Tower Semiconductor (NASDAQ:TSEM) shares gained 4.5% in pre-market trading on Monday after the chipmaker issued fourth-quarter revenue guidance above analyst expectations, supported by strong growth in its high-speed connectivity and silicon photonics businesses.
The company reported third-quarter 2026 revenue of $526.2 million, an increase of 33% from $395.7 million a year earlier and above the consensus estimate of $522.1 million.
Adjusted earnings per share reached $1.05, narrowly missing analysts’ forecast of $1.06.
Tower expects fourth-quarter revenue of approximately $600 million, with a potential variation of 5% in either direction, compared with the market consensus of $579.7 million.
Fourth-Quarter Revenue Guidance Signals Further Growth
Tower Semiconductor’s fourth-quarter revenue forecast implies a range of approximately $570 million to $630 million.
The midpoint of $600 million represents anticipated growth of 36% year over year and 14% compared with the third quarter.
The stronger outlook reflects increasing demand for the company’s semiconductor manufacturing services, particularly in high-speed connectivity applications.
Chief Executive Officer Russell Ellwanger highlighted the company’s accelerating growth trajectory.
“We are entering the strongest growth phase in our history, according to fourth quarter guidance, closing the year at $2 billion annual revenue and a $2.4 billion annualized revenue run rate,” Ellwanger said.
The projected fourth-quarter performance would bring Tower’s annualised revenue run rate to approximately $2.4 billion, based on the quarterly guidance midpoint.
Third-Quarter Profitability Improves Significantly
Tower reported third-quarter gross profit of $178.8 million, up approximately 92% from $93 million in the corresponding period of 2025.
Operating profit, excluding non-recurring items, increased to $127.1 million from $50.6 million a year earlier.
Adjusted net profit reached $131.3 million, compared with $62.8 million in the prior-year quarter.
On a basic per-share basis, adjusted net profit increased to $1.16 from $0.56.
The improvement in profitability accompanied the 33% increase in quarterly revenue, indicating stronger earnings generation as sales expanded.
Despite the substantial year-on-year growth, adjusted diluted earnings per share of $1.05 were slightly below the analyst consensus of $1.06.
Silicon Photonics Drives High-Speed Connectivity Expansion
Tower identified its high-speed connectivity business, particularly silicon photonics, as a major contributor to its growth outlook.
The company is targeting an annualised silicon photonics revenue run rate of approximately $1.1 billion in the fourth quarter of 2026.
According to Tower, this would represent five times its silicon photonics revenue for the full year 2025.
Silicon photonics technology uses optical signals to transmit data and is increasingly relevant to high-speed communications infrastructure.
The company’s growth expectations reflect demand for semiconductor technologies supporting faster data transmission and connectivity.
The projected $1.1 billion figure represents an annualised run rate based on expected fourth-quarter activity, rather than revenue recognised during the full financial year.
Operating Cash Flow Reaches $185.2 Million
Tower generated $185.2 million in cash from operating activities during the third quarter.
Meanwhile, investments in property and equipment totalled $190.7 million.
The figures indicate continued spending on manufacturing infrastructure alongside stronger revenue and profitability.
Property and equipment investment exceeded operating cash flow by approximately $5.5 million during the quarter.
Such expenditure supports the company’s semiconductor production capabilities as it prepares for additional demand.
Outlook
Tower Semiconductor’s third-quarter results demonstrated substantial revenue and profit growth, while its fourth-quarter guidance points to further expansion.
The company expects revenue to reach approximately $600 million in the final quarter of 2026, exceeding analyst expectations and supporting its projection of around $2 billion in annual revenue.
Silicon photonics remains a central growth driver, with Tower targeting a $1.1 billion annualised revenue run rate for the business by the fourth quarter.
Investors will be monitoring whether the company achieves its revenue targets, sustains profitability improvements and converts growing demand for high-speed connectivity technologies into further sales.