Ichor Holdings, Ltd. (ICHR) | The Buildout — AI Infrastructure
The Verdict
Ichor makes the fluid delivery subsystems and components that sit inside semiconductor process tools — the gas and chemical delivery panels, weldments, valves and flow controls that meter and blend the gases and liquid chemistries each process step depends on. It is an upstream supplier to the wafer fab equipment makers, selling into the etch and deposition steps that AI logic and memory demand most heavily. The business is a content story more than a tool story: the more process steps and chambers a fab needs, the more delivery subsystems and components Ichor sells per tool.
| Market Cap | — |
| Revenue (TTM) | $1.0B |
| Revenue Growth | +9.1% |
| EBITDA Margin (TTM) | 0.9% |
| Net Cash | $102M |
| Earnings Beats | 3 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Revenue rose about 15% sequentially in each of the last two quarters, to $294.8M in Q2 FY2026, up 24% year-over-year.
- Management raised FY2026 revenue growth guidance to at least 30% over FY2025 — the high end of WFE expectations — from an informal 25% earlier.
- Gross margin reached 14.1% non-GAAP in Q2, above the high end of the 13%–14% guide, and management still expects about 100 bps of expansion per quarter.
- Capacity today supports $500M in quarterly revenue, and management says targeted investment can lift the existing footprint to upwards of $3B annually.
- Cash rose $167M sequentially to $256M after a completed $200M equity offering, cutting net debt coverage to 1.1 from 1.6.
What We’re Watching
- External supply is the sole named growth gate; a late-Q2 flow-control part shortage pushed some revenue past the June quarter end.
- Two customers — Lam Research and Applied Materials — were 76% of FY2025 sales, so the growth story is a read on two capex plans.
- Operating cash flow was a use of $15.9M in Q2; management expects inventory turns to improve only into 1H 2027.
- The lithography customer's inventory burn pushed its recovery right, to a Q4/Q1 return and 'significant growth in 2027.'
The thesis is strengthening on the evidence: stated guides were met or beaten, the margin cadence beat its own 100 bps schedule twice, and management raised both its full-year growth frame and its capacity ceiling. The risk has narrowed to one thing — external supply — which has already caused one timing slip, while the 76% two-customer concentration keeps the whole story levered to a handful of capex plans. The open question is whether the margin gains hold once volume growth levels off, and whether the supply chain can convert six-month-ahead orders into revenue on time.
Earnings
Q2 FY2026 revenue was $294.8M, up 15% sequentially and 24% year-over-year. Gross margin was 13.9% GAAP (14.1% non-GAAP), above the high end of the 13%–14% guide. A late-quarter flow-control part shortage delayed some shipments past the June 26 quarter end; revenue surpassed $300M for the 13 weeks ending July 3.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $295M | $256M | $240M | +22.7% |
| Gross margin | 13.9% | 11.6% | 11.3% | +260bps |
| EBITDA | $14M | $10M | $3M | +350.0% |
| EPS | $0.03 | $-0.07 | $-0.27 | −110.0% |
| Internal Ichor content (exit rate) | ~25% exiting Q2 2026 | n/a | n/a | — |
Demand is not our growth constraint. Manufacturing capacity is not our growth constraint.— Phil Barros, CEO, 2026-08-03
Management tone: The Q1 2026 call was framed around upside and leverage with a visible caution about supply chain; the Q2 call was more confident, with demand and manufacturing capacity explicitly retired as constraints. Management raised its full-year growth frame to at least 30% and its capacity ceiling to $3B annually, and said confidence in both the magnitude and the duration of the cycle was higher than at any point in the year. It stayed candid about the flow-control supplier it named as a worry, and it declined to give formal 2027 guidance.
Management Guidance
Management guided Q3 2026 revenue to $315M–$345M, gross margin to 14.5%–15.5%, and EPS to $0.40–$0.50, assuming about $1.5M of interest and other expenses, a 20%–25% tax rate, and 38.5M diluted shares. For FY2026 it guided revenue growth of at least 30% over FY2025, operating expenses up about 6%, and capital expenditures within about 3% of revenue. It also expects about 100 bps of gross margin improvement per quarter through 2026, internal Ichor content of about 30% exiting Q3 and 35% exiting Q4, and inventory-turn improvement into 1H 2027. It declined to guide 2027.
Trajectory
Revenue bottomed in late 2025 — $223.6M in Q4 FY2025 — then rose about 15% sequentially in each of the next two quarters, to $256.1M in Q1 FY2026 and $294.8M in Q2 FY2026, which was up 24% year-over-year. GAAP gross margin climbed across the same stretch, from 9.4% to 11.6% and then 13.9%. EBITDA swung from -$3.8M in Q4 FY2025 to $10.4M in Q1 and $14.4M in Q2. Management attributes the margin gain to internal content, footprint realignment and product mix rather than utilization alone. The trailing-twelve-month figures still carry the weak second half of 2025.
The Model
The model projects FY+1 revenue of $1,261M with EBITDA of $90M (a 7.1% margin), and FY+2 revenue of $1,700M with EBITDA of $187M (11.0%). The near term is anchored by management's guidance — at least 30% revenue growth in FY2026, a continuing roughly 100 bps per quarter gross margin cadence, and capacity already in place at $500M per quarter. The FY+2 step to an 11.0% EBITDA margin assumes the internal-content and footprint programs keep converting revenue into margin as volumes grow.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $948M | $1.3B | $1.7B |
| YoY Growth | — | +33.1% | +34.8% |
| EBITDA | −$6M | $90M | $187M |
| EBITDA Margin | -0.6% | 7.1% | 11.0% |
Projections are the median of 5 independent model runs. The model’s revenue sits 11.0% above analyst consensus.
