PHOTRONICS INC recently released its 10-Q report. Photronics, Inc. manufactures and sells photomask products and related services used in making integrated circuits and flat panel displays in the United States, Taiwan, China, Korea, Europe, and other international markets. It also supplies electrical and optical components and sells primarily to semiconductor and FPD designers, manufacturers, and foundries through its sales and customer service teams.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Photronics said its photomask business is tied closely to new semiconductor and display design activity, especially as customers move to more advanced design nodes and fabrication processes. The company noted that demand is driven more by new product design releases than by end-market sales alone, and that shorter design cycles, simpler mask designs, or alternative fabrication methods could reduce photomask demand even if semiconductor and display shipments rise.
The company described its order flow as fast-moving, with many customer orders due within 24 hours. Backlog is typically limited to one to two weeks for IC photomasks and two to three weeks for FPD photomasks, although some IC products can stretch backlog to two to three months.
Photronics said it is investing to stay competitive in high-end and mainstream photomask markets, including manufacturing equipment and infrastructure. Year-to-date capital expenditure payments were $130.4 million in the nine months ended August 2, 2026, compared with $120.6 million in the same period of 2025, and the company expects fiscal 2026 capital expenditure payments of $255 million to $305 million.
Revenue
Total revenue in the quarter ended August 2, 2026 was $216.0 million, up 2.9% from $209.9 million in the prior quarter and up 2.7% from $210.4 million a year earlier. For the nine months ended August 2, 2026, revenue was $651.1 million, up 2.8% from $633.5 million in the prior-year period.
IC revenue was $154.7 million in the quarter, up 4.9% sequentially and up 4.6% year over year. Within IC, high-end revenue rose to $68.5 million from $56.7 million in the prior quarter and from $53.6 million a year earlier, while mainstream IC revenue fell to $86.2 million from $90.8 million sequentially and from $94.2 million year over year. For the nine months, IC revenue was $467.5 million, up 2.1% from $457.7 million, with high-end IC revenue up 13.5% to $196.4 million and mainstream IC revenue down 4.8% to $271.0 million.
FPD revenue was $61.4 million in the quarter, down 1.7% from $62.4 million sequentially and down 1.9% from $62.6 million a year earlier. For the nine months, FPD revenue was $183.6 million, up 4.4% from $175.8 million. High-end FPD revenue was $52.3 million in the quarter and $152.1 million for the nine months, while mainstream FPD revenue was $9.1 million in the quarter and $31.5 million for the nine months.
By geography, quarterly revenue came from Taiwan at $68.5 million, China at $53.0 million, South Korea at $43.3 million, the United States at $40.1 million, Europe at $10.2 million, and other regions at $0.9 million. The company said the quarter-to-quarter increase was mainly due to improved business conditions in Taiwan, the U.S., and South Korea, particularly in high-end products.
Gross margin
Gross profit was $71.7 million in the quarter, up from $65.8 million in the prior quarter and up from $70.9 million a year earlier. Gross margin improved to 33.2% from 31.3% sequentially, but was down from 33.7% a year earlier. For the nine months, gross margin was 33.2% versus 35.4% in the prior-year period.
Photronics said the sequential margin improvement reflected favorable product mix, higher revenue, and operating leverage. The year-over-year and year-to-date margin declines were attributed to higher manufacturing costs, labor and benefits costs, and material costs.
Operating expenses and operating income
Selling, general and administrative expenses were $22.5 million in the quarter, up from $20.8 million in the prior quarter and up from $18.4 million a year earlier. Research and development expenses were $3.7 million in the quarter, compared with $2.8 million in the prior quarter and $4.2 million a year earlier.
Operating income was $45.5 million in the quarter, equal to 21.1% of revenue, compared with 20.1% in the prior quarter and 22.9% a year earlier. For the nine months, operating income was 21.9% of revenue, down from 24.6% in the prior-year period.
Bottom line
Income before income tax provision was 25.4% of revenue in the quarter and 28.1% for the nine months. Net income was 20.3% of revenue in the quarter and 22.6% for the nine months, while net income attributable to Photronics, Inc. shareholders was 13.4% of revenue in the quarter and 15.9% for the nine months. The market has reacted to these announcements by moving the company's shares -2.47% to a price of $28.38. Check out the company's full 10-Q submission here.
