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    UCTT
    Earnings call· Mar 2026(Q1 FY26)

    Ultra Clean Holdings Q1 FY26 earnings call UCTT

    Apr 28, 2026 Source

    Executive summary

    Ultra Clean Holdings Q1 FY26 — Strong Start with AI-Driven WFE Momentum

    Ultra Clean Holdings delivered a strong Q1 FY26, exceeding guidance driven by solid execution and increasing momentum in the semiconductor landscape, particularly from AI-driven computing. The company is strategically positioning for a multiyear upturn with its UCT 3.0 strategy, focusing on ramp readiness, MPX, and digital transformation, while also strengthening its balance sheet. The CFO announced her retirement, with a successor search underway.

    Highlights

    5

    • Total revenue of $533.7 million exceeded the midpoint of guidance, up from $506.6 million in Q4 FY25.

    • Non-GAAP EPS of $0.31 surpassed the midpoint of guidance, up from $0.24 in Q4 FY25.

    • Total gross margin improved to 16.5% in Q1 FY26, up from 16.1% in Q4 FY25.

    • Reduced annual cash interest expense by approximately $30 million by repaying term loan B.

    • Refinanced and upsized revolving credit facility from $150 million to $250 million, reducing interest margin by 75 basis points.

    Concerns

    3

    • Operating cash flow was negative $33.3 million in Q1 FY26, down from positive $8.1 million in Q4 FY25, driven by higher working capital for inventory build.

    • Services segment operating margin decreased to 11.5% in Q1 FY26, compared to 12.4% in Q4 FY25.

    • Domestic China business remains less than 5% of overall revenue.

    Guidance & targets

    8
    CategoryTargetConfidence
    Total Revenue
    $565 million to $605 million
    high materiality
    High
    Non-GAAP EPS
    $0.44 to $0.60
    high materiality
    High
    WFE Outlook
    $140 billion to $145 billion
    high materiality
    High
    WFE Outlook Growth
    15% and above
    high materiality
    Medium
    Tax Rate
    low 20% range
    medium materiality
    High
    Service Revenue Growth
    double-digit growth
    medium materiality
    High
    Service Revenue as % of Total Revenue
    10% to 12%
    low materiality
    Medium
    Revenue Growth Q2 to H2
    similar range of growth
    high materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Products
    Product gross margin was 14.6% in Q1 FY26 compared to 14.1% in Q4 FY25. Margin from products divisions was 4.2% compared to 3.9% in the prior quarter.
    Prior quarter revenue: $442.4 millionPrior quarter margin: 3.9%
    		$465.7 million——4.2%
    Services
    Services gross margin was 30% in Q1 FY26 compared to 29.7% in Q4 FY25. Margin from services was 11.5% compared to 12.4% in the prior quarter.
    Prior quarter revenue: $64.2 millionPrior quarter margin: 12.4%
    		$68 million——11.5%
    Total Company
    Total revenue came in at $533.7 million compared to $506.6 million in the prior quarter. Total gross margin for the first quarter was 16.5% compared to 16.1% last quarter. Total operating margin for the quarter came in at 5.1% compared to 4.9% last quarter.
    Prior quarter revenue: $506.6 millionPrior quarter gross margin: 16.1%Current quarter gross margin: 16.5%Prior quarter operating margin: 4.9%
    		$533.7 million——5.1% (Operating Margin)

    Operational metrics

    19
    Non-GAAP Total Revenue
    $533.7 millionup from $506.6 million in Q4 FY25
    Q1 FY26

    Total revenue for the first quarter, presented on a non-GAAP basis.

    Non-GAAP Products Revenue
    $465.7 millionup from $442.4 million in Q4 FY25
    Q1 FY26

    Revenue from products for the first quarter, presented on a non-GAAP basis.

    Non-GAAP Services Revenue
    $68 millionup from $64.2 million in Q4 FY25
    Q1 FY26

    Revenue from services for the first quarter, presented on a non-GAAP basis.

