Can you elaborate on the broader opportunity and run rate growth for the ICS segment, and if it's higher than 6-9 months ago?

The ICS business continues to outperform significantly, driven by strong alignment to AI-led demand in Advanced Packaging, Thermal Management, and AI PCB, which collectively grew over 50% year-over-year in Q1. These are shorter-cycle wins that scale up quickly. The company expects these areas to remain the fastest-growing parts of its portfolio and is investing to meet customer capacity needs, though not updating guidance at this time. “ICS business continues to outperform significantly and really driven by the strong alignment that it has to AI-led demand.”

Provide more color on AI PCB design wins, the market's direction, visibility, customer engagements, and its growth ranking.

AI PCBs represent an underappreciated growth story. OEMs are driving performance and reliability through increased layers and finer lines/spaces on circuit boards, which aligns with Qnity's metallization strengths. The company shifted its R&D portfolio significantly to focus on this market since the 2023 downturn and has deep roadmaps with leading PCB customers, helping them scale next-generation formats for both printed circuit boards and Advanced Packaging. “The progress that we're seeing on the AI PCBs is maybe an underappreciated part of the growth story.”

How does Qnity's ability to supply align with growth, are there constraints, and what is the revenue framework for capacity?

Supply and demand planning is done in lockstep with customer demand ramps, allowing investments to be made after Process of Record (POR) wins, ensuring high-return projects. The local-for-local operating model is a strategic advantage, with capacity added in every semiconductor product line. Recent expansions include new facilities in Delaware (US) and Taiwan. ICS capacity investments are typically smaller, modular, and quick to scale up. “We can invest inside of the investments of our customers. So that gives us good [indiscernible] and usually after we've already have POR wins.”

Qnity Electronics (Q) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Information Technology· May 12, 2026

Source: earnings call transcript

Executive summary

Qnity Electronics Q1 FY26 — Strong AI-driven Growth and Raised Full-Year Outlook

Qnity Electronics delivered a record first quarter, driven by robust AI-linked demand and strong execution across both segments. The company is strategically positioned for the industry's shift from 2D shrink to 3D stack architectures, leveraging its materials expertise and integrated portfolio. Management raised its full-year outlook, reflecting confidence in continued momentum and operational leverage.

Highlights

Net sales increased 18% year-over-year to $1.3 billion, with organic sales up 17%.
Adjusted operating EBITDA grew 22% year-over-year to $411 million, expanding margin by 125 basis points to 31.3%.
Adjusted EPS rose 33% year-over-year to $1.08.
Interconnect Solutions (ICS) organic sales grew 22% year-over-year, driven by Advanced Packaging, Interconnects, and Thermal Management, which collectively grew over 50%.
Full-year 2026 guidance was raised across all key metrics, including net sales to $5.225B-$5.375B and adjusted EPS to $3.80-$4.14.

Concerns

Anticipated geopolitical inflation headwinds of approximately $20 million for the remainder of 2026 for raw materials and logistics costs.

Guidance & targets

Category	Target	Timeline	Confidence
Q2 FY26 Sequential Net Sales Growth	mid-single digits medium materiality	Q2 · FY26	High
Q2 FY26 Semiconductor Technologies Net Sales Growth	roughly flat sequentially medium materiality	Q2 · FY26	High
Q2 FY26 Semiconductor Technologies Operating EBITDA Margin	mid-30s medium materiality	Q2 · FY26	High
Q2 FY26 Interconnect Solutions Net Sales Growth	high single-digit range sequentially medium materiality	Q2 · FY26	High
Q2 FY26 Interconnect Solutions Operating EBITDA Margin	mid- to high 20s medium materiality	Q2 · FY26	High
Full Year FY26 MSI Wafer Start Growth	mid-single digits to high single digits high materiality	FY26	High
Full Year FY26 Net Sales	$5.225 billion to $5.375 billion high materiality	FY26	High
Full Year FY26 Adjusted Operating EBITDA	$1.535 billion to $1.625 billion high materiality	FY26	High
Full Year FY26 Adjusted Earnings Per Share	$3.80 to $4.14 high materiality	FY26	High
Full Year FY26 Adjusted Free Cash Flow	$500 million to $600 million high materiality	FY26	High
Full Year FY26 Capital Expenditures as % of Sales	approximately 9% medium materiality	FY26	High
Longer-Term Capital Expenditures as % of Net Sales	6% low materiality	Longer Term	Medium
Transformation Plan EBITDA Run Rate Benefit	$100 million medium materiality	by end of 2028 · FY28	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Semiconductor Technologies Performed in line with expectations, led by demand for advanced logic and HBM chips. Also benefited from ongoing improvements in mature nodes and NAND. Margin improvement driven by manufacturing efficiencies and favorable product mix, including $20 million of inventory restocking. Organic sales growth: 12% YoYAdjusted operating EBITDA margin: 36.4%Adjusted operating EBITDA margin sequential change: +130 bpsInventory restocking: $20 millionDemand drivers: advanced logic and HBM chipsUtilization: Fab utilization rates improvingNode activity: 3-nanometer volumes scaling, 2-nanometer meaningful activity, Angstrom era nodes (16, 14, 10) R&D focus	$722 million	12%	—	36.4%
Interconnect Solutions Exceptional quarter with impressive execution, driven by content and share gains in Advanced Packaging and Interconnect and Thermal Management. Capitalized on demand tailwinds from data centers and benefited from ramps on shorter cycle EOR wins. Margin improvement due to strong operating leverage on higher volumes and favorable mix. Organic sales growth: 22% YoYAdjusted operating EBITDA margin: 28.5%Adjusted operating EBITDA margin sequential change: +280 bpsCore areas growth (Advanced Packaging, Interconnects, Thermal Management): >50% YoY	$593 million	22%	—	28.5%

