VSH

Overall Quarterly Performance

• Adjusted net revenue (excluding $30M in customer-directed tariff refunds) hit $919M, growing 9.5% QoQ and 20.5% YoY, exceeding the top end of prior guidance
• Overall Q2 book-to-bill ratio was 1.32, with total backlog growing 18% to $1.9B (equal to 6.1 months of coverage), a record high for resistors and inductors
• Adjusted operating margin hit 5.8%, up from 2.6% in Q1 2026 and 1.4% in Q2 2025; adjusted EPS was 19 cents, up from 5 cents in Q1
• Pricing increases announced since Q4 2025 have been rolled out to ~one-third of active part numbers, with initial impacts already reflected in Q2 financials

Vishay 3.0 Transformation Progress

• The customer-first, capacity-focused Vishay 3.0 operating model is delivering on projected goals, driving market share gains across both semiconductors and passive components
• The company has regained previously underserved high-margin customers and added new high-margin growth accounts, growing total customer count
• Geographic manufacturing footprint aligns with rising customer demand for Western-sourced electronic components, supporting additional share gains

Capacity Expansion Progress

• $900M in capacity investments made during the prior market downturn allow the company to scale faster than historical cycles to meet rising demand
• The new 12-inch wafer fab in Germany has all equipment assembled, with installation on track to complete in Q3 2026; engineering wafer production will start by end-2026, with non-automotive production targeted for mid-2027, with ~half of 2026 full-year CapEx allocated to this project
• Additional wafer capacity at third-party foundries in Korea and China will come online in Q3 2026 to support AI-related demand starting in H2 2026
• Automotive product qualifications are ongoing at La Laguna and Morris facilities; polymer capacitor capacity will expand by end-2026, with a new expansion launched at the La Laguna, Mexico site
• The company is building in-house dedicated back-end capacity to reduce dependency on external subcontractors and improve margin capture

Strategic Priorities

• Proactively allocate available capacity to higher-margin customers and products, moving away from the historical model of maximizing utilization at any margin
• Leverage the company's hybrid business model (in-house production of both discrete semiconductors and passives) to capture up to 80% of component content on power application boards
• Accelerate R&D for wide band gap technologies (silicon carbide, GaN) and reignite disciplined value-accretive M&A to support innovation, funded by the recent $830M net proceeds from a public stock offering
• Target a long-term gross margin of 30% as outlined in the company's strategic plan

• Q3 2026 adjusted revenue is guided between $945M and $975M, representing a 4.5% QoQ increase (midpoint) and 21.4% YoY increase, accounting for typical European seasonal slowdown
• Q3 2026 gross margin is guided to 24.0% ± 50 basis points, achieving the full-year 24% quarterly target one quarter earlier than originally planned
• Full-year 2026 CapEx is maintained at $400M to $440M
• Q3 2026 depreciation expense is expected to be ~$54M, with full-year 2026 depreciation projected at $215M
• Q3 2026 SG&A expense is guided to $155M ± $3M, as the company continues investing in R&D and customer-facing activities
• Q3 2026 effective tax rate is expected to be between 35% and 40%, remaining elevated at current pre-tax income levels and stabilizing to historical averages as earnings grow
• 2026 full-year free cash flow is expected to remain negative due to ongoing capacity expansion plans
• Capital intensity is projected to decline from recent 10-11% levels over time as major capacity projects are completed, even if absolute CapEx dollars remain elevated

All of Vishay Intertechnology's reportable product and end market segments delivered positive year-over-year and quarter-over-quarter revenue growth in Q2 2026:

• Semiconductors: Book-to-bill ratio of 1.23, with accelerating volume growth tied to AI and automotive end markets
• Passive Components: Book-to-bill ratio of 1.40, with record high Q2 bookings for resistors and inductors, and growing demand across industrial, AI and aerospace end markets
• Industrial End Market: Revenue increased 16.2% QoQ and 30.1% YoY, contributing more than half of total Q2 revenue growth; 30.1% revenue contribution growth
• Automotive End Market: Revenue increased 3.6% QoQ and 10.1% YoY, driven by rising electronic content for ADAS, autonomous driving, and EV/hybrid platforms
• Aerospace & Defense End Market: Revenue increased 4.2% QoQ and 15.4% YoY, fueled by growing funded U.S. defense programs and increasing regional demand globally
• Healthcare End Market: Revenue increased 7% QoQ and 14.7% YoY, driven by ramping production at long-standing Americas customers and improving demand at Asian EMS partners
• Other (Telecom, Computing, Consumer) End Market: Revenue grew 11.3% QoQ and 28.4% YoY, driven by AI-related programs in Asia and 5G radio project growth in Europe