    Non-GAAP Gross Margin
    16.5%up from 16.1% in Q4 FY25
    Q1 FY26

    Total gross margin for the first quarter, presented on a non-GAAP basis. Margins influenced by volume, mix, manufacturing region, material, and transportation costs.

    Non-GAAP Operating Expense
    $61.1 millionup from $56.6 million in Q4 FY25
    Q1 FY26

    Operating expense for the first quarter, presented on a non-GAAP basis.

    Non-GAAP Operating Expense as % of Revenue
    11.4%up from 11.2% in Q4 FY25
    Q1 FY26

    Operating expenses as a percentage of revenue for the first quarter, presented on a non-GAAP basis.

    Non-GAAP Operating Margin
    5.1%up from 4.9% in Q4 FY25
    Q1 FY26

    Total operating margin for the first quarter, presented on a non-GAAP basis.

    Non-GAAP Tax Rate
    20%consistent with expectations
    Q1 FY26

    Tax rate for the first quarter, presented on a non-GAAP basis. Fluctuations can occur due to mix of earnings between higher and lower tax jurisdictions.

    Non-GAAP EPS
    $0.31up from $0.24 in Q4 FY25
    Q1 FY26

    Earnings per share for the first quarter, presented on a non-GAAP basis.

    Non-GAAP Net Income
    $14.5 millionup from $10.9 million in Q4 FY25
    Q1 FY26

    Net income for the first quarter, presented on a non-GAAP basis.

    Shares Outstanding
    46.3 million
    Q1 FY26

    Shares outstanding used for EPS calculation.

    Cash and investments balance
    $323.5 millionup from $311.8 million at end of Q4 FY25
    Q1 FY26

    Cash and cash equivalents balance at the end of the first quarter.

    Annual cash interest expense reduction
    $30 million
    Annual

    Reduction in annual cash interest expense due to repayment of term loan B.

    Weighted average borrowing rate reduction
    from ~6.2% to ~1.4%
    Ongoing

    Expected reduction in weighted average borrowing rate after refinancing actions.

    Revolving credit facility upsize
    from $150 million to $250 million
    Ongoing

    Increase in the revolving credit facility limit.

    Revolving credit facility interest margin reduction
    75 basis points
    Ongoing

    Reduction in the interest margin for the revolving credit facility.

    Domestic China business as % of revenue
    <5%maintained
    Q1 FY26

    Percentage of overall revenue from domestic China business.

    Capacity run rate
    $3 billioncurrent run rate $2 billion-$2.2 billion
    Annual

    Current revenue run rate supported by existing global footprint.

    Brick-and-mortar capacity
    $4 billion
    Annual

    Maximum revenue run rate achievable with modest capital investment and time.

    Industry KPIs

    10
    MetricValueDetails
    Ai data center revenue—
    Services installed base—
    Fab capacity utilizationHigher tool utilization
    Bookings net order intakeDemand continue to build week by week
    Wfe industry spend outlook$140 billion to $145 billionUSD
    Design wins socket pipeline—
    Inventory channel inventoryHigher working capital
    Node platform ramp schedule—
    Wafer shipments foundry ASPIncreasing wafer volumes
    End market segment revenue mixLeading-edge foundry logic, HBM, advanced packaging

    Deals & partnerships

    2
    Convertible Senior Notes holdersOffering of 0 coupon convertible senior notes$600 million

    Priced a $600 million offering of 0 coupon convertible senior notes in February.

    LendersRefinancing and upsizing of revolving credit facilityfrom $150 million to $250 millionextended to 2031

    Subsequent to quarter end, refinanced and upsized revolving credit facility from $150 million to $250 million, reduced interest margin by 75 basis points and extended maturity to 2031.

    Risks & headwinds

    3
    Operating cash flow negative due to working capital buildQ1 FY26

    Negative $33.3 million in Q1 FY26, compared to positive $8.1 million in Q4 FY25

    Mitigation: Building inventory to meet near-term demand and support future growth.

    Dynamic near-term environmentNear-term

    Variability across customer spending, potential supply chain constraints, and geopolitics

    Mitigation: Disciplined execution, trusted partnership with key customers, strong ramp readiness, and a global footprint enabling speed, agility, and scale.