Management guided Q3 2026 revenue to $315M–$345M, gross margin to 14.5%–15.5%, and EPS to $0.40–$0.50, assuming about $1.5M of interest and other expenses, a 20%–25% tax rate, and 38.5M diluted shares. For FY2026 it guided revenue growth of at least 30% over FY2025, operating expenses up about 6%, and capital expenditures within about 3% of revenue. It also expects about 100 bps of gross margin improvement per quarter through 2026, internal Ichor content of about 30% exiting Q3 and 35% exiting Q4, and inventory-turn improvement into 1H 2027. It declined to guide 2027.
What Could Go Right — and Wrong
- The at-least-30% FY2026 growth holds and the 2H 'at least 25% above 1H' framework proves conservative.
- The supply chain stays unblocked and six-month-ahead customer POs convert into revenue on time.
- Internal Ichor content reaches the ~30%/~35% exit targets or beats them, lifting gross margin toward the 20% ambition.
- The lithography customer returns in Q4/Q1 and grows significantly in 2027, adding a second demand source.
- Flow control resolves — Ichor's AFC qualifies and displaces incumbents in the category now named as its worst supplier.
- A second supply-chain event pushes revenue by weeks instead of days.
- A capex pause or inventory correction at Lam Research or Applied Materials hits the 76% of sales they represent.
- Gross margin stalls below the 100 bps per quarter cadence, or input-cost inflation outpaces internalization.
- Competitor Ultra Clean Technology converts its larger planned capacity and cleaner near-term delivery into share.
- Working capital keeps consuming cash and the inventory-turn benefit slips past 1H 2027.
Looking Ahead
Over the next twelve months the story is execution against a raised guide. Management expects sequential revenue growth above 10% in each of the next two quarters and 2H 2026 volumes at least 25% above 1H, with gross margin continuing up about 100 bps per quarter. The near-term milestones are the clean-room addition coming online in 2H 2026, internal content at ~30% and ~35% exiting Q3 and Q4, the lithography customer returning in Q4/Q1, and inventory turns improving into 1H 2027. The next scheduled proof point is Q3 earnings in November.
- Q3 2026 (November)Q3 earnings report — Tests the Q3 revenue and gross margin guides.
- 2H 2026Clean-room space online — Prerequisite for the path toward $3B annual revenue.
- Exit Q4 2026Internal content ~35% — Management's named margin driver; ~30% expected exiting Q3.
- Q4 2026 / Q1 2027Lithography customer returns — Inventory burn ends; 'significant growth in 2027' expected.
- 1H 2027Inventory turns improve — Timing management gave for operating cash flow to recover.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $849M | $948M | $1.0B | +11.6% |
| Gross Margin | 12.2% | 9.2% | 10.1% | 295bps |
| EBITDA | $23M | −$6M | $9M | -124.7% |
| EBITDA Margin | 2.7% | -0.6% | 0.9% | 332bps |
| Net Income | −$21M | −$53M | −$40M | -154.3% |
| Free Cash Flow | $10M | −$6M | −$26M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)10.1%
- EBITDA Margin (TTM)0.9%
- Net Margin (TTM)-4.0%
- ROIC-2.4%
- FCF Conversion-284.4%
- SBC / Revenue1.6%
The Company
Ichor designs, engineers and manufactures fluid delivery subsystems and components, primarily for semiconductor capital equipment and also for defense/aerospace and medical. Its main products are gas delivery subsystems that deliver, monitor and control the specialized gases used in etch and deposition, and chemical delivery products that precisely blend the liquid chemistries used in CMP, electroplating and cleaning. It also sells weldments, diaphragm valves, patented advanced flow control (AFC) and precision-machined parts. These sit inside the process tools that make advanced logic and memory chips.
Ichor runs as a single operating segment and is vertically integrated by design — its precision machining line lets it supply its own components for gas delivery systems and weldments. It is realigning its global manufacturing footprint, exiting Scotland and Korea, reducing Minnesota, and moving volume into Mexico and a new high-volume site in Malaysia, while raising the share of proprietary Ichor content inside the systems it builds. Headquarters is in Fremont, California, and the company reports no segment financials.
Business Segments
Competitive Landscape
The fluid delivery subsystem market is concentrated, and Ichor's 10-K says it faces competition from Ultra Clean Technology, with additional competition from other suppliers. That is confirmed from the other side: Ultra Clean's own filings name Ichor Systems a principal competitor in gas delivery systems, alongside Fujikin. Supplier and competitor roles blur in this chain — the wiring file maps MKS and ITW as both competitors in mass flow controllers and suppliers of flow components to Ichor.
- Ultra Clean Technology (UCTT)Ichor's 10-K names it as the competitor in a concentrated fluid delivery subsystem market. Ultra Clean's filings name Ichor Systems a principal competitor. Ultra Clean reported record Q2 revenue of $644.9M and plans capacity for a $4B–$5B annual run rate.
- FujikinNamed by Ultra Clean's filings as one of its principal competitors in gas delivery systems; not named in Ichor's own 10-K.
- MKS Inc. (MKSI)Mapped as a competitor in mass flow controllers in the supply-chain wiring file; not named in Ichor's 10-K. Also mapped as a supplier of MFCs and flow components.
- ITWMapped as a competitor in mass flow controllers in the wiring file; not named in Ichor's 10-K. Also mapped as an MFC and fastener supplier.
- Novanta (NOVT)Mapped in the wiring file as a competitor in precision gas delivery and photonics subsystems; not named in Ichor's 10-K.
Supply Chain
Ichor supplies fluid delivery subsystems and components to the wafer fab equipment makers that build chip tools. Its two largest customers are Lam Research and Applied Materials; no neighbor in the reviewed transcripts named Ichor directly.
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