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    UCTT
    Earnings call· Jun 2026(Q2 FY26)

    Ultra Clean Holdings Q2 FY26 earnings call UCTT

    Aug 3, 2026 Source

    Executive summary

    Ultra Clean Holdings Q2 FY26 — Record Revenue and Capacity Expansion

    Ultra Clean Holdings delivered a strong second quarter, driven by increased demand across both product and service segments, reflecting healthy activity in all end markets. The company is actively executing its UCT 3.0 strategy, focusing on capacity expansion and digital transformation to support anticipated AI-driven demand and strengthen co-innovation partnerships. Management provided optimistic guidance for Q3, anticipating continued growth and margin expansion, while also planning for future capacity to support a $5 billion revenue run rate.

    Highlights

    5

    • Record total revenue of $644.9 million, up 20.8% QoQ.

    • Non-GAAP EPS of $0.70, more than double the prior quarter's $0.31.

    • Non-GAAP total operating margin expanded to 7%, up from 5.1% QoQ.

    • Added 26,000 square feet of clean room space in Malaysia, with further expansions planned to support a $4 billion annualized revenue run rate by mid-2027.

    • Top 2 customer revenue concentration reduced from 64% to high 50s, indicating diversification.

    Concerns

    1

    • Operating cash flow was negative $41.1 million, following negative $33.3 million last quarter, due to strategic inventory investments.

    Guidance & targets

    8
    CategoryTargetConfidence
    Total Revenue
    $700M-$750M
    high materiality
    High
    Non-GAAP EPS
    $0.83-$1.03
    high materiality
    High
    Non-GAAP Tax Rate
    low 20% range
    medium materiality
    Medium
    Annualized Revenue Run Rate Capacity
    $4B
    high materiality
    High
    Annualized Revenue Run Rate Capacity
    $5B
    high materiality
    Medium
    Non-GAAP Gross Margin
    20%
    high materiality
    Medium
    Non-GAAP Gross Margin
    17% range
    medium materiality
    Medium
    Services Revenue Growth
    double-digit growth
    medium materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Total Company
    Record total revenue for the quarter, with gross margin improving due to higher volumes driving factory efficiencies. Operating margin also saw significant expansion.
    Total Gross Margin: 16.7%Total Operating Margin: 7%
    		$644.9M—20.8%16.7%
    Products
    Strong revenue growth and margin improvement, benefiting from increased demand and factory efficiencies. Operating margin expanded significantly QoQ.
    Products Gross Margin: 15.1%Products Operating Margin: 6.5%
    		$572.7M—22.9%15.1%
    Services
    Continued growth in services revenue, though gross margin saw a slight decrease QoQ. Operating margin remained stable.
    Services Gross Margin: 28.9%Services Operating Margin: 11.2%
    		$72.2M—6.2%28.9%

    Operational metrics

    15
    Non-GAAP gross margin
    16.7%vs 16.5% in Q1 FY26
    Q2 FY26

    Gross margin improved primarily due to higher volumes driving factory efficiencies. Margins continue to be influenced by fluctuations in volume, mix, manufacturing region, material, and transportation costs.

    Non-GAAP gross margin
    15.1%vs 14.6% in Q1 FY26
    Q2 FY26

    Products gross margin improved QoQ.

    Non-GAAP gross margin
    28.9%vs 30% in Q1 FY26
    Q2 FY26

    Services gross margin saw a slight decrease QoQ.

    Operating expenses as percentage of revenue
    9.7%vs 11.4% in Q1 FY26
    Q2 FY26

    Operating expenses decreased as a percentage of revenue, indicating improved leverage.

    Non-GAAP operating margin
    7%vs 5.1% in Q1 FY26
    Q2 FY26

    Total operating margin expanded significantly QoQ.

    Non-GAAP operating margin
    6.5%vs 4.2% in Q1 FY26
    Q2 FY26

    Products operating margin saw a substantial increase QoQ.

    Non-GAAP operating margin
    11.2%vs 11.5% in Q1 FY26
    Q2 FY26

    Services operating margin remained relatively stable QoQ.

    Non-GAAP Tax Rate
    20%
    Q2 FY26

    Tax rate was consistent with expectations, with potential fluctuations due to mix of earnings between jurisdictions.

    Non-GAAP EPS
    $0.70vs $0.31 in Q1 FY26
    Q2 FY26

    Earnings per share more than doubled QoQ.

    Cash and investments balance
    $255.9Mvs $323.5M at Q1 FY26 end
    Q2 FY26

    Cash and cash equivalents decreased QoQ.

    Annualized revenue run rate capacity
    $3.5B
    end of FY26

    Capacity expected to be ready by year-end, matching current run rate.

    Annualized revenue run rate capacity
    $4B
    H1 2027

    Capacity expected to be ready in the first half of 2027.

    Annualized revenue run rate capacity
    $5B
    H2 2028

    Targeted capacity run rate for the second half of 2028, supported by new expansions.

