Why SMIC and Hua Hong Profits Jumped 262% and 386% in Q2 2026

SMIC Q2 2026 Financial Results

SMIC reported record financial results across key metrics:

SMIC's revenue crossed the $3 billion mark for the first time, beating the analyst consensus estimate of $2.85 billion compiled by LSEG and the company's own internal guidance . Gross profit rose 69% to $760.6 million from $449.8 million a year earlier .

SMIC co-CEO Zhao Haijun attributed the sharp growth to "surging demand for AI-related supporting chips," and noted that the company expects Q3 2026 revenue to increase 2% to 4% sequentially with gross margin guidance of 26% to 28% .

Hua Hong Grace Semiconductor Q2 2026 Financial Results

Hua Hong Grace Semiconductor also achieved record revenue and a dramatic profitability turnaround:

The company swung from a net loss trajectory in prior periods to a record net profit. Gross profit for the quarter surged 92.2% YoY to $118.4 million, driven by stronger wafer shipments, higher selling prices, and near-full capacity utilization across its 8-inch and 12-inch fabs .

Management guided Q3 2026 revenue of $770–$780 million and gross margin of 16%–18%, citing robust AI-driven demand and ongoing capacity expansion, including the integration of Huali Microelectronics .

Key Drivers of the Triple-Digit Profit Growth

Several interrelated factors propelled the earnings surge for both foundries:

1. Domestic AI chip demand spillover. Chinese technology companies are increasing purchases of domestically produced chips that fall outside US export controls, driving orders for both mature-node and specialty semiconductors. This demand has been a direct beneficiary of US-China technology restrictions, which limit SMIC's access to leading-edge extreme ultraviolet (EUV) lithography tools .

2. Higher wafer shipments and rising ASPs. Both companies reported significant increases in shipment volumes during the quarter and were able to raise prices on tight capacity. SMIC's wafer shipments and average selling prices both increased, with its product mix also improving . Hua Hong similarly cited "increased wafer shipment and improved ASP" as primary revenue drivers .

3. Capacity utilization above 93%. SMIC reported a capacity utilization rate of 93.7% in Q2 2026, up from 92.5% in Q2 2025 . Hua Hong's fab utilization remained near 100% amid tight supply in microcontroller unit (MCU) and memory production lines .

4. Mature-node and specialty chip strength. SMIC, which cannot access advanced EUV tools due to US export controls, benefited from robust orders for legacy and specialty nodes used in AI, IoT, and power management chips. Hua Hong similarly saw strong growth across its embedded/standalone non-volatile memory, power discrete, logic/RF, and analog/power management IC platforms .

Market Reaction and Outlook

SMIC's Q2 2026 results significantly exceeded analyst expectations. Net profit of $479.2 million nearly doubled the average analyst estimate of $253.4 million (LSEG) and beat the $283.1 million Visible Alpha consensus . The company's gross margin of 25.3% also topped its own guidance range of 20%–22% .

Hua Hong shares rose 3.08% following the earnings release . Both companies provided strong Q3 2026 guidance, reflecting continued optimism that AI-driven demand for domestically produced chips will persist amid ongoing US-China technology tensions.

However, risks remain. Geopolitical export controls could tighten further, and aggressive capital spending on new fabrication capacity may pressure future margins . SMIC guided Q3 revenue growth of 2%–4% sequentially — slower than Q2's 20% sequential growth — while maintaining higher gross margin expectations of 26%–28% .