VSH Q2 Earnings Call Highlights Early Upcycle and Margin Lift

VSH Sees Broad-Based Demand Strength

President and chief executive officer Joel Smejkal said adjusted revenues rose 9.5% sequentially and 20.5% year over year, with growth across technologies, end markets, channels and regions.

Book-to-bill reached 1.32, including 1.23 for semiconductors and 1.40 for passive components. Backlog increased 18% to $1.9 billion, equal to 6.1 months of sales.

CEO Smejkal said industrial demand led the increase, supported by smart-grid projects, AI power infrastructure, high-voltage direct-current systems and factory automation. He also cited stronger automotive, aerospace and defense, healthcare, computing and telecommunications demand.

Vishay Pulls Its Margin Goal Forward

Executive vice president and chief financial officer David McConnell guided third-quarter revenues to $945 million to $975 million. At the midpoint, that represents 4.5% sequential growth and 21.4% year-over-year growth, including European seasonality.

Gross margin is expected at 24%, plus or minus 50 basis points. CFO McConnell said that level would arrive one quarter earlier than the prior goal of exiting 2026 at a 24% margin.

CEO Smejkal attributed the progress to volume, pricing, channel management, cost savings and product mix. Management continues to target a 30% gross margin under Vishay 3.0.

VSH Accelerates Capacity Expansion

CEO Smejkal said proceeds from the equity offering allow Vishay to invest in semiconductor and passive-component capacity in parallel. The company expects 2026 capital expenditures of $400 million to $440 million.

Equipment for the new 12-inch wafer fab in Germany has been assembled, with installation planned for the third quarter. Engineering wafers are expected near year-end, followed by nonautomotive production in mid-2027.

A BofA Securities analyst requested detailed wafer-capacity targets. CEO Smejkal declined to provide them but said Korean and Chinese foundries should add AI-related capacity in the third quarter, while automotive approvals should lift utilization at the Newport fab.

Vishay Defends the Quality of Orders

A Needham analyst asked whether longer lead times and rising prices were producing double ordering. CEO Smejkal characterized ordering as rational and said Vishay remains early in the upcycle.

Point-of-sale activity through distribution increased 4.7% sequentially and 20.5% year over year. Distributor inventory fell to 18 weeks from 20 weeks, as consumption continued to outpace replenishment.

A Raymond James analyst asked about orders being pulled forward before price increases. CEO Smejkal said Vishay quickly updates backlog pricing, limiting access to old prices, while crowded production lines also constrain inventory building.

VSH Prioritizes Growth Investment

CFO McConnell said Vishay raised $830 million net through its stock offering and ended the quarter with $1.3 billion in cash and short-term investments. The company repaid its revolver balance in July.

Management plans to use the liquidity for capacity, research and development, and a renewed value-accretive acquisition process. Vishay also continues to expand polymer capacitor output and reduce reliance on outside semiconductor assembly providers.

A BofA Securities analyst asked about 2027 spending and buybacks. CFO McConnell gave no 2027 capital-expenditure target but said capital intensity should decline from recent 10% to 11% levels. Vishay still expects negative free cash flow in 2026 because of expansion spending.

Vishay Keeps Execution at the Center

Management’s tone remained confident on demand while focused on execution. Vishay 3.0 centers on serving more customers, directing capacity toward higher-margin business and expanding the portfolio available through distributors.

Near-term priorities are converting backlog into shipments, adding capacity without sacrificing lead times and sustaining margin improvement as pricing and cost pressures move through results.

VSH’s Zacks Rank and Style Scores

VSH carries a Zacks Rank #3 (Hold). Its Growth Score is A, VGM Score is B, Value Score is C and Momentum Score is D, creating a favorable growth profile but a weaker momentum signal. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Style Scores complement the Zacks Rank, with A and B grades carrying the greatest weight alongside Zacks Rank #1 or #2 stocks. The current Zacks Rank #3 supports a neutral near-term view, and the Rank can change as earnings estimates are revised after the reported results.

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