Tower Semiconductor Nearly Doubles Operating Profit On AI Tailwinds

Tower Semiconductor Ltd. (NASDAQ:TSEM) shares climbed Wednesday after the Israel-based chip foundry reported stronger-than-expected first-quarter results and issued upbeat second-quarter guidance.

The company posted first-quarter revenue of $413.63 million, up 15% from a year earlier and ahead of analysts' estimates of $410.98 million. Adjusted earnings came in at 65 cents per share, topping Wall Street expectations of 56 cents per share.

Tower Semiconductor Profit Growth And Margin Expansion

Gross profit increased 52% year over year to $110.95 million, while gross margin expanded to 26.8% from 20.4% a year earlier.

Operating profit rose 96% to $64.57 million.

Operating cash flow surged to $509.97 million from $93.92 million in the prior-year quarter. Tower Semiconductor ended the quarter with $243.31 million in cash and cash equivalents as of March 31, 2026.

Silicon Photonics Deals Boost Long-Term Visibility

Tower Semiconductor said it signed silicon photonics agreements expected to generate $1.3 billion in revenue in 2027 from its largest customers. The company also secured $290 million in advance payments tied to capacity reservations.

The company said customers have additionally committed to a larger wafer supply agreement for 2028, with further prepayments expected by January 2027.

Tower said demand continues to rise as more than 50 silicon photonics customers expand artificial intelligence, data center and optical connectivity applications.

Chief Executive Officer Russell Ellwanger said the long-term agreements strengthen the company's position in the optical connectivity market, which is benefiting from growing AI infrastructure demand.

Ellwanger added that Tower continues expanding manufacturing capacity globally to support next-generation optical networking technologies. The company is targeting $2.8 billion in annual revenue and $750 million in net profit by 2028.

AI And Manufacturing Expansion Remain Key Focus

Executives said AI-driven demand, long-term customer agreements and growing silicon photonics production remain major growth catalysts.

Ellwanger said Tower is expanding silicon photonics manufacturing across facilities in the U.S., Israel and Japan while working with partners including Coherent Corp. (NYSE:COHR), OpenLight, Lightwave Logic Inc. (NASDAQ:LWLG), NLM Photonics, Salience Labs, Oriole Networks and Scintil Photonics.

The CEO said silicon photonics capacity is expected to increase fivefold from fourth-quarter 2025 levels by the end of 2026 as the company invests in AI connectivity technologies, optical networking and advanced packaging solutions.

Tower Semiconductor Outlook

Tower Semiconductor forecast second-quarter revenue of $432.25 million to $477.75 million, compared with analysts' estimates of $436.38 million.

TSEM Price Action: Tower Semiconductor shares were up 15.43% at $254.90 at the time of publication on Wednesday. The stock is trading at a new 52-week high, according to Benzinga Pro data.

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