Tower Semiconductor recently announced impressive financial outcomes for its fourth quarter, surpassing market expectations for both revenue and profitability. The company saw a 14% year-over-year increase in revenue, reaching $440.21 million, which was slightly above analyst forecasts. Furthermore, its adjusted earnings per share hit 78 cents, outperforming the consensus estimate of 68 cents. This financial strength was accompanied by a notable improvement in gross profit, which surged by 35.4% to $117.61 million, raising the margin from 22.4% to 26.7%.
Driven by the escalating demand for advanced silicon photonics (SiPho) and silicon germanium (SiGe) technologies, Tower Semiconductor is making a substantial investment to enhance its manufacturing capabilities. The company is committing an additional $270 million, bringing its total capital expenditure in these areas to $920 million. This strategic expansion aims to significantly increase SiPho capacity and support the development of next-generation technologies. The objective is to have this expanded capacity fully operational by the fourth quarter of 2026, enabling full production by 2027, and is projected to boost annual wafer shipments by more than fivefold from Q4 2025 levels. Notably, over 70% of this increased SiPho capacity through 2028 has already been reserved by customers, underscoring the strong market need for these components.
The company's technology, particularly its silicon photonics, is crucial for data centers that require ultra-high-speed data transmission to support complex AI operations. This positions Tower Semiconductor as a vital supplier in the rapidly expanding AI sector. While navigating its growth, the company is also addressing a recent development regarding a contract with Intel, which is currently in mediation. Production flows initially transferred to Intel's facility are now being redirected back to Tower's Fab7 site in Japan to ensure continuous customer support, reflecting the company's commitment to operational resilience and customer service. Looking ahead, Tower Semiconductor forecasts its first-quarter revenue to range between $391.4 million and $432.6 million.
Tower Semiconductor's strategic investments in cutting-edge technology and capacity expansion are not merely business decisions; they represent a forward-looking commitment to innovation and progress. By addressing the surging demand for AI-enabling components, the company is contributing to the advancement of technology that has the potential to reshape industries and improve daily life. This dedication to growth and meeting market needs exemplifies a positive spirit of enterprise, fostering a future where technological capabilities are continuously pushed to new heights.