What are Sukhi Nagesh's first impressions and strategic priorities since joining Entegris?

Sukhi is impressed by the critical technology, strong positions in fast-growing semi areas, and ample room for portfolio optimization. His near-term priorities are to drive profitable growth, enhance operational excellence, and allocate capital with discipline to maximize returns. “We need to help drive profitable growth, further enhance the operational excellence and efficiencies of our assets and deploy capital in a manner where we get the best return for every dollar spent.”

Is the 70-75% year-over-year gross margin drop-through sustainable, or are there one-time factors? What is a reasonable flow-through to model?

There was a 150 basis points uplift from a useful life adjustment. Excluding that, margins increased over 300 bps. For future modeling, incremental flow-through should be in the 60% range, which is seen in sequential Q1-Q2 and Q2-Q3 gross profit over revenue flow-through. “But typically, I think what you should be seeing, it's like incremental flow-through should be in the 60% range.”

What are the drivers for strong liquid filtration growth, and what is the status of the KSP facility?

Liquid filtration growth is driven by increasing purity requirements at advanced nodes (sub-5nm, 2nm) across advanced logic, memory, and advanced packaging. KSP is on track to break even this quarter, ahead of schedule, and is ramping up production, contributing to the liquid filtration growth. “KSP, I would categorize as on track. We are on track perhaps to break even this quarter, probably a little bit ahead of schedule.”

ENTG

Entegris (ENTG) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 4, 2026

Source: earnings call transcript

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

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

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

Guidance & targets

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

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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	$371M	5%	—	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	$515M	17%	—	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%	—	—	—	—

Orderbook & backlog

CapEx-oriented businesses bookings strengthened Q2 FY26

higher

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

Deals & partnerships

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

KSP facility ramp underway

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

Mainstream logic market weakness Q2 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

Q3 Revenue Growth

Q3 FY26

Current Q2 YoY growth: 11%

Target Q3 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.

Find out whether ENTG delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.