Photronics’ third quarter was marked by heightened demand for advanced integrated circuit (IC) photomasks and robust execution in the U.S. and Asia, driving results above Wall Street expectations. Management credited the outperformance to a record mix of high-end IC orders, particularly in the U.S., and a favorable shift in product mix. CEO George Makrokostas highlighted increased outsourcing opportunities from traditional captive mask makers and a growing presence in AI-driven packaging, reinforcing the company’s position in critical market segments. Management also noted that capacity expansions at key facilities underpinned the improved performance.
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Photronics (PLAB) Q3 CY2025 Highlights:
- Revenue: $215.8 million vs analyst estimates of $204.5 million (3.1% year-on-year decline, 5.5% beat)
- Adjusted EPS: $0.60 vs analyst estimates of $0.45 (34.8% beat)
- Adjusted EBITDA: $132.8 million vs analyst estimates of $64.2 million (61.6% margin, significant beat)
- Revenue Guidance for Q4 CY2025 is $221 million at the midpoint, above analyst estimates of $207 million
- Adjusted EPS guidance for Q4 CY2025 is $0.55 at the midpoint, above analyst estimates of $0.45
- Operating Margin: 24.1%, in line with the same quarter last year
- Inventory Days Outstanding: 40, down from 41 in the previous quarter
- Market Capitalization: $2.03 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Photronics’s Q3 Earnings Call
- Linda (D.A. Davidson): asked about the competitive landscape after a major rival went public; CFO Eric Rivera acknowledged the competitor’s larger market share overall but emphasized Photronics’ strength when factoring in the FPD segment.
- Christian David Schwab (Craig Hallum): pressed on margin implications from increasing pricing competition in China. Head of Asia Operations Frank Lee explained that Photronics is shifting toward higher-value, higher-margin products to offset competitive pressures.
- Schwab (Craig Hallum): inquired about the potential revenue impact from capacity expansions in Texas. CFO Eric Rivera said new production will drive incremental revenue and margins as advanced nodes ramp up over the next two years.
- Gowshihan Sriharan (Singles Research): questioned how greater outsourcing by chipmakers might impact pricing and margins. Rivera responded that outsourced high-end work carries higher average selling prices and margins, providing a positive mix shift.
- Sriharan (Singles Research): asked about the sustainability of high-end IC growth. CTO Chris Progler said growth is broad-based across existing customers, with robust demand and new opportunities expected to persist.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will monitor (1) progress on capacity expansions in Texas and Korea as signposts for future revenue contribution, (2) the pace of high-end photomask adoption in advanced applications including AI and regional reshoring efforts, and (3) the company’s ability to offset mainstream IC softness by further penetrating high-margin, advanced segments. Developments in the outsourcing trend among large semiconductor manufacturers will also be a key indicator.
Photronics currently trades at $33.89, up from $25.69 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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