Tower Semiconductor Ltd. Q4 FY2025 earnings call

• Revenue in Q4 2025 was $440 million, up 11% Q/Q and 14% Y/Y; full-year 2025 revenue was $1.566 billion, a 9% increase vs 2024. - Net profit in Q4 2025 was $80 million (18% net margin), up from prior quarters due to technology mix enrichment. - Strong growth in technology platforms: power management, image sensors, 300mm RFSOI; record growth in optical transceiver offerings, silicon germanium, and SiPho. - Announced additional $270 million CapEx on top of $650 million for silicon photonics and germanium growth, targeting 5x capacity increase. - Intel's intention not to perform under the Fab 11X agreement; customers redirected to Japanese fab 7. - Silicon photonics platform used in physical AI applications like FMCW LIDAR; silicon germanium platform in high volumes across multiple fabs.

Power Management: Grew 20% year-over-year, representing 16% of 2025 corporate revenues and 15% of Q4 2025 revenues. Image Sensors: Grew 10% year-over-year, representing 16% of 2025 corporate revenue and 15% of Q4 2025 revenue. 300mm RFSOI: RF mobile was down 15% year-over-year, while 300mm RFSOI was up 5.5%; RF mobile represented 23% of 2025 corporate revenue and 24% of Q4 2025 revenues. Silicon Germanium and Silicon Photonics: Silicon germanium platform grew 43% year-over-year; silicon photonics revenues in 2025 were $228 million, up from $106 million in 2024; in Q4 2025, SiPho achieved $95 million or a $380 million annual run rate. RF infrastructure had a 75% revenue increase year-over-year, with silicon germanium and silicon photonics representing 27% of corporate revenues in 2025 ($421 million, up from $241 million in 2024). Mixed Signal CMOS: Decreased 18% year-over-year. Discrete: Decreased 14% year-over-year.

• Guide Q1 2026 midrange revenue to $412 million ±5%, a 15% increase vs start of 2025. - Target quarter-over-quarter revenue and profitability growth in 2026. - Updated financial model targets $2.84 billion revenue, 39.4% gross margin, 31.7% operating margin, $750 million net profit by 2028.

• Intel's non-performance under the Fab 11X agreement and ongoing mediation. - Currency fluctuations (yen, shekel) and their impact on margins. - Potential delays in CapEx equipment qualification due to supplier issues or other factors. - Market uncertainties affecting mobile business, including memory shortages and their impact on unit volumes.

Q: Mehdi Hosseini asks about collaboration with NVIDIA and 5x capacity increase.

A: Russell Ellwanger states the partnership relates to supply alignments and commitments, and the 5x capacity increase is for meeting demand.

Q: Tavy Rosner asks about shipping to NVIDIA and CPU R&D.

A: Russell Ellwanger confirms Tower doesn't ship directly to NVIDIA for photonics ICs and is working on CPO strategies with XPU makers.

Q: Cody Acree asks about silicon photonics contribution and mobile business.

A: Russell Ellwanger discusses ramp profile of silicon photonics and concerns about memory shortages impacting mobile business.

Q: Tyler asks about model timeline and CapEx utilization.

A: Russell Ellwanger states the model is targeted to be achieved by 2028, and CapEx is for meeting demand with fungible capacity.

Q: Lisa Thompson asks about tax benefit and lease extension.

A: Oren Shirazi explains the onetime tax benefit and details of the Newport Beach lease extension prepayment.