Entegris' Gross Margin Progress and CapEx Growth Forecasts Clash in Back-to-Back Earnings Calls

Date of Call: Aug 4, 2026

Financials Results

• Revenue: $883M, up 11% YOY
• EPS: GAAP $0.61 per diluted share; Non-GAAP $0.93 per diluted share
• Gross Margin: 47.6%
• Operating Margin: APS segment adjusted operating margin 30.3%, up YOY and sequentially; MS segment adjusted operating margin 20.9%, in line with prior year

Guidance:

• Q3 revenue expected to be $905-$935M, up ~14% YOY at midpoint.
• Q3 gross margin expected between 47.5%-48.5%, up from Q2 and up >400 bps YOY.
• Q3 EBITDA margin expected 28.5%.
• Q4 revenue expected up ~4% sequentially from Q3 midpoint, implying mid-teens YOY growth.
• Full year 2026 net interest expense ~$180M; non-GAAP tax rate ~14%; diluted share count ~$154M; CapEx $250M.
• Expect to end 2026 with net leverage in high two times range.

Business Commentary:

Revenue and Profitability Growth:

• Integris reported Q2 sales of $883 million, an increase of 11% year-over-year, exceeding guidance ranges.
• Adjusted net income rose to $143 million, an increase of 42% from the previous year.
• The growth was driven by strong demand across semiconductor manufacturing, particularly in AI-driven sectors, and operational improvements.

CapEx and Unit-Driven Business Expansion:

• CapEx-related revenue increased by 15% year-over-year, while unit-driven revenues grew by 10% in Q2.
• This increase was supported by significant growth in front-opening unified pods (FOOPs) and strong demand in liquid filtration and purification solutions.

Gross Margin Improvement:

• Gross margin on both GAAP and non-GAAP bases was 47.6% in Q2, showing sequential improvement.
• This improvement was attributed to stronger operational execution and strategic actions to simplify and optimize the business.

Supply Chain and Capacity Optimization:

• The company is proactively scaling ahead of the market, focusing on unlocking capacity and expanding capabilities.
• Integris is leveraging its global footprint to meet customer needs, supported by strategic facility rationalizations to streamline operations.

Outlook and Strategic Positioning:

• Integris expects 7% to 8% MSI growth in 2026, supported by accelerating capital spending in semiconductor manufacturing.
• The company is well-positioned to benefit from the ongoing semiconductor investment cycle, supported by its technology leadership and strategic footprint in key market areas.

Sentiment Analysis:

Overall Tone: Positive

• Strong performance exceeding guidance; 'second quarter was another strong quarter'; 'visibility we have enables us to identify emerging constraints early'; 'We are well positioned to accelerate growth expand profitability'; 'Our technology leadership positions... continue to strengthen our competitive advantage'; 'We entered the second half with strong momentum'.

Q&A:

• Question from Melissa Weathers (Dosha Bank): Could talk more about CapEx-oriented business outlook for second half 2026 and first half 2027?
  Response: CapEx revenue driven by strong WFE growth (low double-digit) in H2 2026, with fab construction benefit accruing more in 2027; industry tracking 20+ leading-edge capacity expansions.

• Question from Melissa Weathers (Dosha Bank): Any strategic priorities ahead of analyst day?
  Response: Near-term priorities: deliver profitable growth, drive operational excellence, allocate capital for best return; impressed with technology, strong positions in fast-growing areas, and optimization potential.

• Question from Elizabeth Sun (Citi): On track to outperform market by 3-6 points for full year? What drives upside?
  Response: Business accelerating: Q1 5% YOY, Q2 11%, Q3 mid-teens YOY growth guided; increased order visibility and backlog support improved outlook for H2 and 2027.

• Question from Elizabeth Sun (Citi): Upside in Q2 gross margin? Baseline margin going forward?
  Response: Gross margin improved 70 bps sequentially; investing ahead for demand but delivering strong incrementals; significant room for structurally higher margins through operational initiatives and scale.

