Soitec Earnings Call: Photonics SOI Demand Has Sharply Inflected—and the Company Can Scale Without Meaningful New Spend
Soitec FY2026 Results and FY2027 Outlook — May 28, 2026
Soitec's fiscal year 2026 results were, by any measure, a difficult set of numbers. Revenue fell 30% organically to EUR 592 million, gross margin collapsed to 16.3% from 32.1%, and the company reported a current operating loss of EUR 8 million. But the headline financials obscure the most important signal to emerge from Thursday's call: photonic silicon-on-insulator demand has undergone a sharp and recent inflection that is straining the company's delivery capacity, and crucially, Soitec believes it can absorb a large part of that surge by redeploying already-installed, fungible capacity with only limited incremental capital. That combination — accelerating demand meeting low-cost-to-deploy supply — is the central investment thesis investors need to evaluate.
Photonics: The Curve Has Changed Shape
New CEO Laurent Remont, who took the role on April 1 after three decades in the semiconductor industry, was direct about the shift. "We said 20% to 30% CAGR. We see something above 30% now," he told analysts, adding that the acceleration is particularly pronounced since March and is being driven by both pluggable optics and early preparation for co-packaged optics ramp-ups. Soitec's photonics SOI platform has crossed EUR 100 million in annual revenue and grew in excess of 30% year-on-year in FY2026. Management described more than ten customers either in full production or in qualification, and said longer-term agreements are being put in place across both 200-millimeter and the increasingly adopted 300-millimeter format.
The strategic logic is straightforward: as data center architecture shifts from copper to optical interconnect to handle the bandwidth and energy demands of AI inference and agentic workloads, Soitec's engineered substrates sit at the enabling layer. Chief Technology Officer Christophe Maleville articulated why the position is difficult to replicate: "Everything counts in photonics more than any other product. All the levels of roughness are so important. The thickness uniformity is pushed to the extreme — 0.2%. There's not many industries where you've got 0.2% uniformity control." The company started working with Intel on photonics in 2015, and that accumulated process know-how, combined with 4,800 patents and a toolbox built around its Smart Cut technology, constitutes what management argues is a meaningful barrier to entry.
On competition, Remont was blunt: "I have been in the semiconductor industry for 30 years. I know that everything is very competitive in semiconductors. My assumption is there will be competition." GlobalWafers was specifically raised by analysts as a potential entrant. Soitec's response was not to dismiss the threat but to lean on lead-time advantage. "It will take any competitor that is starting and wants to enter right now a lot of time to get to the level which is required for the most advanced products," said one executive — with CPO in particular flagged as technically demanding enough to provide a long qualification runway for incumbents.
The Fungibility Argument: Scaling Photonics Without a CapEx Surge
The operational argument Soitec is making is worth understanding in detail, because it has meaningful implications for cash flow conversion. Head of Operations Cyril Menon outlined four levers the company is pulling simultaneously. First, reallocation of underutilized SOI lines in France to photonic SOI across both 200 and 300-millimeter formats. Second, qualification of the Singapore facility, which requires no new capital since the assets are already there, and where new customers are now beginning prototype runs directly from Singapore. Third, tooling of new 300-millimeter photonic SOI capacity in the Bernard 4 building in France. Fourth, the Singapore extension, which was built but unequipped, remains available if demand surges beyond current expectations.
On the Singapore-to-France asset transfer, Menon was unusually candid about the urgency: "Every day is important now, and to buy a new asset for Singapore for the future — we have decided to transfer specific critical assets from Singapore to Bernard because Bernard is qualified. We can even cope with this type of situation in several days, transferring tooling to France. We don't do that like Soitec normally, but when we have to, we do it because what matters is to deliver the wafer to the customer."
The overall FY2027 capital expenditure envelope is guided at approximately EUR 100 million, down from EUR 135 million in FY2026, which was itself a 40% reduction. Less than half of the EUR 100 million is earmarked for photonics-related capacity additions — meaning Soitec is scaling its fastest-growing and most profitable product line on a capital budget that many peers would consider modest. This is the asset fungibility thesis in practice.
