This article first appeared on GuruFocus .
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Revenue:Q3 2026 revenue of $328.7 million, up 12% sequentially and 37% year-over-year; within 0.4% of guidance midpoint.
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Gross Margin:16% in Q3, up 190 basis points sequentially and above the high end of guidance; incremental gross margin of 33%.
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Operating Expenses:$24.4 million in Q3, below forecast.
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Operating Margin:8.6% in Q3, up from 5.5% in Q2.
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EPS:$0.63 in Q3, above the high end of guidance, based on 38.2 million diluted shares.
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Adjusted EBITDA:$33.9 million in Q3.
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Cash Generation:Roughly $30 million from the P&L after interest and taxes, a new four-year quarterly record.
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Cash Flow from Operations:Total use of $29 million, reflecting a $75 million increase in inventory and receivables.
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Inventory Turns:3.6 turns in Q3, similar to Q2.
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DSO:39 days in Q3, similar to Q2.
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Capital Expenditures:$10.7 million in Q3.
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Cash and Equivalents:$213.5 million at quarter end.
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Total Debt:$119 million at quarter end; net debt coverage ratio of 0.8.
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Proprietary Content:Exited Q3 above 30% of gas systems sold (vs. 25% in Q2); on track for ~35% exiting Q4.
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Manufacturing Headcount:Expanded 40% year-to-date through Q3, including 320 hires in Q3 alone.
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Q4 Revenue Guidance:$345 million to $365 million; midpoint implies 8% sequential growth and full-year 2026 growth of ~30%.
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Q4 Gross Margin Guidance:16.5%, plus or minus 0.5%.
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Q4 Operating Expense Guidance:$26 million, plus or minus $500,000.
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Q4 EPS Guidance:$0.65 to $0.75, assuming ~15% effective tax rate and 38.5 million diluted shares.
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2027 Outlook:Sequential revenue growth every quarter; gross margin expansion aligned with incremental gross margin model of at least 25%; OpEx growth of ~15%; earnings growth expected to outpace revenue growth by over 2x.
Release Date: November 02, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Revenue grew 12% sequentially and 37% year-over-year to $329 million, with full-year 2026 growth expected at roughly 30%.
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Gross margin reached 16%, exceeding the high end of guidance and up 190 basis points sequentially, a full quarter ahead of plan.
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Net income increased 100% sequentially every quarter this year, with Q4 earnings growth expected to outpace revenue growth.
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Proprietary content within gas systems rose to over 30% in Q3, on track for ~35% by Q4, driving margin expansion.
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Component sales outside gas panels grew 250% from Q1 to Q4 and secured wins across six new tool platforms, broadening revenue and improving mix.
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Manufacturing footprint expansion in Malaysia and Mexico is progressing, with welding capacity nearly doubled and clean room build-out completed for 2027 demand.
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Strong visibility into 2027 with every quarter expected to be a growth quarter and earnings growth projected to outpace revenue by over 2x.
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Adjusted EBITDA of $33.9 million and cash generation from P&L of ~$30 million marked a new four-year quarterly record.
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Customer backstopping of inventory positions is broader than in the past, reducing inventory risk amid the ramp.
Negative Points
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Supply chain constraints, particularly in valves, fittings, substrates, and flow control, are limiting revenue and impacting high-end etch and deposition applications.
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Q4 revenue guidance was reduced by about $10 million due to component constraints and pushouts in the commercial space business.
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Incremental gross margin is expected to moderate to ~25% in Q4 from 33% in Q3 as more gas panels enter the mix.
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Operating expenses are forecast to increase ~15% in 2027, with a significant step-up in Q1, pressuring near-term profitability.
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Capital expenditures are expected to be skewed to the first half of 2027, requiring continued investment and working capital.
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Flow control revenue is not expected until 2027, delaying a key driver for further margin expansion beyond 40% internal content.
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Revenue linearity, while improving, remains affected by component shortages, creating potential for quarterly variability.
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The company must manage aggressive hiring (40% headcount increase year-to-date) and training to support the ramp, which could strain operations.
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Long-term gross margin target remains 20% at $2-3 billion revenue capacity, implying limited upside from current 16% levels without further mix shift.
Q & A Highlights
Q: Brian Chin (Stifel) asked how much cushion the Q4 revenue midpoint provides given tighter component supply, and when sub-tier constraints might ease. A: CEO Phil Barros said he feels very confident Ichor will hit anything guided as of November 2, noting about half of the roughly $10 million Q4 revenue reduction stems from the commercial space business (launch schedule pushouts) and component constraints in semi. He added that revenue linearity this quarter is significantly better than last quarter, suggesting constraints are starting to loosen, and that Ichor aims to be part of the long-term solution by bringing more of its own products online.