• Question from Timothy Arcuri (UBS): Gross margin drop-through guidance for next year? Any one-timers?
  Response: Year-over-year gross margin uplift included ~150 bps from useful life adjustment; excluding that, margin expanded >300 bps; incremental flow-through typically ~60%.

• Question from Timothy Arcuri (UBS): Q4 guidance seems conservative?
  Response: 4% sequential increase implies mid-teens YOY growth, reflecting meaningful outperformance vs. underlying semi-market due to content gains, technology transitions, and leading-edge exposure.

• Question from Bhavesh Lodea (BMO Capital Markets): Strong growth in liquid filtration: regions, new fab capacity or higher rates? Is KSP involved?
  Response: Growth driven by advanced nodes (sub-5nm) requiring higher purity; KSP on track, ramping from break-even in H2 2026 to dilutive in 2027, participating in liquid filtration ramp.

• Question from Bhavesh Lodea (BMO Capital Markets): Billion-dollar incremental sales capacity split between units and CapEx?
  Response: More than a billion dollars of incremental capacity across units and CapEx; current network can satisfy majority of visible demand with limited capital investment.

• Question from Jim Schneider (Goldman Sachs): Why would CapEx-related business exceed WFE growth in 2027?
  Response: Timing: fab construction revenue lags (12-24 months) tool placement and wafer starts; WFE strong now, fab construction-driven revenue will build in 2027, units later in 2028.

• Question from Jim Schneider (Goldman Sachs): Update on sales strategy?
  Response: Enterprise sales team with customer-by-customer plans; deep R&D engagements (>50 projects); targeting advanced packaging and other attractive SAMs for deeper penetration.

• Question from Charles (Needham): Opportunity for LTAs and pricing discussions with customers?
  Response: Engaged in supply agreements recently; priority is supporting customer demand; confident in being compensated for value, capacity, and technology.

• Question from Charles (Needham): Thoughts on molybdenum (MOLLE) growth and third equipment entrant?
  Response: MOLLE up >20% YOY in Q2; market still largely two-horse race; Integris well-positioned with unique chemistry; growth expected to double in 2026 vs 2025.

• Question from John Roberts (Mizuho): Where are you in footprint optimization? More rationalization to come?
  Response: Progress on network optimization, procurement centralization, yield, productivity; no additional rationalization plans currently as demand increases; facilities utilized to fullest.

• Question from John Roberts (Mizuho): Thoughts on bolt-on M&A with improving balance sheet?
  Response: Near-term focus is reducing leverage to below three times; evaluate investments (internal, CapEx, M&A) based on return relative to cost of capital.

• Question from Mike Harrison (Seaport Global): Share gains in CMP slurries/cleans? Competitive environment?
  Response: Feeling good about CMP business; strong growth in pads, expanding and defending plans and slurries; successful inroads into advanced packaging.

• Question from Mike Harrison (Seaport Global): Are customers adopting full optimized suite (molybdenum deposition, CMP, etch, filtration) or sourcing separately?
  Response: Majority of value in molybdenum is in distribution cabinet and molecule; other processes (etch, filtration) typically separate buying centers.

• Question from Chris Parkinson (Wolf Research): Expectations for mainstream logic and HBM in second half?
  Response: Mainstream logic improving modestly but mixed due to consumer pressure; foundry utilization ~80-85%; below leading-edge growth. HBM driving memory growth, but pricing/outlook depends on memory market.

• Question from Chris Parkinson (Wolf Research): Framework on exited life sciences business?
  Response: Exited <$20M annual revenue fluid management business; dilutive margins; remaining filtration products still ongoing.

• Question from Edward Yang (Oppenheimer): MS growth below industry MSI in Q2? Expect margins to expand in H2?
  Response: MS grew in line with market (5% YOY vs. 7-8% MSI); expecting to grow above market in H2. Investing in long-term growth areas (e.g., moly precursors); earnings power to increase over time.

• Question from Edward Yang (Oppenheimer): How quickly can scale advanced packaging organically from $100M run rate?
  Response: Market still defining; many growing SAMs available; can target differentiated areas without incumbent advantage; more detail at Capital Markets Day.

