Prepared remarks
Good day, ladies and gentlemen, and welcome to the Amkor Technology Second Quarter 2026 Earnings Conference Call. My name is Diego, and I will be your conference facilitator today. At this time, all participants are in a listen-only mode. After the speakers' remarks, we will conduct a question-and-answer session. As a reminder, this conference is being recorded. I would now like to turn the call over to Jennifer Jue, Head of Investor Relations. Ms. Jue, please go ahead.
Good afternoon, and welcome to Amkor's second quarter 2026 Earnings Conference Call. Joining me today are CEO Kevin Engel and CFO Megan Faust. Our earnings press release was filed with the SEC this afternoon and is available on the Investor Relations page of our website, along with the presentation slides that accompany today's call. During this presentation, we will use non-GAAP financial measures, and you can find a reconciliation to the comparable GAAP financial measures in the slides. We will make forward-looking statements today based on our current beliefs, assumptions, and expectations. Please refer to our press release for a disclaimer on forward-looking statements and our SEC filings for a discussion on the risk factors and uncertainties that may affect our future results. I will now turn the call over to Kevin.
Thank you, Jennifer. Good afternoon, everyone. Thank you for joining. Amkor delivered a strong quarter achieving second quarter revenue of $1.9 billion, up 26% year-on-year. Revenue growth was broad-based across our business, with all end markets increasing year-on-year. Record revenue in computing, as well as automotive and industrial markets, reflects the strength of our customer engagements and the increasing value of the technologies we provide. Both Advanced and Mainstream revenue increased year-on-year, with Mainstream achieving its fifth consecutive quarter of year-on-year growth. This continued improvement demonstrates the breadth of demand across our portfolio and strong execution by our global teams. Earnings per share was $0.70, a significant increase from the prior year, reflecting the benefits of higher utilization. These trends contributed to stronger profitability and are beginning to demonstrate the benefits of our strategic investments. The first half of 2026 highlights the breadth of demand across our business. Revenue increased 26% year-on-year, with growth across every end market. Communications led the increase, supported by strength in the iOS ecosystem, while computing, and in addition automotive and industrial, each delivered strong double-digit growth driven by advanced technologies and increasing semiconductor content. Consumer improved as demand continued to recover across a broad set of applications. Importantly, growth has not been limited to our advanced product portfolio. Mainstream revenue increased 21% during the first half of the year, and the overall average utilization percent improved from the 50s into the 70s across our manufacturing network. Several technology platforms are now operating at full capacity, reflecting strong demand and improved loading across the business. At Investor Day, we outlined a clear path to increasing earning power through higher utilization and a richer mix of advanced packaging technologies. The progress we achieved during the first half reflects disciplined execution against our strategy and reinforces our confidence in the long-term opportunities. Semiconductor demand remains robust, particularly in AI data center applications, where packaging complexity and performance requirements continue to increase. As advanced packaging becomes increasingly strategic, customers are placing greater emphasis on manufacturing scale, technology leadership, and supply chain resiliency. Our global footprint and deep customer relationships position us well to support these evolving requirements. As demand continues to accelerate across AI and HPC applications, we are optimizing our manufacturing network to align capacity with the highest growth opportunities. This approach supports additional participation in high-value computing applications while improving the overall mix of the business over time. Now let me share an update on our initiatives. I will begin with our first pillar, enhancing strategic partnerships in key markets. As we discussed during Investor Day, advanced packaging has become increasingly critical to enabling next-generation semiconductor technologies. As packaging complexity increases, the development cycle lengthens. Customer engagements occur earlier in the design process and extend across multiple product generations. These dynamics create deeper partnerships, improve planning visibility, and enable closer alignment on technology roadmaps and capacity requirements. Recently, we announced two significant partnership agreements that demonstrate this trend. First, we announced a 10-year advanced packaging agreement with TSMC. The agreement establishes a framework to expand advanced packaging and test capacity while strengthening the U.S. semiconductor supply chain. Together, we are working to provide customers with more integrated manufacturing solutions spanning advanced silicon fabrication through advanced packaging and test. By combining TSMC's leading-edge wafer fabrication capabilities with Amkor's advanced packaging and test expertise, we are helping build a more resilient semiconductor ecosystem in Arizona and enabling faster