Product announcements

Product	Type	Timeline
New CMP materials (pads and advanced cleans)	launch	ongoing
Lithography solutions (EUV sublayers)	milestone	ongoing
AI PCB boards (fine lines, interconnect, copper interconnect products)	milestone	ongoing
Thermal management portfolio (thermal pads, liquid gap fillers, face change materials)	update	ongoing

Deals & partnerships

NVIDIA collaboration

New collaboration focused on advancing materials research and development for next-gen AI, high-performance computing, and Advanced Packaging. Combines Qnity's materials expertise with NVIDIA's modeling and simulation capabilities to accelerate development and improve manufacturing.

Apple inclusion in program

Inclusion in Apple's American manufacturing program, recognizing Qnity's role as a long-term trusted partner.

Capital programs

Delaware Facility Expansion opened

Benefit:385,000 square foot facility

Expanded footprint in the U.S. with the March opening of a 385,000 square foot facility in Delaware. The first line is already operational and in customer [indiscernible].

Taiwan State-of-the-Art Site underway $61.5 million

Period spend: 1/3 of $61.5 million

Benefit:advanced production, clean rooms, warehousing, and R&D labs

Announced a new state-of-the-art site in Taiwan with advanced production, clean rooms, warehousing, and R&D labs. Equipment installation and fit-out will be completed this year, with full operation expected in early 2027. Approximately one-third of the $61.5 million investment was made in Q1.

Risks & headwinds

Geopolitical inflation headwinds remainder of 2026

approximately $20 million

Mitigation:Leveraging local-for-local operating model, working with a diversified supplier base across regions, adjusting inventory levels for critical materials, and taking targeted pricing actions to pass through incremental increases in input or logistics costs.

Labor unrest in Korea (memory and foundry customers) near-term

unquantified

Mitigation:Closely monitoring news, daily conversations with customers, constant practice of rigorous scenario planning to be agile and resilient, and rapid response to unexpected shocks.

Q&A highlights

What are the assumptions for mainstream recovery's impact on H2/2027, and what is the framework for new product ramps?

Mainstream demand shows constructive signs with improving utilization rates (mid-70s last year to high 70s/low 80s in Q1), expected to continue improving. AI applications are extending into mainstream (edge computing, physical AI), powering the next wave. New Process of Record (POR) wins are strong across advanced technologies, including CMP materials for 2nm and Angstrom era nodes, lithography (EUV sublayers), AI PCB boards, and thermal management.

“AI-led infrastructure growth is more than offsetting any softness in consumer electronics.”

asked by Christopher Parkinson · answered by Jon Kemp

2 min read 5 chapters

Detailed narrative

Shift from Shrink to Stack Architectures

Jon Kemp highlighted the semiconductor industry's fundamental shift from 2D shrink to 3D architectures, emphasizing stacking chips to unlock the next frontier of computing. This transition elevates the importance of advanced materials, integration, and reliability, playing directly to Qnity's strengths.

The company's integrated portfolio is designed to manage complex integration at scale, addressing critical challenges like power efficiency, heat management, and signal integrity in next-generation stacked systems.

AI-Driven Growth and Operational Leverage

Qnity reported its eighth consecutive quarter of strong profitable organic growth, with organic sales increasing 17% year-over-year. This robust performance is primarily attributed to ongoing momentum in AI-exposed end markets and next-generation technologies. The Interconnect Solutions (ICS) segment demonstrated exceptional organic sales growth of 22% year-over-year, driven by its Advanced Packaging, Interconnect, and Thermal Management businesses, which collectively grew over 50% year-over-year, reflecting strong operating leverage.

Strategic Capacity Expansion and Local-for-Local Model

The company is actively executing a capital allocation strategy focused on bolstering manufacturing capacity and strengthening its local-for-local operating model. Key investments include the March opening of a 385,000 square foot facility in Delaware, with its first production line already operational.

Additionally, a new state-of-the-art site in Taiwan, featuring advanced production, clean rooms, warehousing, and R&D labs, is scheduled to be fully operational in early 2027. These expansions are critical for meeting demand for CMP materials and enhancing operational agility.

End Market Diversification and Resilience

Despite some softness in consumer electronics, Qnity's results demonstrated resilience, primarily due to its exposure to premium devices and the significant growth driven by AI-led infrastructure. The company's portfolio mix is increasingly diversifying beyond consumer electronics into high-value applications such as data centers, autonomous driving, and aerospace and defense.

Data centers are now approaching 20% of the company's total portfolio, indicating a strategic shift towards more resilient and high-growth end markets.

Innovation and Customer Collaboration

Qnity maintains a strong Process of Record (POR) position across both its Semiconductor Technologies and Interconnect Solutions segments, a result of continuous R&D investments and deep alignment with customer roadmaps. Recent strategic collaborations include a partnership with NVIDIA to advance materials research and development for next-generation AI, high-performance computing, and Advanced Packaging.

The company's inclusion in Apple's American manufacturing program further underscores its role as a trusted partner in pioneering next-generation technology.

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