Tower Semiconductor posts record $460m Q2 revenue, guides $520m Q3
Tower Semiconductor reported record second-quarter revenue of $460 million on 4 August 2026, a 24% year-on-year increase, and guided for a further step up to $520 million in the third quarter, which would represent 31% year-on-year growth. The Israel-headquartered specialty foundry, dual-listed on NASDAQ and the Tel Aviv Stock Exchange, also posted record profitability, with gross profit of $138 million and net profit of $91 million (both on a non-GAAP adjusted basis excluding equity compensation and intangible amortisation), giving a 20% net margin.
Operating profit came in at $90 million, more than double the $40 million recorded in the equivalent quarter of 2025. Earnings per diluted share were $0.79 on a GAAP basis. Cash from operating activities was $177 million, while capital expenditure reached $187 million as the company continued its capacity build-out across its five owned fabs in Israel, the United States, and Japan.
Silicon photonics drives triple-digit growth
The standout figure in chief executive Russell Ellwanger's commentary was the performance of Tower's silicon photonics (SiPho) platform, which he said reached a $680 million annualised revenue run rate in Q2 2026, up from a $180 million run rate in the same quarter of 2025. That represents more than a tripling in twelve months. Ellwanger said the company expects SiPho to cross a $1 billion annualised run rate in the fourth quarter of 2026, with continued growth through 2027.
Silicon photonics is increasingly critical to AI infrastructure, where data centres require high-bandwidth, low-latency optical interconnects to link GPU clusters. Tower's SiPho process platforms serve customers building co-packaged optics and optical transceiver modules, a supply chain that hyperscalers and networking original equipment manufacturers are racing to secure.
Looking further ahead, Ellwanger raised the company's 2028 target business model to $3.6 billion in revenue with $1.2 billion net profit, describing that target as "fully spoken for by our customers." The company attributed the uplift to deep strategic customer engagements, though it did not name specific customers or disclose contract values.
Market context and competitive positioning
Tower operates in the specialty or "value-added" foundry segment, distinct from leading-edge logic fabs. Its peers include GlobalFoundries, X-Fab, and Vanguard International Semiconductor, all of which serve similar mixed-signal, RF, power management, and imaging sensor markets. The specialty foundry tier has generally been more insulated than leading-edge logic from the cyclical inventory corrections that weighed on the broader semiconductor industry in 2023 and 2024, because its customers tend to operate on longer design cycles with more stable volume commitments.
The SiPho trajectory is a differentiated growth lever. Few foundries offer a mature, process-qualified SiPho platform at scale; the combination of Tower's process breadth (SiPho, SiGe, BiCMOS, CMOS image sensors, BCD power) and its customer advance payments (long-term customers' advances on the balance sheet rose sharply from $1.9 million at end-2025 to $145 million by end of June 2026) suggests strong forward commitment from strategic buyers.
Tower does face a notable legal overhang. The release references ongoing patent infringement claims brought by GlobalFoundries, as well as a separate dispute related to its Fab 3 lease in the United States. It also notes that the collapse of Intel's proposed acquisition of Tower in 2022 left a capacity-corridor dispute still in arbitration.
From a regulatory standpoint, the company flagged incremental exposure from the OECD Pillar Two minimum corporate tax rules, which lifted Tower's effective rate in Israel from 7.5% (under a prior preferred tax regime) to closer to 15% from 2026 onwards. The company also acknowledged risks from US and other export controls, which could affect its Israeli operations and global supply chains, particularly given the continuing security situation in the region.
Capital expenditure of $343 million in the first half of 2026 signals that Tower is investing aggressively to meet committed customer demand. Investors will be watching the Q3 print closely to see whether the $520 million guidance midpoint holds and whether SiPho revenue continues its steep ascent.