Qnity’s 2026 Outlook: Revenue Growth Jumps to 18% as ICS Acceleration and MSI Expectations Shift

Date of Call: Aug 4, 2026

Financials Results

• Revenue: $1.4B, up 22% YOY and 9% sequentially
• EPS: $1.19 per adjusted diluted share, up 53% YOY
• Gross Margin: Not explicitly provided; adjusted operating EBITDA margin was 30.2%.
• Operating Margin: Adjusted operating EBITDA margin was 30.2%.

Guidance:

• Q3 sequential net sales growth expected in the low single digits range; Semi low single-digits, ICS mid-single-digits.
• Q3 adjusted EBITDA margin profile: Semi mid-30s, ICS high-20s.
• Full-year net sales expected to be $5.55B to $5.65B (implying ~18% growth at midpoint).
• Full-year adjusted operating EBITDA expected to be $1.675B to $1.725B (~20%+ growth).
• Full-year adjusted EPS expected to be $4.40 to $4.60 (35% growth).
• Full-year adjusted free cash flow expected to be $600M to $700M.

Business Commentary:

Strong Revenue and Profitability Growth:

• CUNY reported net sales of $1.4 billion for Q2 2026, up 22% year-over-year and 9% sequentially. Organic sales increased by 22% year-over-year.
• The growth was driven by strong demand across semiconductor technologies and interconnect solutions, particularly in AI-driven applications and advanced packaging.

Segment Performance and Margin Stability:

• Semiconductor Technologies segment achieved net sales of $744 million, with organic sales growth of 17% year-over-year, while ICS delivered net sales of $685 million, with organic sales growth of 28%.
• Margin stability was maintained with Semiconductor Technologies at approximately 49% and ICS at approximately 44%, despite some headwinds from product mix and growth investments.

Capital Investments and Expansion:

• CUNY has deployed approximately $600 million in growth investments since 2022 to expand capacity and support next-generation technologies.
• The investments are aligned with the local-for-local model, enhancing manufacturing and technical support capabilities to meet rising demand.

Leadership Changes and Strategic Focus:

• Kate DeCasse was appointed as president of the Semiconductor Technologies business segment, bringing over 25 years of semiconductor industry experience.
• The company continues to focus on strategic growth initiatives, including customer engagement and innovation in advanced packaging and thermal management.

Outlook and Guidance:

• CUNY raised its full-year outlook with net sales expected to be $5.55 billion to $5.65 billion, adjusted operating EBITDA between $1.675 billion to $1.725 billion, and adjusted EPS between $4.40 to $4.60.
• The optimistic outlook is supported by broad-based demand across AI-driven applications, high-performance computing, and advanced connectivity.

Sentiment Analysis:

Overall Tone: Positive

• Executives highlighted "ninth consecutive quarter of strong, profitable organic growth," "strong momentum," and "broad-based growth." The call expressed confidence in "long-term growth outlook" and "differentiated position," with guidance raised for the full year. Quotes: "performing better than our expectations," "delivered another exceptional quarter," and "position us to capture the long-term growth we see ahead."

Q&A:

• Question from Unnamed Analyst: I was wondering if you could maybe comment on how you're seeing sequentials play out, especially into Q4. It seems like even towards the upper end of your guidance, the Q4 sequential will be very muted and potentially even down a little bit sequentially. Just wanted to make sure I understand what is driving that. And is there any pull-in that you're seeing in Q3? Or do you expect that you could actually see a little bit of headwind in any of the areas?
  Response: Guidance reflects strong first-half momentum and improved second-half visibility. Q3 includes a typical seasonal consumer electronics peak. Underlying demand remains strong, but order books and customer engagement are healthy. Headwinds from ongoing developments in the Middle East and timing of customer ramps could impact outcomes.

• Question from Unnamed Analyst: You cited some of the headwinds to gross or EBITDA margins in the quarter, and I think they came in a little bit below where we were modeling. I'm just sort of curious, I think you called out specifically mix and investments. Can you maybe unpack those a little bit?
  Response: Margin pressure in the quarter was due to product mix variability from Q1 and growth investments (e.g., R&D, product qualifications). Headwinds from logistics and energy costs (~$20M total, half realized in H1) are being offset by pricing actions. Transformation programs (plant productivity, footprint optimization) are expected to drive margin expansion, particularly in H2 next year.

