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ENTEGRIS INC (ENTG)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $792.4M, up 2.5% sequentially and above both company guidance ($735–$775M prior) and Wall Street consensus; non-GAAP EPS of $0.66 was at the high end of guidance and a modest beat versus consensus .
  • Gross margin compressed to 44.4% (non-GAAP 44.6%) on tariffs, inventory optimization, and operational inefficiencies amid manufacturing localization; adjusted EBITDA margin was 27.3% .
  • Q3 2025 outlook guides sales to $780–$820M, adjusted EBITDA margin ~27.5%, GAAP EPS $0.43–$0.50, and non-GAAP EPS $0.68–$0.75; CFO highlighted lower non-GAAP tax rate (9%) and net interest expense ($48M) for Q3 .
  • Segment performance mixed: Materials Solutions (MS) grew on CMP/etch/deposition materials, while Advanced Purity Solutions (APS) declined YoY on weaker facilities CAPEX; China demand recovered late in Q2 as tariffs were put on hold .
  • Catalysts: revenue/EPS beat vs consensus, China reacceleration, continued localization ramps (Taiwan, Colorado), and announced CEO succession (effective August 2025) supporting medium-term execution narrative .

What Went Well and What Went Wrong

What Went Well

  • MS delivered YoY and sequential growth on CMP slurries & pads, selective etch, and deposition materials; CEO: “double-digit year on year growth... driven by strong growth in China, strength in HBM and early node transitions in logic and 3D NAND” .
  • China demand reaccelerated in late Q2; management “got most of [the ~$50M tariff headwind] back,” targeting 85% of China demand served from Asia sites by year-end and ~95% in 2026 .
  • Cash generation remained solid with CFO of $113.5M and free cash flow of $47.0M in Q2; management implemented cost reductions delivering $15M annualized savings .

What Went Wrong

  • Gross margin and APS margins compressed on tariffs, inventory optimization, and operational inefficiencies; adjusted operating margin fell to 20.9% (vs 22.0% prior year) .
  • APS sales down 6.9% YoY on softer facilities CAPEX (FOUPs, fluid handling); adjusted APS margin declined to 24.1% .
  • Visibility remains tenuous outside AI/advanced logic; management cited “erratic buying patterns” from tariff uncertainty and mid-80% fab utilization levels, limiting broad-based recovery near-term .

Financial Results

Consolidated Performance vs Prior Periods and Estimates

MetricQ2 2024Q1 2025Q2 2025
Net Sales ($M)812.7 773.2 792.4
Gross Margin % (GAAP)46.2% 46.1% 44.4%
Adjusted Gross Margin % (non-GAAP)46.2% 46.1% 44.6%
Operating Margin % (GAAP)16.0% 15.8% 13.4%
Adjusted Operating Margin % (non-GAAP)22.0% 22.1% 20.9%
Diluted EPS (GAAP)$0.45 $0.41 $0.35
Diluted EPS (non-GAAP)$0.71 $0.67 $0.66
Adjusted EBITDA Margin %27.8% 28.5% 27.3%
Q2 2025 Actual vs S&P Global ConsensusConsensus*Actual
Revenue ($M)765.5*792.4
Primary EPS (non-GAAP)$0.64*$0.66
EBITDA ($M)214.2*216.7

S&P Global disclaimer: Values marked with an asterisk (*) are retrieved from S&P Global.

Segment Breakdown

Segment MetricQ2 2024Q1 2025Q2 2025
MS Net Sales ($M)342.3 341.4 354.9
APS Net Sales ($M)472.6 433.9 439.9
MS Segment Profit ($M)70.3 75.0 72.5
APS Segment Profit ($M)122.6 108.1 95.9
MS Adj. Segment Profit ($M)70.8 75.1 75.5
APS Adj. Segment Profit ($M)122.6 110.4 105.8

KPIs

KPIQ2 2024Q1 2025Q2 2025
Cash from Operations ($M)111.2 140.4 113.5
Capital Expenditures ($M)59.3 108.0 66.5
Free Cash Flow ($M)51.9 32.4 47.0
Inventories, net ($M)633.4 671.5 694.6
Net Debt ($B)——~$3.7
Gross/Net Leverage (x)——~4.3x gross; ~4.0x net