Pluggable vs. CPO: Not a Cannibalization Story
A central concern among analysts was whether the anticipated ramp of co-packaged optics would come at the expense of the pluggable transceiver market, which is Soitec's current photonics revenue base. Management was consistent and specific: the two serve different architectural functions. Pluggables handle scale-out connectivity — linking AI clusters and data centers to one another. CPO addresses scale-up — the high-density connectivity within a rack. "The amount of data is growing, so it means we need even more pluggable transceivers to do that data connectivity, and on top of that, we see more and more photonics in the rack itself. So it's incremental," said one executive. If accurate, the CPO ramp represents additive rather than substitutive demand for Soitec's substrate, a point that meaningfully changes the long-run revenue trajectory.
RFSOI: Inventory Correction Is Not Over, and the Timeline Is Uncertain
While photonics generated most of the discussion, the ongoing RFSOI inventory correction remains the primary drag on financials and the key swing factor for near-term margin recovery. Customer inventories stand at approximately 2 million RFSOI wafers. The correction was running at roughly 200,000 to 300,000 wafers per quarter in the prior two quarters, but Q4 FY2026 saw limited progress due to seasonal patterns and a memory shortage affecting smartphone demand. Remont was measured but non-committal on timing: "I expect this inventory correction to restart, but this is dependent on topics like memory shortage that are not so easy to forecast. This will take several quarters for sure." Mobile communication revenue fell 41% year-on-year in FY2026, and management gave no indication that a meaningful recovery is imminent.
Smart SIC: A EUR 41 Million Impairment and an Honest Reassessment
Soitec took a EUR 41 million impairment on its Smart SIC assets, citing the "radical market evolution in the EV automotive market and very intense price competition from monocrystalline Chinese players." The technology's value proposition for high-performance applications was not disputed — management acknowledged there are use cases, including potentially in data center power management, where the performance benefit is real. However, the pricing environment created by vertically integrated and Chinese monocrystalline suppliers has fundamentally changed the economics. A portfolio review is underway, with findings to be shared when conclusions are reached. Investors should not expect a near-term reversal on this position.
The Tax Reassessment: Maximum Cash Exposure of EUR 205 Million
CFO Albin Jacquemont provided an update on the French tax authority reassessment that was first disclosed in January 2025. Following the authorities' response to Soitec's formal observations in March 2026, the two sides agreed on part of the claims. The remaining dispute could, in a worst case, reduce Soitec's tax loss carryforward by EUR 384 million out of a total EUR 765 million, and separately result in a maximum cash exposure of EUR 205 million. Discussions between Soitec and the French tax authorities are scheduled to commence shortly and continue through July. Soitec's advisers "continued to view Soitec's position as robust on the merits," Jacquemont said, and litigation remains an option, though that path would require a EUR 128 million payment guarantee to be posted. The outcome remains genuinely uncertain and warrants close monitoring.
Margins: The Path Back Is Real, But FY2027 Is Another Transition Year
Jacquemont offered a useful framework for modeling the margin recovery without providing a specific target year. Approximately 70% of process costs are variable and cash in nature, while 30% are fixed and non-cash. In the very short term, incremental revenue carries a contribution margin of approximately 60%. As utilization normalizes, that drops toward 50%. "An additional EUR 100 million of revenue would be expected to generate approximately EUR 50 million of incremental gross profit and EBIT," he said — giving analysts the building blocks to do their own reconstruction. The company's utilization rate was approximately 50% in FY2026 versus 70% the prior year, representing an approximately 800 basis point headwind to gross margin alone. Utilization recovery is the primary lever; the second headwind in FY2027 is an expected material reduction in government subsidies as the IPCEI program concludes. EUR/USD is 95% hedged at 1.19 for FY2027, providing some protection against recent currency moves.
Q1 FY2027 Guidance and the Free Cash Flow Inflection
Q1 FY2027 revenue is guided up approximately 15% year-on-year at constant currency and scope. Management cautioned against extrapolating this as a run-rate, as the Q1 figure includes deliberate efforts to reduce channel seasonality rather than purely reflecting underlying demand momentum. Photonics and Edge AI continue to grow; RFSOI and Automotive remain depressed. Full-year FY2027 CapEx is guided at approximately EUR 100 million. Free cash flow turned positive at EUR 63 million in FY2026, a EUR 86 million improvement on the prior year outflow, achieved through EUR 145 million of trade receivable reduction and EUR 24 million of inventory draw-down alongside the capital discipline already described. Net debt stands at EUR 56 million, leverage at 0.4x EBITDA, and liquidity at EUR 562 million of gross cash plus EUR 270 million of undrawn facilities — a balance sheet that is not a constraint on execution.