IQE Returns to Profit as AI Data-Centre Demand Lifts 2026 Outlook

IQE’s first-half results point to a sharp recovery for the Cardiff-based compound-semiconductor wafer supplier. Revenue for the six months ended 30 June 2026 rose 43% to £64.6 million, while adjusted EBITDA turned positive at £6.0 million, compared with a £0.4 million loss a year earlier. 18

The central driver is demand tied to AI infrastructure and data-centre construction. That demand is particularly relevant to IQE’s photonics materials, used in applications including data-centre lasers. It has helped the company offset an earlier electronics-market slowdown and disruption associated with U.S. tariffs. 8

A photonics-led first-half recovery

Photonics was the strongest segment in the first half. Revenue rose 45% to £38.5 million, supported by AI and data-centre demand as well as U.S. defence-programme funding. Wireless revenue increased 40% to £26.0 million. 18

Higher factory utilisation and a product mix weighted more heavily toward photonics contributed to the improvement in profitability. 8 The result matters because it moves IQE back to a positive adjusted EBITDA position after the previous year’s first-half loss.

Why AI investment is improving the outlook

The increase in AI use is driving spending on data-centre equipment, creating demand for the optical and photonics components that move data at high speeds. IQE expects this trend to support growth in its core segments, with its order book and recently signed supply agreements underpinning expectations for stronger momentum in the second half. 89

In July, IQE raised its 2026 revenue-growth forecast to more than 30% year on year, from previous guidance of more than 20%, after first-half trading exceeded management expectations. It has reaffirmed that upgraded outlook. 111

There is still an execution caveat: the outlook depends on the company converting demand into production and shipments while managing supply constraints and costs. AI infrastructure demand is supportive, but it does not remove those operational pressures. 8

Expanding InP capacity for photonics and data-centre lasers

IQE plans to convert existing manufacturing tooling during the second half to add capacity for indium phosphide, or InP, epiwafers. These materials are used in photonics applications, including lasers for data centres. 8

The planned expansion is designed to position the company for further demand growth rather than relying solely on its current capacity. IQE has also announced a multi-year InP epiwafer supply agreement with Tower Semiconductor, while a strategic global technology customer placed a $14 million production order for AI and data-centre applications in July. 4

Long-term agreements are changing demand visibility

IQE has been shifting away from spot orders toward longer-term arrangements with customers, including MACOM, Tower Semiconductor and Lumentum. Reuters reported that the company sees these agreements as a way to improve planning and utilisation, while leaving room for additional contracts and further AI-related upside. 813

That model is important for a wafer supplier: more predictable demand can make it easier to plan manufacturing capacity and reduce the volatility associated with short-notice orders. The benefit, however, will depend on how quickly agreements convert into sustained production volumes.

Supply bottlenecks and tariff exposure remain

The recovery is occurring alongside supply shortages and higher raw-material costs. IQE has been considering increased U.S. production, expanding its supplier base and sharing tariff costs with customers to reduce the impact of potential U.S. duties and broader trade disruption. 6

Those actions show that AI demand is improving the growth outlook, but not eliminating supply-chain and trade-policy risk. The company’s ability to secure inputs and scale InP output will be a key practical test of its second-half expectations.

Main Market move targeted for 2027

IQE’s shares were up 0.6% in late trading after the results. 13 The company also intends to seek admission to the London Stock Exchange’s Main Market, moving from AIM, with completion targeted in the first half of 2027. 113

For now, the investment case rests on whether the AI and data-centre buildout can continue to translate into photonics orders, higher utilisation and durable profitability. IQE’s first-half performance and upgraded revenue guidance suggest meaningful momentum, while supply constraints, material costs and tariff exposure remain the principal limitations on that opportunity. 18