time-to-market for our customers. We also announced a multi-year strategic partnership with NVIDIA. This agreement focuses on advanced packaging and test supporting next-generation AI infrastructure. This collaboration aligns long-term technology roadmaps, supports expansion of advanced packaging capacity, and reinforces the important role advanced packaging plays in enabling computing platforms. While these agreements are important individually, together they demonstrate a broader industry transition. As advanced packaging moves onto the critical path of system performance, customers are seeking deeper engagement earlier collaboration and longer-term alignment with strategic partners. These types of partnership agreements are not unique to the U.S. supply chain, as we have several Asia-based agreements. These capacity discussions outside of the U.S. manufacturing are building a high level of confidence in our long-term loading in our Asia facilities. Across our global footprint, customer engagements increasingly include longer planning horizons, capacity alignment discussions, and other forms of investments to help facilitate further growth. The level of long-term collaboration and visibility we are experiencing today is meaningfully different from previous industry cycles. Beyond these announcements, we continue to strengthen relationships across the semiconductor ecosystem, including foundries, fabless companies, integrated device manufacturers, hyperscalers, and OEMs. As we help our partners achieve their technology and growth objectives, we continue to deepen relationships that create value for both parties and support durable, multi-year growth opportunities for Amkor. Our second pillar is elevating our technology leadership. Our investments in advanced packaging and test platforms position Amkor to participate in early co-development activities that customers increasingly require. We continue to see growing customer engagements across our leading-edge packaging and test technologies, with active programs spanning 2.5D, high-density fan-out, and emerging technologies such as co-packaged optics. These engagements extend across AI infrastructure, high-performance computing, and network applications, reinforcing our confidence in the durability and growth potential of our technology platform across our global manufacturing footprint. These high-value advanced packaging platforms are being adopted to support increasingly complex computing architectures. We are engaged in several HDFO programs this year. Our newest data center CPU program began ramping in Q2 and is expected to continue scaling throughout the second half of the year. By combining advanced packaging and test capabilities through turnkey solutions, we can reduce cycle time, accelerate product ramps, and improve execution as packaging complexity increases. This integrated approach strengthens our competitive position while enabling the scalable and repeatable manufacturing requirements to support demand for next-generation AI in high-performance computing. Our third strategic pillar is disciplined, intentional expansion of our global footprint. This pillar is about more than just adding capacity; it is about providing customers with geographic flexibility, supply chain resiliency, and regional execution where they need it most. Phase 1 construction of our Arizona facility continues to progress and remains a key component of our long-term growth strategy. The facility is designed to provide high-volume advanced packaging and test capabilities in the United States and support growing customer demand for regional semiconductor manufacturing. Our projections now show Phase 1 as fully committed, and we continue to evaluate future expansion plans as part of our long-term strategy to align our capacity with our customers' operations. In Korea, construction remains on schedule for completion of a new assembly and test building on our Songdo campus by the end of the year. R&D expansion is also underway on our Guangzhou campus, where we expect incremental manufacturing space will provide cleanroom capacity to support data center and advanced packaging growth opportunities in 2028 and beyond. To round out our expansion plans, incremental cleanroom expansion and equipment installations are underway in Vietnam, Portugal, and Taiwan. In Vietnam, we are continuing to build out our facility through a phased expansion approach as we increase SiP and NAND memory capacity to support communications and consumer end markets. The SiP move from Korea to Vietnam enables additional capacity for our rapidly scaling computing programs in Korea. The semiconductor industry is undergoing a structural transition as advanced packaging becomes increasingly critical to system performance and value creation. This transition is driving greater packaging complexity, deeper customer engagement, and increasing demand for regional manufacturing capabilities. Success in this environment requires scalable technology platforms, strong strategic partnerships, and geographical flexibility. Our strategy is intentionally aligned with our customer demand and industry trends, and we believe our execution against these priorities positions Amkor to capture significant long-term opportunities, increase our earnings power, and create sustainable long-term shareholder value. I will now turn the call over to Megan to provide more details on our second quarter performance and near-term outlook.
