X-FAB Group reported second-quarter 2026 revenue of USD 199.8 million, down 7% year-on-year but up 2% quarter-on-quarter, as inventory adjustments weighed on automotive demand. Despite the top-line decline, the specialty semiconductor foundry maintained its EBITDA margin within the guided range of 17-20%, signaling operational resilience amid sector volatility. Management indicated that the first half of 2026 marked the bottom for its automotive business, with sequential booking improvements pointing toward a gradual recovery in the second half.

The Board of Directors declared an intermediate result for the period ended June 30, 2026. Excluding the impact of revenue recognized over time under IFRS 15, quarterly revenue stood at USD 196.0 million, aligning with the guided range of USD 190-200 million. Core business segments—automotive, industrial, and medical—contributed USD 182.1 million, accounting for 93% of total revenue. Order intake reached USD 173.3 million, up 2% sequentially, while backlog decreased by 5% to USD 291.8 million from the previous quarter’s USD 308.4 million.

Segment Performance

Automotive revenue declined 19% year-on-year to USD 116.0 million, reflecting broader industry inventory normalization. However, the book-to-bill ratio reached its highest level in two years, reinforcing management’s view that structural growth drivers like vehicle electrification and ADAS remain intact. Industrial revenue fell 4% year-on-year to USD 45.2 million, primarily due to temporary order volatility from a major silicon carbide customer. Conversely, medical revenue surged 39% year-on-year to USD 21.0 million, driven by strong demand in pacemaker and ultrasound applications.

Technology-wise, Smart CMOS & SOI revenue dropped 15% year-on-year to USD 156.7 million, while Microsystems & Photonics grew 14% to USD 28.7 million. Wide-bandgap technologies saw a 34% year-on-year increase to USD 10.6 million, supported by growing SiC prototyping activities. X-FAB also highlighted emerging opportunities in data center infrastructure, including power management and optical connectivity, with a long-term annual revenue potential of approximately USD 300 million across its business units.

Financial Highlights

EBITDA came in at USD 33.6 million, down 35% year-on-year, with a margin of 16.8%. Adjusting for IFRS 15 impacts, the EBITDA margin improved to 17.6%, within the guided 17-20% range. Operating profit (EBIT) fell sharply by 90% year-on-year to USD 2.1 million, impacted by lower capacity utilization in the automotive segment. Income tax expenses included a non-cash charge of USD 11.0 million related to the derecognition of deferred tax assets at the Malaysian subsidiary.

Capital expenditures totaled USD 24.2 million in the quarter, bringing first-half 2026 capex to USD 50.2 million. Cash and cash equivalents stood at USD 163.6 million at the end of June 2026. Net debt increased by USD 20.9 million quarter-on-quarter to USD 312.3 million. The company’s business remains naturally hedged against exchange rate fluctuations, with profitability largely unaffected by currency movements.

What the Numbers Show

A key divergence in the results is between the headline EBITDA margin and the adjusted metric. While the reported EBITDA margin of 16.8% appears pressured, the underlying operational performance—reflected in the 17.6% adjusted margin—remains stable within guidance. This suggests that the primary drag on profitability is not operational inefficiency but rather accounting treatments related to revenue recognition timing (IFRS 15) and specific non-cash tax charges. Additionally, the strong growth in medical and wide-bandgap segments offsets declines in automotive and industrial, indicating a successful diversification strategy that reduces reliance on any single end market.

Outlook and Strategic Developments

Looking ahead, X-FAB expects Q3 2026 revenue to fall within the range of USD 195-205 million, with an EBITDA margin of 17-20%. This guidance assumes an average exchange rate of 1.14 USD/Euro and excludes IFRS 15 impacts. In June 2026, the company secured EUR 127.4 million in public funding under the EU Chips Act to expand microsystems and photonics manufacturing at its Erfurt site in Germany. The new facility is scheduled to begin initial production by the end of 2028, supporting existing customer demand in X-FAB’s fastest-growing business areas.