Photronics (PLAB) Q2 FY26 earnings call: guidance and Q&A

When did the visibility become clouded in the quarter, and when did the slowdown start?

Visibility became clouded with the US-Iran conflict and fab utilization issues. The slowdown after Chinese New Year was much longer than anticipated, starting at the end of February.

“So it really started becoming cloudy when the conflict and in -- with Iran in the U.S. started during the quarter. Then after that, we started seeing fab utilization was also affecting us.”

asked by Maxwell Michaelis · answered by Eric Rivera

Have customers provided any rough timelines for new designs, or do they still lack clarity?

Customers remain optimistic about the midterm outlook, but near-term visibility is limited. While Q2 saw many delays, some recovery in tape-outs began in early May, though caution remains.

“Our customers actually are still optimistic about the midterm outlook. However, in the near term, the visibility remains kind of a limit. So we see a lot of delay in the tape-out in Q2. However, at the beginning of Q3, we did see some recovery of those delays.”

asked by Maxwell Michaelis · answered by Unknown Analyst

Are the deferred designs already in the pipeline, or is it new designs that are slowing down?

The slowdown in new design releases is happening at the very beginning of the process, at the design house level, not within existing pipelines.

“This type, the new design slowdown actually happened at the end of the foundry customer namely the design house. So the design has actually has a slower new about new design release. So it's not in a pipeline. It's at the very beginning of the new design release.”

asked by Gowshihan Sriharan · answered by George Macricostas

Are there any specific levers to pull for cost reductions if demand remains soft, or is it a fixed-cost business?

There are very few levers to pull as a large portion of costs are fixed. Margin is primarily dependent on product mix and utilization.

“Yes, -- very little levers we can pull. I mean it's really the product mix that will be available to the market gives us is what we'll have. Most of our cost is fixed or a big portion of it anyway is very fixed. So we don't have much levers to pull there.”

asked by Gowshihan Sriharan · answered by Eric Rivera

Will bringing new Allen capacity online in a weak demand environment add depreciation costs and further compress margins?

The Allen expansion is on track, with qualifications started in Q3 and revenue expected later in the year. Management does not anticipate the current economic environment to depress returns. The expansion is for technology upgrades and to shift lower-end high-end orders from Boise to Allen, freeing Boise for higher ASP orders.

“Our area expansion is not only capacity expansion. We upgraded our technology. So the qualification basically is for the technology, which Alan cannot do at this moment. So once we qualify the customer, I think we will increase our market share in technology node, which Alan cannot produce right now.”

asked by Gowshihan Sriharan · answered by George Macricostas

Are memory supply constraints and OEM cost pressures affecting all geographies evenly, or are there regional differences?

The memory shortage and price surge have a significant negative impact on low-end consumer products, primarily affecting Asia, specifically Taiwan and China.

“Yes. The memory shortage and especially also the price surgeon has a huge negative impact on the consumer product, especially the low-end consumer product. So those are mainly in Asia. So I think this impact happened in Taiwan and also in China.”

asked by Gowshihan Sriharan · answered by George Macricostas

Can the company provide revenue targets or market share goals for increased capacity in lower geometry nodes, and are there aspirations to go below 7/8 nanometers?

The company plans to continue investing to go below 8nm/7nm, as it's an industry imperative. While specific revenue targets for Allen were not provided, US revenue expansion is expected to be larger in 2027. The investment aims for technology upgrades and to establish Photronics as a main photomask supplier in the US.

“In terms of our aspirations to go 8-nanometer, 7-nanometer, we're going to continue going down now. I mean, we have to do that because that's the -- that's our industry. We have to continue investing and we see a lot of opportunity there. So definitely, we plan to go below those ranges.”

asked by Christian Schwab · answered by Eric Rivera