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($M)Q3 2025—780–820 New
GAAP Operating Margin %Q3 2025—14.5%–16.4% New
Adjusted Operating Margin %Q3 2025—20.4%–22.1% New
Adjusted EBITDA Margin %Q3 2025~27.5% (Q2 guide) ~27.5% Maintained
GAAP EPS ($)Q3 2025—0.43–0.50 New
Non-GAAP EPS ($)Q3 2025—0.68–0.75 New
GAAP OpEx ($M)Q3 2025—228–232 New
Non-GAAP OpEx ($M)Q3 2025—182–186 New
Non-GAAP Tax Rate %Q3 2025~13% (Q2 actual) ~9% (reserve expiration) Lowered
Net Interest Expense ($M)Q3 2025—~48 New
Dividend per Share ($)Q3 2025 timing$0.10 (prior quarterly) $0.10 (pay Aug 20, record Jul 30) Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
AI/Advanced LogicOutperformance positioning into node transitions; strong Q4 execution Tariff uncertainty; continued POR wins and roadmap engagement AI/HBM strength; double-digit growth in MS tied to advanced logic/HBM Strength sustained in AI-driven content; broader recovery still limited
Tariffs/MacroCautious 2025 visibility; protectionist measures noted Explicit Q2 tariff headwind built into guide Tariffs put on hold in May; China reaccelerated late Q2; ongoing uncertainty Improving near term, but policy volatility persists
Supply Chain/LocalizationGlobal footprint expansion; preparing for resilience Mitigating tariffs via regional supply chains Ramping Taiwan, Colorado; aim 70% non-U.S. manufacturing serving Asia demand; China served 85% from Asia by YE25 Execution ramp, short-term inefficiencies pressuring margins
Product Performance (CMP/Filters/FOUPs)Growth in liquid/gas filters; APS margins strong Micro contamination solutions drove APS; sequential CAPEX softness CMP/etch/deposition strong; APS down YoY on facilities CAPEX; FOUPs helped sequential Mixed; unit-driven materials strength offsets CAPEX-related softness
Inventory/FCFStrong FY24 FCF; inventory elevated Focus on debt paydown and FCF improvement Inventory optimization actions; FCF $47M; targeting low double-digit FCF margin in 2025 Active working capital management aiding FCF
Regulatory/LegalVarious risks cited Tariff regimes increased uncertainty Continuing trade policy volatility impact Ongoing external risk backdrop

Management Commentary

  • CEO: “Revenue was above our guidance range... Growth was driven by demand for unit-driven solutions, particularly CMP consumables, selective etch and deposition materials. Gross margin, EBITDA margin and non-GAAP EPS were all within guidance.” .
  • CEO: “We do expect stronger performance... in the second half of this year... our expertise in materials science and materials purity is increasingly valuable...” .
  • CFO: “Gross margin... was 44.4%... The sequential decline... driven by tariffs, inventory management, and some operational inefficiencies... We implemented cost reduction initiatives delivering $15 million in annual cost savings.” .
  • CEO on localization: “We expect to complete most critical product qualifications [Taiwan] by year-end and ramp volumes in Q4; Colorado grand opening in November, with product qualifications later this year.” .
  • CEO succession: “Dave Reeder will become the next CEO... I could not think of a better leader to take Entegris to the next level of excellence.” .

Q&A Highlights

  • Tariffs/China remediation: Management regained “most” of the ~$50M Q2 headwind; expect 85% of China demand served from Asia sites by YE25, ~95% in 2026; near-term headwind largely mitigated barring policy changes .
  • Margin pressures: Near-term GM headwinds from production/inventory balancing and ramp inefficiencies in Taiwan/Colorado; longer-term path to higher margins intact as volumes ramp and localization matures .
  • Cycle visibility: Fab utilization mid-80%; wafer starts modestly up at best for FY25; mainstream logic likely to recover first, NAND later into 2026 .
  • Channel mix: Fab revenue up low single digits sequentially; equipment and chemicals/materials sales down mid-single-digit reflecting CAPEX/demand softness .
  • Q4 outlook color: Stronger H2 expected, but no Q4 quantification given due to volatility; node transitions in NAND (“Molly”) and advanced logic supportive .

Estimates Context

  • Q2 2025 beat: Revenue $792.4M vs consensus $765.5M*; non-GAAP EPS $0.66 vs $0.64*; EBITDA $216.7M vs $214.2M* .
  • Q3 2025 setup: Company guides $780–$820M (midpoint $800M) vs consensus revenue $804.1M*; non-GAAP EPS guide $0.68–$0.75 vs consensus $0.7247*; EBITDA guide implies ~27.5% margin vs consensus EBITDA $223.1M* .
  • Potential estimate revisions: APS margins may remain pressured near-term; non-GAAP tax rate reduction to ~9% could support EPS; localization inefficiencies likely to diminish into 2026 per CFO .

S&P Global disclaimer: Values marked with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

  • The quarter was a clean revenue/EPS beat vs guidance and consensus, driven by unit-driven MS materials strength and late-quarter China recovery; margins compressed but within guidance, with clear drivers and mitigation path .
  • Q3 guide is broadly in line on revenue and EPS, with a lower non-GAAP tax rate tailwind; watch net interest expense (~$48M) and operating expense discipline .
  • APS headwinds from facilities CAPEX may persist near-term; MS momentum tied to AI/HBM and node transitions provides offset and content-per-wafer tailwinds .
  • Localization ramps (Taiwan, Colorado) are strategic positives for resilience and margin structurally, but near-term inefficiencies weigh on GM; expect improvement as volumes ramp in 2H25/2026 .
  • China remediation is largely in place with orders resuming; policy volatility remains a risk factor—monitor tariff/exclusion developments .
  • FCF trajectory improving with working capital actions and capex control; company reiterates focus on deleveraging to sub-4x gross leverage .
  • CEO transition to David Reeder in August 2025 adds execution focus with deep semi ops/finance experience; near-term narrative should center on H2 strength, margin normalization, and AI-driven content gains .