Thank you, Kevin, and good afternoon, everyone. Amkor delivered record second quarter revenue of $1.9 billion, a sequential increase of 13% outperforming the high end of our guidance. Revenue upside was driven by strong demand within the computing, and automotive and industrial end markets. High factory utilization and favorable product mix contributed to results exceeding our expectations across gross margin and EPS. Revenue in the communications end market increased 6% sequentially driven by double-digit growth in the iOS ecosystem. Android revenue declined 20%, reflecting the impact of memory supply dynamics. For the third quarter, we expect communications revenue to decline in the high single digits sequentially which is a departure from the typical seasonal patterns. This outlook reflects three primary factors. First, the strategic initiative outlined by Kevin to move SiP to Vietnam. Second, ongoing memory supply constraints. And third, build pattern changes. Communications remains the largest end market for Amkor and a core component of our long-term strategy. Our global manufacturing footprint provides the flexibility to support both next-generation mobile platforms as well as rapidly growing computing applications, aligning capacity with evolving customer requirements. Revenue in the computing end market reached a new quarterly record in Q2, increasing 20% sequentially driven by growth across a broad customer base for data center applications. Computing growth is expected to accelerate to nearly 30% sequentially in Q3, driven by AI data center demand and the HDFO CPU ramp Kevin referenced earlier. Revenue in the automotive and industrial end market also achieved a new quarterly record, increasing 17% sequentially. ADAS was the primary driver of growth, supported by higher semiconductor content and strong demand for advanced packaging in next-generation vehicle platforms. Revenue within the automotive and industrial end market is expected to grow mid-single digits sequentially in Q3. Consumer revenue increased 15% sequentially due to broad-based demand across customers primarily with IoT applications. Revenue in Q3 is expected to grow in the mid-teens percent sequentially, driven by continued strength in IoT demand. Across the portfolio, demand remained robust for our high-value advanced technology platforms supporting record revenue and improved profitability during the quarter. Gross margin was 16.8% expanding over 250 basis points sequentially. Gross profit for the quarter was $319 million, up 33% compared to Q1. Operating expenses for Q2 came in as expected at $119 million and included a $21 million gain on the sale of real estate. Operating income was $200 million and operating income margin was 10.5%. Our effective tax rate for the quarter was lower than expected at 14% due to $14 million in net discrete tax benefits. Net income was $174 million and EPS was $0.70. EBITDA was $400 million and EBITDA margin was 21%. As Kevin discussed, our first half performance reflects strong execution across the business. Revenue increased 26% year-on-year, producing a record first half. Gross margin expanded 360 basis points. Operating income more than doubled and earnings per share more than tripled compared to the first half of 2025. The magnitude of these improvements demonstrates the leverage in our financial model as revenue scales and factory utilization improves. In early May, we issued $1.15 billion of 0% convertible debt resulting in an increase in cash liquidity and total debt. This financing provides additional flexibility to support our strategic growth initiatives as we progress through our current investment phase. As of June 30, we held $2.5 billion in cash and short-term investments and total liquidity was $3.6 billion. Total debt was $2.5 billion, and our debt to EBITDA ratio was 1.8x. Now turning to our third quarter outlook. Accelerated growth in computing and continued momentum in automotive and industrial are expected to drive another solid quarter of revenue and improved profitability. Q3 revenue is expected to be between $1.95 billion and $2.05 billion. Gross margin is projected to be between 18.5% and 19.5% driven by a richer mix of advanced technologies and continued operating leverage across the business. We expect operating expenses of approximately $140 million. Our full year 2026 effective tax rate is expected to be around 20%. Net income is forecasted to be between $180 and $205 million resulting in EPS between $0.72 and $0.82. Our estimated 2026 CapEx spend remains between $2.5 billion and $3 billion. Approximately 65% to 70% is projected for facilities expansion, including Phase 1 of our Arizona campus. About 30% to 35% is projected for HDFO test and other advanced packaging capacity. The remaining spend is projected for R&D and quality programs. In closing, as the business scales, we expect that disciplined execution will continue to strengthen our financial performance. We delivered record second quarter results and our strong third quarter outlook reflects our continued focus on our strategic initiatives. This concludes our prepared remarks. We will now open the call up for your questions. Operator?
Questions and answers
Thank you. And at this time, we will conduct the question-and-answer session. Before pressing the star keys, our first question comes from Randy Abrams with UBS. Please state your question.
Hey, I wanted to ask the first question on the smartphone outlook where I believe you are guiding down versus normal. You get the peak season iOS builds. Could you go through between Android and iOS your expectation? Also, you mentioned one factor was the SiP moving to Vietnam. If you could discuss, is that a timing issue such that as you do the transition it is a delay and you ramp up later? Maybe as part of that you could discuss implications with the lower third quarter base if it swings the build up in fourth quarter.