• Question from Melissa Weathers (Deutsche Bank): I want to touch on the interconnect solutions business. You guys had another really nice quarter of sequential growth in that business, and it seems like it's growing a lot faster than maybe, I don't know, even for your analyst day last September. It seems like you've seen a nice acceleration in that business. Any updated thoughts on how you guys are thinking about the long-term growth profile of that business, given AI and given the shift from shrink to stack?
  Response: ICS outperformance is driven by accelerated adoption of AI, especially in advanced packaging and thermal management. The business remains consumables-based and tied to volume, but customer expansions in high-value areas provide confidence in the durability of its long-term growth profile.

• Question from Melissa Weathers (Deutsche Bank): On the capacity side of things, I know you guys have been working over the last couple years to add capacity. Clearly things are off to a strong, on a strong ramp. It seems like the semi-technologies business that's starting to ramp too. industrial semis are getting stronger and that semi-cycle is getting stronger. Are you capacity constrained anywhere?
  Response: Capacity is built on a local-for-local model aligned with customer footprints. Since 2022, $600M in modular investments has been made to expand capacity. Growth is faster than expected, but existing facilities and quick adjustments allow for supporting ramps. The company is well-prepared for long-term growth in 27/28 nodes.

• Question from Chris (Firm not specified): When do you think we'll see the vast majority of these benefits. What are you most excited about? And were the vast majority of these announcements that hit our inbox almost on a weekly basis, more or less, were all those basically considered at the time of the spin, or are many of those new?
  Response: The announcements reflect the benefit of being a pure-play company, showcasing innovation and partnerships earned over years. Most are new innovation wins and POR (Product on Release) wins in the fastest-growing, highest-value technologies. Executives are most excited about the favorable growth trajectory these wins establish.

• Question from Chris (Firm not specified): When you look out two to three years, do you see CUNY's portfolio primarily based, you know, just from a distribution perspective across, you know, logic, you know, mainstream, advanced, versus memory, basically the same way that you were assessing that, you know, six, 12, 18 months ago.
  Response: Customer capacity is shifting to highest-value applications. Device mix remains ~80% logic (advanced + mainstream), ~20% memory (HBM/DRAM). End-market mix has data centers growing, industrial markets steady, and consumer electronics slowing. Growth is concentrated in advanced nodes, packaging, interconnects, and thermal materials.

• Question from Saurabh (Mizuho): I have first question on the advanced packaging. There are multiple roadmap on the architectures there in the advanced packaging. And I would assume each one have different material requirements. How are you positioned to serve these different architectures? And is your content opportunity consistent across these roadmaps?
  Response: New advanced packaging architectures trend toward larger formats and tighter geometries, increasing material complexity and intensity. CUNY's incumbency with current architectures and proven relationships with customers position it well to capture benefits from this complexity and higher content in new formats.

• Question from Saurabh (Mizuho): So you talked about mainstream doing well in the low 80s utilization. So in terms of end market, what is driving that mainstream improvement from the last quarter? And what do you expect in the next quarter?
  Response: Mainstream logic improvement is driven by strong demand from data centers and industrial markets (auto, aerospace, defense, telecom). Steady sequential improvement is expected, though memory market dynamics may moderate gains. The shift to physical AI creates broader participation opportunities for CUNY.

• Question from Frank (Firm not specified): You indicated that advanced nodes grew over 20% in the second quarter. I recall at the investor day, your expectation was a steady growth of around 7%. for advance notes. I'm just curious as to, how should we think about the near term? What's your visibility there?
  Response: Broad-based participation from all logic and memory leaders in scaling advanced nodes (3nm, 2nm, 18a, HBM3/4) is driving outperformance. The pace is such that advanced nodes will reach 45-50% of the portfolio earlier than previously thought (exited H1 at ~40%).

• Question from Frank (Firm not specified): I'm just curious if you could provide your latest take on what you expect MSI growth to be for the broader industry here in 26.
  Response: Latest view is that industry MSI growth for 2026 is expected to be in the high single digits, with PCB growth in the mid-to-high single digits.

• Question from Bhavesh Lodaya (BMO Capital Markets): So if I look at semi-stack, looking at a volume growth of 18%, it continues to be significantly ahead of traditional metrics like MSI, also meaningfully higher versus the last quarter. Is it just more CMP steps? Are you seeing more share gains, business wins?
  Response: Content outperformance is driven by successful commercialization of advanced nodes by all major customers, increasing material complexity/intensity. Additional factors include incremental share gains in CMP (cleans, slurry) and strong performance in ancillary lithography layers around EUV.

• Question from Bhavesh Lodaya (BMO Capital Markets): We have seen some M&A activity in your subsector recently. Now, clearly, you have a lot going on around internal organic growth investments and initiatives. I would love to hear updated thoughts on capital allocation around M&A, especially in light of a balance sheet coming in much better now versus value-set rating.
  Response: Capital allocation prioritizes organic reinvestment (CapEx, R&D). For inorganic, focus is on bolt-on/tuck-ins in high-growth areas like advanced packaging and thermal management, with a disciplined pipeline and process.

