Entegris (NASDAQ:ENTG) reported second-quarter 2026 results above its guidance ranges, citing accelerating AI-related semiconductor demand, higher capital spending across the chip industry and progress on operational initiatives.
Second-quarter sales rose 11% year over year to $883 million. GAAP net income was $94 million, while adjusted net income increased 42% from a year earlier to $143 million. GAAP diluted earnings per share were $0.61, and non-GAAP EPS was $0.93.
Demand Gains Across Unit-Driven and Capital Spending Businesses
Reeder said unit-driven revenue increased 10% year over year during the quarter, supported by increased materials content required at leading-edge manufacturing nodes. The company cited growth in liquid filtration, chemical mechanical planarization, including pads, advanced deposition materials and selective etch chemistries. Liquid filtration recorded its fourth consecutive record quarter.
Capital-expenditure-related revenue increased 15% year over year, led by FOUPs, or front-opening unified pods, as well as broad strength in gas filtration and purification products. The company said bookings in its capital-expenditure-oriented businesses strengthened during the quarter, raising backlog and providing greater visibility into customer spending plans.
Entegris said it is tracking more than 20 major leading-edge capacity expansions globally, including approximately eight to 10 advanced logic facilities, seven to eight advanced memory facilities and six to eight advanced packaging projects. Reeder said these investments should become a more meaningful growth contributor in the second half of 2026 and into 2027.
The company expects 2026 MSI, or monthly semiconductor industry sales, growth of 7% to 8%, compared with its prior mid-single-digit assumption. While advanced logic and memory expectations were largely unchanged, management said mainstream logic conditions had modestly improved, though they continued to trail leading-edge markets.
Advanced logic accounts for about 40% of Entegris revenue, while memory represents approximately 30%. In Taiwan, the company reported double-digit growth associated with advanced-node capacity expansions and higher production volumes. It also cited photofiltration wins tied to EUV lithography and demand for FOUPs.
Within memory, Reeder pointed to HBM4 and through-silicon-via CMP wins, as well as roughly two-times year-over-year growth in molybdenum precursor demand. He later said Entegris expects its molybdenum business to roughly double in 2026 compared with 2025, driven in part by NAND memory technology transitions toward higher layer counts.
Margins Improve as Company Invests in Capacity
GAAP and non-GAAP gross margin was 47.6% in the second quarter, reflecting sequential improvement. Chief Financial Officer Sukhi Nagesh said the company increased factory direct labor by a double-digit percentage from the fourth quarter to help unlock capacity for anticipated customer demand.
Adjusted EBITDA was $251 million, or 28.4% of sales. GAAP operating expenses were $255 million, while non-GAAP operating expenses were $204 million, or about 23% of sales. Nagesh said most of the year-over-year increase in expenses reflected higher variable compensation tied to stronger business performance.
During the analyst question-and-answer session, management said gross-margin improvement reflected work on manufacturing-network optimization, centralized procurement, yield and scrap reduction, throughput, and productivity. Reeder said direct labor had increased more than 20% since the end of 2025 as the company invests ahead of expected demand.
Nagesh said approximately 150 basis points of year-over-year gross-margin improvement was related to a useful-life adjustment. Excluding that factor, he said margins expanded by more than 300 basis points year over year. Management said a roughly 60% incremental gross-profit flow-through was a more appropriate comparison for modeling future performance.
Segment Results and Portfolio Changes
- Materials Solutions: Sales increased 5% year over year to $371 million, driven by advanced deposition materials, selective etch chemistries and CMP. Adjusted operating margin was 20.9%, unchanged from the prior year. The company expects the segment to generate double-digit year-over-year growth in the second half of 2026.
- Advanced Planarization Solutions: Sales rose 17% to $515 million, supported by both unit-driven and capital-spending demand. Adjusted operating margin expanded to 30.3%, aided by volume growth, favorable mix and operational improvements.
Entegris also announced it would exit its U.S. Life Sciences Fluid Management business and close its Logan, Utah, facility. Reeder said the exited business represented less than $20 million in annual revenue and had dilutive gross and EBITDA margins. The company will continue to operate certain life-sciences filtration businesses.
Management described the Logan closure as its third dilutive facility rationalization since late 2025. Reeder said the company has no additional network optimization plans at present because demand has continued to increase, though Entegris will continue evaluating its manufacturing footprint.
Cash Flow, Debt Reduction and Outlook
Free cash flow reached $120 million, or 14% of sales, in the second quarter. Entegris reduced its cash conversion cycle by about 20 days year over year and repaid $200 million of debt during the period. Net leverage fell to 3.4 times.
The company said it repaid another $25 million in debt during July and now expects to finish 2026 with net leverage below three times, with Reeder stating that it expects the year-end ratio to begin with a two.
For the third quarter, Entegris forecast sales of $905 million to $935 million, representing approximately 14% year-over-year growth at the midpoint. It expects gross margin of 47.5% to 48.5%, GAAP EPS of $0.75 to $0.83, and non-GAAP EPS of $0.96 to $1.04.
Based on current visibility, the company expects fourth-quarter revenue to rise about 4% sequentially from the midpoint of third-quarter guidance, which would represent mid-teens year-over-year growth. For the full year, Entegris expects approximately $250 million in capital expenditures, about $180 million in net interest expense, a non-GAAP tax rate of about 14%, and diluted shares of roughly 154 million.
Entegris plans to host an Investor Day on Nov. 9 in New York, where it intends to provide more detail on its AI materials platform strategy, technology roadmap and long-term financial framework.
About Entegris (NASDAQ:ENTG)
Entegris, Inc is a leading provider of advanced materials and process control solutions for the semiconductor and other high-technology industries. The company develops and supplies a broad portfolio of products designed to ensure purity and reliability throughout the manufacturing process, helping customers address critical contamination and yield challenges.
Entegris’s product offerings include high-purity chemicals and specialty materials, liquid and gas filtration and purification systems, and sophisticated wafer and chip handling solutions.
