FY26

    Above guidance range.

    GAAP Tax Rate
    15%
    Q2 FY26
    Non-GAAP Tax Rate
    16%
    Q2 FY26
    GAAP Diluted EPS
    $0.61
    Q2 FY26
    Operating expenses (GAAP)
    $255M
    Q2 FY26
    Operating expenses (Non-GAAP)
    $204M
    Q2 FY26

    Majority of YoY increase driven by higher variable compensation associated with stronger business performance.

    Debt repayment
    $200M
    Q2 FY26

    Additional debt repaid in the quarter.

    Debt repayment
    $25M
    July 2026

    Additional debt repaid in July.

    Direct labor increase
    double-digit percentage
    since Q4 FY25

    Increased by more than 20% since end of 2025 to unlock additional capacity.

    Molybdenum precursor demand growth
    ~2xYoY
    Q2 FY26

    Further evidence of increasing memory complexity translating into greater content opportunities.

    Foundry utilization (mainstream)
    80%-85%improved
    Q2 FY26

    Improved but still mixed.

    Life Sciences Fluid Management annual revenue
    <$20M
    annual

    Business exited due to dilutive margin and focus on semiconductors.

    Industry KPIs

    8
    MetricValueDetails
    Backlog order bookhigher
    Ai data center revenue—
    Fab capacity utilization80%-85%%
    Bookings net order intakestrengthened
    Wfe industry spend outlook20%-30%%
    Design wins socket pipelinephoto filtration wins
    Node platform ramp schedule—
    End market segment revenue mixAdvanced Logic: ~40% of revenue; Memory: ~30% of revenue%

    Orderbook & backlog

    1
    CapEx-oriented businesses bookingsstrengthenedQ2 FY26

    higher

    Driving backlog levels higher and providing greater visibility into customer spending plans.

    Deals & partnerships

    1
    Life Sciences Fluid Management business (U.S.)Exit of non-core business

    Less than $20 million of annual revenue. Decision made to exit given significant growth in semiconductors and management focus.

    Capital programs

    1
    KSP facility rampunderway

    Benefit: Increased liquid filtration capacity

    On track to break even in Q3 FY26, ahead of schedule. Moving from dilutive to enterprise average gross margin category in 2027. Participating in liquid filtration ramp.

    Risks & headwinds

    1
    Mainstream logic market weaknessQ2 FY26 and potentially longer

    mixed, lagging leading-edge markets

    Mitigation: Offset by strength in AI-related applications like power management and silicon photonics; company's focus on leading-edge.

    What to watch in Q3 FY26

    5

    Q3 Revenue Growth

    Q3 FY26
    CurrentQ2 YoY growth: 11%
    TargetQ3 YoY growth: ~14% (midpoint of $905M-$935M)

    Why it matters

    Verifies continued acceleration of business momentum and outperformance against market expectations.

    We expect Q3 sales to range between $905 million and $935 million, a year-over-year increase of approximately 14% at the midpoint, reflecting continued momentum in the industry.

    Q&A highlights

    7

    How should we model the CapEx-oriented business for H2 2026 and H1 2027, given the current fab build-out momentum?

    CapEx business is 25% of revenue (10% WFE, 15% fab construction). H2 2026 will be driven by strong WFE growth (20-30%) and low double-digit fab growth. 2027 will benefit from much stronger fab construction growth, followed by WFE as fabs are populated, and then increased unit growth in 2028. The company is tracking over 20 leading-edge capacity expansions.

    “2027 will benefit from much stronger fab construction growth followed again by WFE as those fabs are populated with tools which will then be followed again by increased wafer unit growth at those tools process wafers.”

    asked by Melissa Weathers · answered by David Reeder

    2 min read6 chapters

    Detailed Narrative

    01

    AI-Driven Demand and Semiconductor Investment Cycle

    Entegris is experiencing accelerating AI-driven demand, contributing to 11% YoY revenue growth in Q2. The company is tracking over 20 major leading-edge capacity expansions globally, including 8-10 advanced logic, 7-8 advanced memory, and 6-8 advanced packaging facilities. These investments are expected to become a more meaningful contributor to growth in H2 2026 and into 2027, reflecting the early stages of a broader semiconductor investment cycle.

    02

    Operational Execution and Margin Expansion

    Adjusted gross margin improved sequentially to 47.6%, the highest since early 2022, driven by stronger operational execution and optimization initiatives. The company has increased direct labor by over 20% since the end of 2025 to unlock capacity. Management expects continued margin expansion, with incremental flow-through gross margin in the 60% range for future modeling, excluding one-time📎 adjustments.

    03

    Strategic Portfolio Management and Footprint Rationalization

    Entegris is sharpening its strategic focus by exiting its U.S. life sciences fluid management business (less than $20 million annual revenue, dilutive margin) and closing its Logan, Utah facility. These actions streamline the manufacturing footprint and concentrate resources on core semiconductor businesses, where the company sees the greatest long-term growth opportunities. This marks the third facility rationalization since late 2025.

    04

    Strong Free Cash Flow and Accelerated Deleveraging

    Free cash flow reached $120 million, or 14% of sales, driven by higher earnings and improved working capital management, reducing the cash conversion cycle by approximately 20 days YoY. This enabled an additional $200 million debt repayment in Q2 and $25 million in July, bringing net leverage to 3.4x. The company now expects to end FY26 in the high 2x net leverage range, significantly faster than anticipated.

    05

    End Market Outlook and Content Gains

    The company raised its FY26 MSI growth expectation to 7-8% from mid-single-digits. Advanced Logic (40% of revenue) and Memory (30% of revenue) remain strong growth opportunities, driven by technology transitions and increasing complexity. Liquid Filtration achieved its fourth consecutive record quarter, and FOUPs delivered its strongest performance in over three years. Molybdenum precursor demand grew approximately 2x YoY, reflecting content gains in HBM4 and TSV CMP wins.

    06

    Sales Strategy and Advanced Packaging Focus

    Entegris has implemented an enterprise sales team to track opportunities across its top 35 customers, developing detailed plans for greater penetration and broader product line coverage. The company is also targeting the rapidly growing advanced packaging market, which was historically not a significant focus. While currently around $100 million in this segment, Entegris aims for faster growth and increased product placement, with more details to be shared at the upcoming Investor Day.

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