By sales channel:

• Distribution: 58% of total Q2 revenue (up from 55% in Q1), revenue increased 15.6% QoQ and 24.2% YoY, leading all channel growth
• OEM: Revenue increased 1.7% QoQ and 16.8% YoY
• EMS: Revenue increased 3.2% QoQ and 10.8% YoY

By region:

• Asia: Accounted for over half of total Q2 sequential revenue growth, with sales up 12.5% QoQ
• Americas: Sales grew 14.1% QoQ, with passive orders hitting a 20+ year high and a Q2 book-to-bill of 1.5

• Geopolitical tensions and ongoing supply chain uncertainty drive customer concerns about product availability, leading to extended order lead times and forward ordering that could potentially shift demand over time
• Capacity constraints at the company and across the industry limit the ability to meet all current demand, even with expanded capacity investments
• Automotive program approvals for the Newport fab are taking longer than initially planned, delaying utilization increases
• The elevated GAAP effective tax rate remains impacted by U.S. taxation of foreign earnings and repatriation rules at current profitability levels
• Consumer segment demand is partially tempered by ongoing memory shortages and broad-based component price increases

Q: An analyst asked about current fab utilization, the share of manufacturing done at external foundries, and expected wafer-per-month capacity for the Newport fab (end of 2026) and Germany 12-inch fab (2028). / A: Additional capacity at Korean and Chinese foundries will come online in Q3 2026 to support AI-related wafer and end product demand. Newport fab is progressing through automotive customer audits, with 9-10 completed and a few remaining; utilization will rise as Tier 1 program approvals come in monthly through end-2026, with freed capacity at the Itzehoe 8-inch fab supporting additional growth. The Germany fab remains on track for mid-2027 non-automotive production launch, but the company is not ready to disclose wafer capacity targets at this time.

Q: An analyst asked about Vishay's exposure to MLCCs vs polymer tantalum capacitors amid reported industry shifts, whether the company plans to expand polymer capacity, and current polymer revenue share. / A: Vishay's existing MLCC portfolio is focused on specialized military and medical applications, with limited ad-hoc demand from AI/compute programs when competitors have long lead times. Demand for polymer tantalum continues growing across automotive and AI applications despite industry discussion, and the company is expanding polymer output at existing sites by end-2026, with a new capacity expansion launching at La Laguna, Mexico. Polymer will remain a growing core part of Vishay's product portfolio.

Q: An analyst asked about the gross margin growth trajectory after the 24% target was pulled forward to Q3, whether the long-term 30% target timeline has changed, and what drivers will support continued margin expansion. / A: Multiple levers are driving ongoing margin expansion: higher volume, rising ASPs, proactive channel and mix management that prioritizes higher-margin customers, annual division-level cost savings, rising utilization at the Newport fab that accretes earnings quarter-over-quarter, 12-inch wafer economies from the Germany fab, in-sourced back-end capacity that eliminates subcontractor margin costs, and long-term factory footprint optimization starting in 2027. The long-term 30% gross margin target for 2028 remains on schedule with no acceleration to early 2027.

Q: An analyst asked how broad current demand escalations are, if there is evidence of irrational double ordering that could distort demand, and how AI demand compares to the company's start-of-year expectations. / A: Current ordering remains largely rational; point-of-sale consumption through distribution is growing, and distributor inventory weeks have declined quarter-over-quarter, so distributors have not been able to build excess inventory. Forward ordering is driven by customer concerns about missing supply for growing AI demand, but no meaningful double ordering has been observed to date. AI demand is significantly stronger than the company's start-of-year expectations; the company is gaining additional share as competitors cannot meet demand, and growing passives content per AI data center design, with additional capacity coming online in H2 2026 to support further growth.