Tower Semiconductor rises as strong forecast signals record growth phase

Tower Semiconductor (TSEM) shares rose 5% after the chipmaker reported better-than-expected third-quarter earnings and revenue and forecast fourth-quarter sales above analysts' estimates, citing strong demand for high-speed connectivity products.

The company reported third-quarter revenue of $526M, up 19.5% from a year earlier and beating analysts' estimates by $3.94M. Earnings were $1.05 a share, 10 cents above expectations.

Tower expects fourth-quarter revenue of $600M, plus or minus 5%, compared with analysts' estimates of about $580. The midpoint of the forecast represents growth of 36% from a year earlier and 14% from the previous quarter.

“We are entering the strongest growth phase in our history, according to fourth quarter guidance, closing the year at $2 billion annual revenue and a $2.4 billion annualized revenue run rate. We target to begin 2027 avoiding first quarter’s typical industry seasonality, with clear visibility to incremental sequential revenues with accompanying margins’ growth,” said CEO Russell Ellwanger.

“With a background of growth and strong increasing demand in each of our core businesses, infrastructure (SiPho and SiGe) demand specifically is driving exceptional growth in our high-speed connectivity business," Ellwanger added.

Tower is targeting an annualized SiPho revenue run rate of $1.1B in the fourth quarter, five times its 2025 revenue from the business.

The company is also expanding manufacturing capacity, including its previously announced 300-millimeter facility expansion in Japan. The investments are progressing ahead of schedule and are supported by customer contracts extending through 2029.

Cash generated from operating activities was $185M in the third quarter, compared with $139M a year earlier. Investments in property and equipment rose to $191M from $103M.