• Question from Unnamed Analyst: Could you just remind us on your margin profile across your data center business versus auto and electronics?
  Response: Company-wide blended EBITDA margin ~30%. Semi consistently mid-30s; ICS structurally in high-20s. Qualitatively, data centers (AI-led) have the strongest margins due to advanced content; industrial markets (auto, aerospace) are balanced; consumer electronics have lower margins.

• Question from Unnamed Analyst: Can you give us an early view into 2027 growth? Your long-term model was for 7% growth, but you grew 10% last year, guiding for 18% growth this year. WFE companies are looking for growth rates to be stable at very high levels for next year. What do you see?
  Response: It's too early to speculate on 2027, but secular demand drivers (AI, HPC, connectivity) remain strong. Customer capital expenditures and capacity additions are expected to support future growth, positioning CUNY well to capitalize.

Contradiction Point 1

Interconnect Solutions (ICS) Long-Term Growth Profile and Pace

Contradiction on the speed and drivers of ICS growth acceleration.

Melissa Weathers (Deutsche Bank) - Melissa Weathers (Deutsche Bank)

2026Q2: The pace of acceleration is faster than previously thought due to AI adoption. - John Kemp(CEO)

What is your updated outlook for the long-term growth of the interconnect solutions business considering AI and the shift from shrink to stack? - Christopher Parkinson (Wolfe Research, LLC)

2026Q1: Momentum in securing new process-of-record wins continues across advanced technologies. - Jon Kemp(CEO)

Contradiction Point 2

Mainstream Logic Utilization Trends and Drivers

Contradiction on the primary driver and stability of mainstream logic utilization improvement.

Saurabh (Mizuho) - Saurabh (Mizuho)

2026Q2: Mainstream logic utilization is improving steadily due to strong demand from data centers and industrial markets (auto, etc.). This is expected to continue with sequential steady improvement. - John Kemp(CEO)

What is driving the mainstream improvement in utilization (low 80s) from the last quarter, and what do you expect for the next quarter? - Christopher Parkinson (Wolfe Research, LLC)

2026Q1: Utilization rates on mainstream logic are improving sequentially, expected to continue through the year. AI applications are extending into the mainstream, powering the next wave of AI-led infrastructure demand. - Jon Kemp(CEO)

Contradiction Point 3

2026 Manufacturing Services Index (MSI) and PCB Growth Expectations

The expected growth rate for the broader manufacturing services index and PCBs was raised.

Frank (Questioner) - Frank (Questioner)

2026Q2: Latest view: MSI growth for 2026 is expected to be in the high single digits. PCB growth is expected in the mid-to-high single digits. - Mike Goss(Interim CFO)

What is your latest expectation for MSI growth in the broader industry in 2026? - Bhavesh Lodaya (BMO Capital Markets)

2025Q4: Expect MSI growth to be mid-single digits in 2026, similar to 2025. PCB indicators are also in the mid-single-digit range. - Jon Kemp(CEO)

Contradiction Point 4

2026 Revenue Growth Outlook

The implied full-year 2026 revenue growth guidance appears to have increased.

Questioner - Questioner

2026Q2: The 2026 revenue guidance is implied to be around 18% growth (from 10% in 2025). The secular demand drivers (AI, high-performance computing, advanced connectivity) remain broad-based. - Mike Goss(Interim CFO) [Contextual inference from Q&A about 2027 and growth drivers]

Can you provide an early view into 2027 growth, given the recent outperformance versus the long-term model? - Edward Yang (Oppenheimer & Co. Inc.)

2025Q4: The guide is anchored to mid-single-digit MSI/PCB market indicators plus Qnity's outperformance content advantage. It aligns with the midterm framework of 6-7% sales growth. - Jon Kemp(CEO) and Michael Goss(Interim CFO)

Contradiction Point 5

EBITDA Margin Trajectory

Forecast for EBITDA margin progression differs between quarters.

Questioner (Deutsche Bank) - Questioner (Deutsche Bank)

2026Q2: Q2 margins were affected by product mix... and growth investments... Some quarterly variability is expected, but the margin profile is constructive. - Mike Goss(Interim CFO)

What are your expectations for gross and EBITDA margin improvements over the next two to three quarters? - Arun Viswanathan (RBC Capital Markets)

2025Q3: Management remains confident in **operating leverage**... EBITDA growth is expected to outpace sales growth in the long term (guidance of 7-9% EBITDA growth vs. 6-7% sales growth). - Matthew Harbaugh(CFO)