Contradiction Point 1

Gross Margin Trajectory and Drivers

Guidance on gross margin drivers and near-term trajectory shifts between quarters.

Elizabeth Sun (Citi) - Elizabeth Sun (Citi)

2026Q2: Dave Reeder highlighted that the company is making good progress on initiatives like network optimization, procurement centralization, and productivity, with significant room to grow margins. Suki Nagesh added that gross margin improved 70 bps sequentially in Q2, with strong incrementals despite investing ahead for demand. - [Dave Reeder](CEO), [Suki Nagesh](CFO)

What is the expected Q2 gross margin upside and the baseline for future periods considering operational efficiency and rationalizations? - Yiling Sun (Citigroup Inc.)

2026Q1: Q1 gross margin of 46.9% (non-GAAP) included ~50 bps of one-time items; normalized to ~46.4%, a 240 bps sequential improvement driven by a 100 bps useful life accounting change and 140 bps from productivity/efficiency initiatives. - [David Reeder](CEO)

Contradiction Point 2

CapEx Business Composition and Growth Drivers

The characterization of CapEx revenue composition and its near-term growth drivers changes between the two calls.

Melissa Weathers (Dosha Bank) - Melissa Weathers (Dosha Bank)

2026Q2: Dave Reeder explained that 75% of Integris' revenue is from wafer starts (units) and 25% from CapEx. Within CapEx, 10% comes from WFE and 15% from fab construction. - [Dave Reeder](CEO)

How should we model the CapEx-oriented business outlook, particularly with the ongoing FAB construction, for the second half of 2026 and first half of 2027? - Melissa Weathers (Deutsche Bank AG)

2026Q1: About 25% of revenue is CapEx-related (1/3 WFE, 2/3 fab construction). The CapEx demand cycle has three waves: fab construction (wave 1) increases first, followed by gas purification/fluid management (wave 2), and finally unit-driven product lines (wave 3). - [David Reeder](CEO)

Contradiction Point 3

Revenue Growth Outlook and Expectations

Contradiction on the expected growth rate for the second half of 2026.

Elizabeth Sun (Citi) - Elizabeth Sun (Citi)

2026Q2: Given increased order visibility and backlog, the company provided improved sequential guidance for Q4 (up ~4%), implying mid-teens year-over-year growth again. - [Dave Reeder](CEO)

Are you still on track to outperform the market by 3-6 points for the full year, and what factors are driving the upside to the outlook? - Michael Harrison (Seaport Research Partners)

2025Q4: Outperformance depends on node transitions... Q1 guidance implies ~4-6% growth at the high end - [David Reeder](CEO)

Contradiction Point 4

Market Share and Competitive Dynamics in CMP

Contradiction on the company's stance regarding competitive intensity and market share in the CMP business.

Mike Harrison (Seaport Global) - Mike Harrison (Seaport Global)

2026Q2: Expressed being "quite pleased" with the CMP business, noting strong growth rates, market-leading growth in PADS, and successful expansion/defense of plans and slurries. - [Dave Reeder](CEO)

How do you assess the competitive environment in CMP and any potential share shifts? - Timothy Arcuri (UBS Investment Bank)

2025Q4: Outperformance depends on node transitions... Fab construction CapEx timing remains a wild card, influencing revenue participation in that segment. - [David Reeder](CEO)

Contradiction Point 5

Timing and Phasing of CapEx-Related Revenue

Contradiction on the expected growth trajectory for CapEx components like fab construction and WFE.

What were Dosha Bank's key financial highlights in Q2? - Melissa Weathers (Dosha Bank)

2026Q2: He noted that second half 2026 CapEx revenue will be driven by low double-digit WFE growth and ~7% fab growth, while 2027 will see stronger fab construction growth followed by WFE and then unit growth. - [Dave Reeder](CEO)

How should we model your CapEx-oriented business outlook, particularly with the expansion of FABs, for the second half of 2026 and first half of 2027? - Timothy Arcuri (UBS Investment Bank)

2025Q3: CapEx is expected to materially decrease in 2026. - [Linda LaGorga](CFO)