    Gross margin fluctuationsQuarter-to-quarter

    Influenced by fluctuations in volume, mix, manufacturing region, material, and transportation costs

    Mitigation: Maintaining strong focus on operational efficiency, cost discipline, and margin improvement.

    What to watch in Q2 FY26

    5

    Revenue growth trajectory

    Second half of FY26
    CurrentQ1 FY26 revenue $533.7M; Q2 FY26 guidance $565M-$605M (close to double-digit QoQ growth)
    TargetSimilar range of growth (close to double-digit QoQ) for H2 FY26

    Why it matters

    Indicates sustained momentum in the AI-driven semiconductor upturn and validates management's confidence in a multiyear cycle.

    As you can see that in our forecast, we're seeing close to double-digit growth quarter-over-quarter from Q1 to Q2. We expect similar range of growth going forward⏳ and for the second half.

    Q&A highlights

    7

    What is the current WFE outlook, and how does resolving the memory bottleneck impact foundry unit output?

    Management stated that customers are quoting WFE outlook of $140 billion to $145 billion for 2026, representing 18% to 20% year-over-year growth, with similar momentum of 15% and above for 2027. The memory bottleneck, which previously constrained capacity, is being resolved by major memory customers investing in greenfield factories and upgrades, unlocking capacity for new leading-edge foundry logic factory launches.

    “We see really from our customers, they're quoting $140 billion to $145 billion in 2026. So that's depending on where you see the '25 number end up with, it's 18% to 20% of year-over-year growth. And we see the similar momentum. The customers are talking about 15% and above for the 2027.”

    asked by Yu Shi · answered by James Xiao

    2 min read5 chapters

    Detailed Narrative

    01

    AI-Driven Market Momentum

    The rapid expansion of AI infrastructure is fueling increased investment across the semiconductor ecosystem. Hyperscalers and cloud providers are expected to deploy significant data center capacity, spending around $600 billion in 2026, which is sharply driving demand. This investment is accelerating fab capacity for AI memory, leading-edge foundry logic, and advanced packaging, all critical enablers of AI workloads. Device complexity is increasing, driving higher process and equipment intensity, particularly in deposition and removal, sustaining the WFE cycle and expanding UCT's opportunities.

    02

    UCT 3.0 Strategy Execution

    Ultra Clean Holdings is actively executing its UCT 3.0 growth strategy, which focuses on ramp readiness, MPX (new product introduction, development, and transition), and digital transformation. These initiatives aim to accelerate time to market, improve operational efficiency, and enhance scalability. The company is investing in regionalized centers of excellence in the U.S., Asia, and Europe to co-innovate with customers, aligning with their global engineering footprint and enabling faster ramps to high-volume production. Digital transformation efforts are upgrading systems and data infrastructure with AI-compatible solutions to improve visibility and productivity.

    03

    Capacity and Operating Leverage

    UCT's global footprint currently supports approximately $3 billion in revenue and has the capacity to scale up to $4 billion with modest incremental capital investment. This expansion could be achieved within 6 to 9 months. This significant runway allows UCT to address additional demand and is expected to drive stronger operating leverage, improved profitability, and margin expansion through enhanced utilization and more efficient operations as volumes ramp.

    04

    Balance Sheet Strengthening and Cost Reduction

    The company strategically strengthened its balance sheet by pricing a $600 million offering of 0 coupon convertible senior notes in February. A portion of these proceeds was used to fully repay its term loan B, resulting in an annual cash interest expense reduction of approximately $30 million. Subsequent to quarter-end, UCT refinanced and upsized its revolving credit facility from $150 million to $250 million, reducing the interest margin by 75 basis points and extending maturity to 2031. These actions are expected to reduce the weighted average borrowing rate from around 6.2% to approximately 1.4%.

    05

    CFO Transition

    Sheri Savage announced her decision to retire from UCT after 17 years of service. She will remain fully engaged until a successor is found, with a search looking both internally and externally, to ensure a smooth transition. She expressed pride in the company's achievements and confidence in its future growth.

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