IQE upgrades 2026 sales growth forecast to 30% as AI data-centre demand surges for optical chips

IQE Upgrades Sales Growth Forecast Amid AI Infrastructure Boom

IQE, the Cardiff-based compound semiconductor wafer manufacturer, has sharply upgraded its 2026 sales growth forecast to above 30%, a significant jump from its previous 20% projection, as AI data-centre demand for its specialized materials accelerates 2

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. The chipmaker now expects core profit to reach the low-teens millions of pounds, supported by first-half 2026 revenue of at least £64 million that exceeded management expectations across all core businesses 2

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The improved outlook marks a dramatic turnaround from 2025, when IQE posted an 18% revenue decline to £97.3m, down from £118.0m, while adjusted EBITDA dropped 60% to £3.2m, representing a margin of roughly 3% 1

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. The company's pretax loss held steady at £37.0m, though operating cash flow improved to £8.1m from £1.3m as capital spending was curtailed 1

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Indium Phosphide Products Drive Recovery in Photonics Division

The rebound centers on indium phosphide products, the substrate behind optical photonic products that wire AI infrastructure and data centres together 2

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. Demand for these solutions accelerated in the first half of 2026 and is expected to remain strong through the rest of the year 2

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. The photonics division showed resilience even during the difficult 2025, with revenue rising 15% to £57.1m, driven by data-centre networking and defence work 1

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Much of the photonics strength came from the US, where faster releases of military funding lifted orders throughout the year 1

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. The same optical components that shuttle data between servers also feed sensing and communications equipment for aerospace and defense customers, a market IQE has leaned on while consumer demand wobbled 1

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. The pull is structural rather than cyclical, tied to the scale of AI clusters being built globally and the fibre links needed to keep them operational 1

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Wireless Division Struggles as Handset Demand Remains Soft

While the photonics division thrived, the wireless division that supplies chips for smartphone sensors slid 40% to £40.1m as handset demand stayed soft and customers ran down inventory 1

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. This slump, tied partly to US tariffs and a flat mobile market, explains most of the revenue decline in 2025 1

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. However, the improved 2026 outlook suggests robust demand for 3D sensing and wireless products is returning 2

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Semiconductor Supply Chain Pressures and Strategic Positioning

Chief executive Jutta Meier said IQE was "uniquely positioned as a critical enabler of the world's fastest-growing technology ecosystems," pointing to "accelerating demand" for its indium phosphide products 1

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. The materials have become a pressure point in the semiconductor supply chain, with shortages and Beijing's curbs on indium and gallium exports pushing raw-material costs higher 1

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. Meier acknowledged the firm was working with customers "to really ensure that we are sharing the pain of that pricing" rather than passing costs on in full 1

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Fundraise Strengthens Balance Sheet for Expansion

Underpinning the expansion is an £81m fundraise completed in April, including £45m from Macom Technology Solutions, which took a position through £30m of equity and £15m of convertible notes and signed long-term supply agreements 1

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. The cash gives IQE the balance sheet to add capacity as orders build without leaning on its lenders, crucial after a year in which the group had to secure a covenant waiver to stay onside with its bank 1

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This positioning cements the company's place among the few European makers of these specialist materials, at a moment when governments on both sides of the Atlantic are treating semiconductor supply as a strategic concern 1

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. That strategic importance has driven investor confidence, with shares up close to 900% since January 2026, making IQE one of the best-performing London stocks of the year 1

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. Whether the 30% growth materializes depends on wireless steadying and data-centre customers holding their orders to schedule, but the upgraded forecast signals strong confidence in the demand story ahead 1

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