    Top 2 customer revenue concentration
    high 50sdown from 64%
    Q2 FY26

    Diversifying customer mix to reduce volatility.

    Implied Q3 Gross Margin
    19%
    Q3 FY26

    Analyst's implied gross margin for the September quarter based on guidance.

    Industry KPIs

    4
    MetricValueDetails
    Services installed base$72.2MUSD
    Fab capacity utilization—
    Wfe industry spend outlook$190B-$220BUSD
    Inventory channel inventory—

    Capital programs

    3
    Malaysia Clean Room Expansioncompleted

    Benefit: 26,000 square feet of clean room space

    Additional clean room space built out in Malaysia facility to support increased demand.

    Singapore and Czech Republic Capacity Expansionunderway

    Benefit: increased capacity within current footprint

    Increasing capacity within existing facilities to support a $4 billion annualized revenue run rate by mid-2027.

    Future Capacity Expansion (Southeast Asia)evaluating

    Benefit: support $5 billion revenue run rate

    Process of evaluating future capacity requirements, strategic geographic locations, and greenfield opportunities to support a $5 billion revenue run rate.

    Risks & headwinds

    2
    Component ShortagesQ2 FY26

    no issues for UCT

    Mitigation: proactive readiness campaign to secure critical components

    Supply Chain Pressureongoing

    double-digit growth quarter-by-quarter

    Mitigation: actively and proactively manage

    What to watch in Q3 FY26

    5

    $4B Revenue Run Rate Capacity Readiness

    H1 2027
    Current3.5B capacity ready by year-end FY26
    Target4B capacity ready

    Why it matters

    This capacity is foundational to supporting anticipated AI-driven demand and achieving the company's growth targets.

    So at the end of the year, you will see a $3.5 billion, we'll see💬 $3.5 billion capacity ready and not really match the run rate we see today. And then in the first half of 2027, we will hit that $4 billion run rate in capacity, and we're going full speed on that.

    Q&A highlights

    5

    Why was Q3 guidance not higher, given that a major customer guided systems up 30% QoQ, implying UCT's product revenue outgrew them in Q2?

    Management explained that there's a timing gap in revenue recognition due to customers integrating UCT's subsystems into their systems and differing quarter-end schedules. They noted that aggregated over two quarters, UCT's revenue growth is on par or higher than customer growth.

    “I think that definitely, you realize that we have a timing gap with certain customers. where we need to really -- they need to integrate our subsystem into their systems, and there's a timing lag.”

    asked by Timothy Arcuri · answered by James Xiao

    2 min read5 chapters

    Detailed Narrative

    01

    Industry Environment and AI-Driven Demand

    Ultra Clean Holdings observed increased demand across both its product and service businesses in Q2 FY26, driven by healthy activity in all end markets. AI-driven investments are reshaping the semiconductor capital equipment landscape, leading to higher volumes and complexity in required systems and components. The company notes that incremental AI demand extends beyond GPU-intensive training clusters to CPU compute, necessitating scaling across all layers of semiconductor manufacturing. This trend is leading customers to engage earlier with UCT for manufacturing readiness and accelerated execution.

    02

    UCT 3.0 Strategy and Capacity Expansion

    The company's UCT 3.0 strategy focuses on ramp readiness, new product development (NPX), and digital transformation. UCT recently added 26,000 square feet of clean room space in Malaysia and plans further capacity increases in Singapore and the Czech Republic. These expansions are designed to support an annualized revenue run rate of $4 billion by mid-2027, aligning with a projected $200 billion WFE market. The company is also evaluating future greenfield opportunities to support a $5 billion revenue run rate, corresponding to a $250 billion WFE, targeting H2 2028.

    03

    NPX Initiative and Digital Transformation

    UCT launched its first NPX (New Product Development, Introduction, and Transfer) Center of Excellence in Hillsboro, Oregon. This initiative aims to foster earlier and deeper engagement with customers, accelerating product qualification and improving the transition to high-volume manufacturing. The digital transformation pillar of UCT 3.0 involves modernizing systems and data infrastructure to enhance operational visibility, accelerate decision-making, and increase productivity through automation, advanced analytics, and AI-enabled capabilities.

    04

    CFO Transition

    The call marked Sheri Brumm's final earnings call as CFO, after 17 years of service to UCT. James Xiao recognized her contributions to the company's growth and financial foundation. Mike Keogh is joining as the new Chief Financial Officer, bringing extensive financial, operational, and public company leadership experience to support the UCT 3.0 growth plan.

    05

    Customer Diversification and Market Timing

    UCT is actively diversifying its customer base, with revenue from its top two customers decreasing from 64% to the high 50s. This strategy aims to reduce volatility from segment movements within the WFE market. The company also noted a timing gap in revenue recognition with certain customers due to the integration of UCT's subsystems into their systems and differing quarter ends, which can cause short-term discrepancies in reported growth rates compared to customer system growth.

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