Qnity Lifts 2026 Outlook After 22% Sales Growth in Q3

Qnity Electronics raised its full-year 2026 outlook by $200 million in revenue after third-quarter sales grew 22% year over year, reaching $1.6 billion. Adjusted earnings per share came in at $1.46, up 55% from a year earlier, and adjusted operating EBITDA rose 36% to $503 million.

The company called it the 10th consecutive quarter of profitable organic growth. CEO Jon Kemp said the results reflected demand for materials used in both smaller chips and increasingly complex stacked architectures.

Adjusted gross margin improved to 47.8% from roughly 46% a year earlier. Net sales rose 9% from the second quarter.

What lifted both segments?

Semiconductor Technologies posted sales of $797 million, up 15% year over year, with organic growth of 16% and adjusted operating EBITDA of $285 million. CFO Ken Rizvi said the segment's advanced nodes portfolio grew 25% and accounted for about 44% of semiconductor-related revenue, up from 42% in the first half.

Interconnect Solutions sales rose 30% to $759 million, with organic growth of 29% and $236 million in adjusted operating EBITDA. Rizvi cited thermal management, advanced packaging and AI printed circuit boards as the strongest performers, helped by seasonal consumer electronics production.

Kemp said those three faster-growing platforms represented about 30% of Interconnect Solutions and grew more than 50% in the quarter. Thermal management was the largest, followed by advanced packaging and AI printed circuit boards. The remainder of the segment grew at a mid-teens rate.

Despite broader softness in consumer electronics, Kemp said Qnity's exposure was concentrated in premium devices, where demand held up better. Rising content per device made consumer electronics a positive contributor to growth this year, he said.

What does the new guidance say?

Qnity increased its full-year revenue outlook by $200 million and its adjusted EPS outlook by 50 cents at the midpoints. Updated guidance calls for:

• Net sales of $5.77 billion to $5.83 billion.
• Adjusted operating EBITDA of $1.785 billion to $1.805 billion.
• Adjusted EPS of $4.95 to $5.05.
• Adjusted free cash flow of $800 million to $900 million.

At the midpoint, Qnity expects approximately 26% year-over-year sales growth in the fourth quarter and 22% for the full year. The outlook incorporates normal seasonality and possible customer inventory management at year-end, Rizvi said.

He declined to give first-quarter guidance. The company has historically seen a modest, low-single-digit sequential sales increase from the fourth quarter to the first, he noted.

For 2027, Rizvi expects wafer-start growth in a high-single-digit to low-double-digit range, similar to the revised 2026 industry assumption. He said that expectation could change, with more detail due on the next earnings call.

Can the growth last?

Kemp said Qnity was on pace to exceed its previous record for process-of-record wins (a customer qualifying a material for use in a manufacturing process). Such wins typically last five to 10 years and can generate recurring revenue as production scales, he said.

The company has secured an increasing number of wins for 2-nanometer technology and HBM4 memory, both entering production. The advanced-node wins behind this year's growth were largely secured in 2023 and 2024.

Qnity is tracking more than 15 advanced fabs and a handful of mature-node fabs targeting production within the next year. After equipment installation, process qualification takes 12 to 18 months, Kemp said, with materials demand building as customers ramp.

Asked whether Qnity can keep outperforming its underlying markets, Kemp said that depends partly on customers commercializing advanced technologies and bringing capacity online as expected. A reasonable caveat.

Margins and capital spending

Rizvi said Qnity aims to move gross margin toward 50% over time through advanced product mix, factory execution and capturing the value of its technology in customer engagements. He offered no timetable.

The quarter ended with $1.1 billion in cash and roughly $4 billion in total debt. Net leverage was about 1.7 times, comfortably below the company's historical ceiling of three times. Adjusted free cash flow was $320 million for the quarter and $607 million for the first nine months.

Capital expenditures totaled $290 million year to date. Rizvi kept the full-year target at $450 million to $470 million, though timing could shift some spending into the first quarter of 2027. Kemp said Qnity had accelerated selected capacity projects to support expected 2027 volumes and growth beyond.

Qnity Electronics (NYSE:Q) develops materials for semiconductor manufacturing and electronic interconnect applications, and became independent through the separation of DuPont's electronics business.