Qnity Electronics Q2 FY26 earnings call Q

Qnity is strategically positioned at the center of the semiconductor industry's fundamental shift from shrink to stack. The company offers a broad portfolio of end-to-end solutions, spanning front-end CMP pads, cleans, slurries, and lithography materials, to middle-of-stack advanced packaging solutions, and back-end thermal materials for data centers and AI applications. This comprehensive approach, combined with decades of innovation and a local-for-local operating model, enables Qnity to align with groundbreaking technology roadmaps and capture significant long-term value as AI, high-performance computing, and advanced connectivity reshape the industry.

The company's strong Q2 performance was significantly driven by AI, high-performance computing, and advanced connectivity. The advanced nodes portfolio within Semiconductor Technologies grew over 20% year-over-year. Qnity observed broad-based improvement in fab utilization, with advanced logic in the mid-80% range, mainstream logic in the low 80s, DRAM in the high 80s, and NAND in the low 80s. This trend, coupled with increasing layers and processing complexity for advanced nodes, translates to higher Qnity content per wafer, supporting confidence in the long-term growth outlook for the semi business.

The Interconnect Solutions (ICS) segment delivered exceptional results with 28% organic growth year-over-year. This outperformance was primarily fueled by key growth platforms: advanced packaging and interconnect, AI PCBs, and thermal management, which collectively grew more than 50% year-over-year. The increasing complexity in next-generation AI systems, particularly around signal integrity, power delivery, and heat dissipation, broadens demand across Qnity's portfolio and reinforces confidence in the durable long-term growth outlook for the ICS business.

Qnity advanced its innovation progress during the quarter, extending its technology leadership. This included the launch of Optivision Max polishing pads, an expansion of its CMP offerings, which is already seeing adoption in leading-edge nodes and advanced packaging for AI and HBM architectures. The company also secured multiple POR wins at 16nm and 14nm logic, gained new business in pulse plating for advanced AI PCBs, and further strengthened its thermal management portfolio with new materials designed to efficiently move heat in high-power-density AI systems.

Over the past several years, Qnity has executed a disciplined and sustained investment strategy in capacity. Since 2022, the company has deployed approximately $600 million in growth investments, focusing on expanding capacity and enabling next-generation technologies aligned with its local-for-local operating model. These investments, primarily high-return, quick modular capacity expansions in existing facilities, position Qnity to support accelerating customer demand and capture long-term growth opportunities across its end markets, including anticipated growth in 2027 and 2028.

Qnity is a few months into its multi-year transformation plan and is beginning to see tangible benefits. Examples include productivity and throughput improvements in its [indiscernible] business, targeted warehouse consolidations expected to deliver approximately 10% logistics cost savings, and significant progress towards IT independence, with about two-thirds of sites on track to migrate to Qnity's own systems by the end of the year. This progress is expected to unlock operating flexibility and build a stronger, more agile operating model for future growth.

The company's portfolio mix continues to evolve as customers allocate capacity to highest-value applications. This has led to rapid growth in data centers, steady growth in automotive and other industrial markets, and slower but resilient growth in consumer electronics due to exposure to premium devices. Qnity increasingly sees AI moving from the cloud into the physical world of devices, vehicles, and machines, presenting another exciting long-term growth opportunity where materials innovation will be critical for re-architecting and scaling AI in strict thermal, power, and size envelopes.