Okay, thanks, Randy. It is good to hear you. As Megan went through, you can think of a few different dynamics going on and I will touch on all three of them. Two of those are more market-driven dynamics and one that Amkor has a little more control of. If you think of the market-driven dynamics, there are two buckets. There are material constraints related to memory and memory pricing and how that potentially affects the end market unit volumes. The other is typical build patterns that we are seeing. I would say those two items account for about half of what we are seeing versus the typical seasonal Q3 lift. The other half is driven by the SiP move. We have been very focused on our operational efficiencies. One component of that is getting the right products in the right locations so that we can scale and be efficient with those products over time. This helps us stay competitive longer-term and optimize our cost structure. The SiP move has some timing impact. Over the past year plus we have been working with all of our SiP customers to migrate the products into Vietnam to build efficiency and scale in that Vietnam facility. As we move those products out of Korea, that frees up space for us to continue to scale our high-value advanced products. Regarding Android versus iOS, we are seeing demand components in both. Megan highlighted that for Android, even in Q2 we started seeing some weakness and we continue to see that moving forward, mostly driven by materials and overall demand. iOS has a different dynamic, but overall, if you look at market data providers, they expect unit volumes to be down this year, and we are seeing some of that.
Okay. Thank you. I appreciate the color. One quick follow-up: is that an issue that is one-quarter timing and you pick back up some of that half, or is it something that may extend through this cycle and then you pick up more later? Second question: I wanted to ask about the inflection of computing. It looks like a very strong ramp of this initial big CPU project. Could you talk about the pipeline? At Investor Day you talked about other projects like the fan-out bridge. Where do you expect those to come in over the next year and how does the pipeline expand into 2027?
Yes. Regarding the programs we have announced: for 2.5D we discussed 11 customers and many different programs. For HDFO we discussed five customers and ten active engagements. Across all of those, we still see traction to have multiple products launching this year. The CPU program that we have been talking about most recently began ramping today and is the largest from a scale perspective. The other programs will continue to ramp throughout the course of the year. Bridge-type technologies would be more of a 2028 timeline, so there is a bit of time before they contribute materially. On the SiP dynamics and whether this is one quarter: across the customers migrating, they are in different phases. Some are already in volume production today, others are ramping today, and others are in qualification. There is one application space where we see this headwind lasting longer, so it is not strictly a one-quarter dynamic. It will probably extend into Q4 and into the first half of next year.
Thank you. In order to get through as many questions as we have, please limit yourselves to one question and one follow-up. Your next question comes from Craig Ellis with B. Riley Securities. Please state your question.
Yes. Thanks for taking the question. I wanted to start by making sure I understood the SiP issue that Randy dug into. As it relates to the impact around the third quarter where your guidance is clear, as you get ready for that transition, was there any communications benefit in Q2? And as we look at the fourth quarter, Kevin, can you speak more specifically to what we should expect coming off of this initial impact with the SiP move?
Okay. So first I would say there was not any specific benefit for Q2 related to this transfer. We potentially saw a little bit of general pull-in in Q2, but I would not say that was related to the transfer. Looking forward to Q4, we would expect communications in general to have some softness, and we would not expect to see a significant lift like we typically would in the second half going into Q4.
That is really helpful. Thank you. The second question is related to the NVIDIA agreement. Congratulations on signing what seems like a significant agreement. As you do R&D work to develop technology with that partner, what should we think of as the impact to R&D and operating expense and when would that happen for the technology development work? And what is the timing on the $1.5 billion in receipt for that partnership? When does it come onto the balance sheet?
Okay, thanks, Craig. I will take some of that and then Megan can add in. Around R&D, there is no step-function change in our standard engagements for high-value advanced packaging versus this agreement with NVIDIA. It is not like I would expect a huge step-up. We continue to work with all of our customers to advance next-generation technologies. Typically we spend between 3% and 5% of our capital on R&D activities, and I would expect that level to continue. Related to timing, the structure here is that this is a prepayment that would be received in 2027 and returned back to the customer as we provide the services in the U.S. The longevity of the agreement can fluctuate a bit, but we would expect it to be between five to ten years.
Your next question comes from Ben Reitzes with Melius Research. Please state your question.
Hey, guys. Thanks a lot. Could we bridge the gross margin going up at the midpoint of 220 basis points sequentially? What is the impact of the SiP in that? And what is the utilization expectation as we go from Q2 to Q3 to get that much improvement? Thanks.
