Tower’s AI chip surge powers record quarter as revenue heads for $500 million milestone
The Israeli chipmaker beat expectations, posted record profits and says booming silicon photonics demand is already supporting its sharply higher 2028 targets.
Tower Semiconductor is once again giving investors reasons to smile. The Migdal HaEmek-based chipmaker ended the second quarter with record revenue of $460 million, up 24% year over year and above the $455 million forecast it provided three months ago. But Tower is not stopping there. The company expects revenue to reach $520 million, plus or minus 5%, in the current quarter, implying 31% year-over-year growth and putting it on track to surpass the $500 million quarterly revenue mark for the first time.
The strong top-line growth was accompanied by record profitability. Gross profit surged 72% to a record $138 million, while operating profit more than doubled to a record $90 million, 2.3 times higher than in the same quarter last year. Net profit climbed 95% to a record $91 million, giving the company a 20% net profit margin, meaning one out of every five dollars of revenue reached the bottom line.
Tower also continued to generate strong cash flow while accelerating investment in future growth. Cash generated from operating activities rose to $177 million, compared with $123 million in the second quarter of 2025, while net investment in property and equipment increased to $187 million, up from $111 million a year earlier, reflecting the company's aggressive manufacturing expansion.
Russell Ellwanger, CEO of Tower Semiconductor, said: “Amidst a powerful demand momentum across Tower’s key business units, we achieved record revenue and record profitability, whilst simultaneously strengthening our technology leadership and greatly expanding manufacturing capacity throughout 2026. Moreover, we recently announced additional substantial capacity expansions, in direct support of our strong growing customer demand. SiPho presented triple digit year over year revenue increase to $680 million annual run rate in the second quarter of 2026 from $180 million annual run rate in the second quarter of 2025. We plan to cross the $1 billion of SiPho revenue annual run rate in the fourth quarter of 2026, with continued significant growth throughout 2027.”
Ellwanger further added: “We are raising our 2028 target business model to $3.6 billion of revenue with $1.2 billion net profit, being fully spoken for by our customers. Deep strategic customer engagements provide exciting sustainable growth for our customers, and for Tower, thus enabling growing shareholders’ value.”
Tower has been riding the silicon photonics boom for more than a year after identifying the growing need to replace copper-based interconnects in AI data centers with optical infrastructure capable of handling dramatically larger volumes of data at much higher speeds.
The company has already secured customer commitments worth more than $1 billion for 2027, almost equal to its entire revenue in 2025.
About a month ago, Tower announced a $4 billion project to expand silicon photonics manufacturing capacity in Japan, backed by a $1 billion grant from the Japanese government. The expansion will be carried out in two phases.