Q: Craig Ellis (B. Riley) asked what changes to take incremental gross margin from 30% in Q3 to the guided 25%more gas panels returning to the mix or an unusual components mix? A: CEO Phil Barros said Ichor's business has historically delivered 20%25% flow-through, and the ~30% this year shows the strategy has taken hold; the go-forward model is 25%30%, and he expects to land at the low end (~25%) because more gas boxes are expected to ship in Q4 than in Q3, bringing the average down.
Q: Charles Shi (Needham) asked whether Ichor can ship a gas box short of MFCs and still recognize revenue, and how much. A: CFO Greg Swyt said Ichor works with customers to get authorization to short ship when a specific component like an MFC is unavailable; once authorized, it can ship, with no material revenue impact at this point. For the most part full revenue is recognized, depending on the arrangementwhether the customer pays full value or a portion is held back.
Q: Charles Shi (Needham) asked how much component upside in Q3/Q4 comes from components going inside the gas box versus outside of it. A: CEO Phil Barros said internal (proprietary) content rose from about 25% to 30% last quarter and will exit Q4 at around 35%. External component sales are growing rapidlyup about 250% from Q1 to Q4 off a small baseand he expects continued growth from Q3 into Q4 and Q4 into Q1, making it a revenue driver this year.
Q: Edward Yang (Oppenheimer) asked what customer benefit exists in taking delivery of a gas panel without the MFC. A: CEO Phil Barros explained some customers need to test the tool before it ships as a complete unit, so taking the subsystem lets them verify overall equipment functionality against their customer requirements. He said such acceptance has been hit or miss and case-by-case; Ichor does not plan on it and instead plans and guides for shipping full boxes.
Q: Edward Yang (Oppenheimer) asked how Ichor thinks about long-term agreements and customers' willingness to make binding inventory and capacity commitments amid high demand. A: CEO Phil Barros said customers are increasingly backstopping inventory positionsa practice that is newer and now much wider and broader than in the past. Customers want assurance that inventory Ichor buys and POs it places will move; under the agreements, if inventory doesn't move for a period of time, the customer owns it.
Q: Ben Taxdahl (Craig-Hallum) asked about internal content targets for 2027 and whether the percentage will keep rising past 35%. A: CEO Phil Barros said the near-term target is 40% internal content; going much beyond that requires flow control, which remains a 2027 revenue event. His long-term goal is a 50-50 split between components and systems, which he said would put Ichor well above its forecast, but that is a long-term objective rather than a near-term one.
Q: Ben Taxdahl (Craig-Hallum) asked whether the $3 billion capacity plan assumes 25% gross margins, or whether 25% could come closer to $2 billion, and about the capacity timeline. A: CFO Greg Swyt clarified Ichor has not set a 25% gross margin targetit is a 20% gross margin target with 25%30% incremental flow-through. The target at $2 billion to $3 billion in revenue remains 20%, though he said the company may revisit that.
Q: An analyst (Freedom Broker) asked how significant supply chain constraints affecting high-end etch and deposition are today and which components are the biggest bottlenecks. A: CEO Phil Barros said about four components or suppliers keep him up at night on any given day, and those four change daily, requiring constant work with suppliers on capacity and parts availability. He said constraints are fully contemplated in guidance, the supply chain is starting to catch up, and he feels more comfortable today than a quarter ago.
Q: The same analyst asked whether internal manufacturing of valves, fittings, substrates and eventually flow control is aimed at unlocking additional revenue or mainly at reducing supply chain risk and protecting existing shipments. A: CEO Phil Barros said the short answer is yes to both: the strategy began as a way to lift gross margins by becoming vertical in the systems Ichor makes, but as it matured, Ichor sees a significant opportunity to sell the same proprietary components outside its gas delivery systems. That is exactly what happened in Q3, when Ichor won qualification positions in other areas of the tool.
Q: Craig Ellis (B. Riley) asked what the business must manage to grow at customers' expected 30%35% pace in 2027, and whether Ichor has supply chain flexibility if demand rises another 1015 points. A: CEO Phil Barros said supply chain is the first thing to manage, hand-in-hand with customers, and he is confident the industry will solve the constraints over time. To flex an extra 10%15%, the key levers are people and supply chain; he feels good about capacity being put in place for internal content, external components and systems, with clean rooms built out and flexibility within the Malaysia factory.
Q: An analyst (TD Cowen) asked whether 2027 gross margins around 17.5% imply roughly 45% incremental margins, and what could return incremental gross margins above 30%. A: CEO Phil Barros said the way to accelerate gross margin flow-through back to
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