Yes, Ben. Megan provided a lot of detail on the numbers, but I will add a little background. When we think about utilization: in Q1 we were in the 70s, and in Q2 we were in the high 70s. When working on moving assets from Korea to Vietnam and incrementally adding assets, there are assets in flight between crating them up in one location, shipping them to the other location, uncrating, and qualifying. That is idle capacity in transition. If we take that piece off the table, utilization across the board is pretty high, especially for advanced application spaces where utilization is very high. We still have some open capacity in some of our mainstream areas, even though we have seen improvements there, especially in the Philippines. Utilization overall is a key driver of profitability.
Hi, Ben. Specific to SiP, we actually had an increase in our overall SiP portfolio between Q1 and Q2. Of the over 250-basis-point expansion, I would characterize two-thirds of that expansion as volume or utilization related, and one-third as favorable product mix. We are getting strong profit expansion at the gross profit line, and operating income has also increased substantially with strong fall-through to EPS.
Sorry, so going into the third quarter, bridging to the guidance, what is the impact of those issues—both utilization and the SiP issue—to get the big increase for the third quarter?
Yes. For the third quarter, the gross margin expansion is predominantly related to product mix. We have a steep accelerated ramp in our compute portfolio, and with the decrease in communications, that mix shift is driving most of the profit expansion.
Okay. Got it. Thanks a lot.
Your next question comes from Denis Pyatchanin with Needham and Company. Please state your question.
Thank you very much. I also had a question about gross margins; it seems like it may have been partially answered already. Could you clarify a little about the mix and utilization impact? Going from Q1 into Q2 did I correctly understand that it was about one-third mix and two-thirds utilization? And then going from Q2 to Q3, the mix would be the bigger driver of the upside?
That is correct, Denis.
Wonderful. For my follow-up, about the revenue dynamics between Q2 and Q3: were there any pull-ins from Q3 into Q2 on specific technologies? It seems like revenue came in a little higher than some expectations, and I was wondering if things were shifting around or if there was no activity like that.
I will take that. There was nothing obvious in terms of pull-ins. As I mentioned earlier, there could have been some communications pull-ins, but across the other markets we did not see pull-in dynamics.
Understood. Thank you very much.
Your next question comes from Steve Barger with KeyBanc Capital Markets. Please state your question.
Hey, thanks. Over the past few years, in Q4 the gross margin steps up sequentially from Q3. From where you are guiding this Q3 at 19%, as volume ramps in compute and auto but is offset by some communications weakness, is there any reason we should think the seasonal pattern would be different this year? Do you expect that step up, or how would you expect that to play out?
I would say it will be dependent on mix and utilization—those are the two primary drivers. If utilization remains high and the mix stays about the same, we would not expect significant deltas from Q3 into Q4.
The reason I ask is if you do get that same gross margin or a little bit better, if my math is right you end up this year around 17.5% gross margin and EPS around $2.50, which is where the 2028 targets were from Investor Day. Can you frame up how you expect this year to play out versus 2027 and into that 2028 target to help us think about cadence?
Your math is reasonable. Next year you need to consider the U.S. manufacturing burden, which will be a headwind. We need to continue to manage through operating margin dilution from additional depreciation and underutilized assets as we ramp U.S. manufacturing.
Yes. In 2028 we will also have impacts to gross margin from ramping underutilized Arizona manufacturing. That is part of the bridge you are trying to understand—why 2028 might match 2026 despite continued investments. There will be ramping underutilized capacity in both gross margin and operating margin in 2028.
Understood. Thanks.
I am showing no further questions. I would like to turn the call back over to Kevin for closing remarks.
Thank you for your questions. Now for a recap of our key messages. Amkor delivered record second quarter revenue of $1.9 billion with record computing as well as automotive and industrial revenue. We saw year-on-year growth across all end markets. The first half of 2026 performance demonstrates the strength in our customer partnerships, technology leadership, and our global footprint strategy. Demand for advanced packaging continues to expand and our advanced packaging programs remain on track to support growth in the second half of 2026. Recent strategic partnerships with TSMC and NVIDIA reinforce the increasingly critical role advanced packaging plays and the strength of our long-term growth opportunities. We are executing with discipline against our strategic priorities and remain confident in our ability to create long-term value for customers and shareholders. Thank you for joining the call today.
Thank you. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.