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Q · Q3 2025
Q · Q1 2026

Q · Q4 2025 Earnings

Cautious

Qnity Electronics

Reported February 26, 2026

30-second summary

30-second take: Q4 FY2025 revenue of $1.19B (+8.1% YoY) capped FY2025 at $4.754B (+9.7%), beating the ~$4.7B guide, with full-year Adjusted Pro Forma Operating EBITDA of $1.402B in line with the ~$1.4B reaffirmation; margin of 29.5% was a modest miss vs. the ~30% target. The headline is the FY2026 guide: revenue $4.97–5.17B (+4.6–8.9%), EPS $3.55–3.95 (+5.7–17.9%), but adjusted free cash flow guided to $450–550M vs. FY2025 Adjusted Pro Forma FCF of $706M (15% of sales) — meaningfully below FY2025, driven by elevated capex (~9% of sales vs. normalized ~6%) and ~$140M of transformation cost-to-achieve over 2-3 years against a $100M-by-2028 EBITDA run-rate benefit. Management framed mid-teens FCF margin as the through-cycle target once capex normalizes. The growth story is intact; the cash story takes a one-to-two-year intermission.

Headline numbers

EPS

Q4 FY2025

$0.82

Revenue

Q4 FY2025

$1.19B

+8.1% YoY

Gross margin

Q4 FY2025

46.1%

Key financials

Q4 FY2025
MetricQ4 FY2025YoYQ3 FY2025QoQ
Revenue$1.19B+8.1%$1.27B-6.7%
EPS$0.82—$0.12+583.3%
Gross margin46.1%———

Guidance

FY2025 beat guidance on revenue and EBITDA; FY2026 guidance introduced with modest 5–18% EPS growth but significant FCF decline to $450–550M.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueFY2025~$4.7B$4.754B+$0.054B above guideBeat
Adjusted Pro Forma Operating EBITDAFY2025~$1.4B$1.398Bin-lineBeat

New guidance

MetricPeriodGuideYoY
RevenueFY2026$4.97B - $5.17B+4.6% to +8.9% YoY
Adjusted EPSFY2026$3.55 - $3.95+5.7% to +17.9% YoY
Adjusted Operating EBITDAFY2026$1.465B - $1.575B+4.8% to +12.6% YoY
Adjusted Free Cash FlowFY2026$450M - $550M-55.2% to -45.2% YoY
Sequential Net Sales GrowthQ1 FY2026high single digits—

Segment performance

Q4 FY2025
SegmentQ4 FY2025YoY
Semiconductor Technologies$0.661B+7.3%
Interconnect Solutions$0.529B+9.1%
Semiconductor Technologies Adjusted Operating EBITDA$232M—
Interconnect Solutions Adjusted Operating EBITDA$136M—

Capacity & utilization

Q4 FY2025
SegmentQ4 FY2025
Organic Sales Growth8.0%
Full Year 2026 Guidance - Revenue$4.97B - $5.17B
Transformation Plan EBITDA Benefit Target (2028)$100M run rate

Profitability

Q4 FY2025
SegmentQ4 FY2025
Adjusted Pro Forma Operating EBITDA Margin29.3%
Full Year 2026 Guidance - Adjusted Operating EBITDA$1.465B - $1.575B
Full Year 2026 Guidance - Adjusted EPS$3.55 - $3.95

Other KPIs

Q4 FY2025
SegmentQ4 FY2025YoY
Americas$0.157B+6.1%
EMEA$0.085B-1.2%
Asia Pacific$0.948B+9.3%

Management tone

Pre-spin Q3 communication (press-release framing under DuPont) → Q4 FY2025 first standalone call (transformation plan, capacity expansion, M&A optionality, FCF compression accepted as the cost of growth).

Management's posture shifted from "we are a clean standalone with an advanced-packaging tailwind" pre-spin to "we are entering a multi-year capital-intensive growth phase, and we want you to look past 2026 FCF" on the Q4 FY2025 first standalone call. The Q4 FY2025 release pairs a $500M buyback announcement with a meaningful step-down in free cash flow — a sequencing that asks investors to trust the 2028 endpoint. Prepared remarks reframe Qnity as foundational to AI infrastructure ("the next leap in AI and other advanced technologies will be powered by materials innovation, and that's where CUNY leads") rather than a cyclical specialty-chemicals supplier — a deliberate elevation of the strategic frame.

The capacity narrative also hardened. Pre-spin Q3 release language referenced "strategic investments in capacity and capabilities." Q4 FY2025 prepared remarks commit explicitly: "We're committed to making the R&D and manufacturing capacity investments necessary to support the strong advanced node ramp activity we expect in 2026 and beyond." This is the source of the FCF guide — and management is telling you that without softening it.

Management also flagged capital-allocation optionality including selective, accretive M&A and an active pipeline. Pairing a buyback authorization with an active M&A pipeline and a stepped-down FCF guide is an unusual capital-allocation cocktail, and one that deserves scrutiny on the Q1 FY2026 call.

Hedging language is concentrated in two places: MSI growth ("not terribly different from 2025") and capacity execution (subject to incremental customer capacity coming online for the most advanced technologies). Both are honest qualifiers but constrain how aggressively management can defend the high end of the FY2026 revenue range if AI capex digestion slows.

Recurring themes management leaned on this quarter:

Advanced node scaling as primary growth lever (N3, N2, HBM3/4 adoption)Materials innovation leadership positioning CUNY as embedded partner in next-gen semiconductor roadmapsAI/data center demand overshadowing consumer electronics seasonal weaknessLocal-for-local manufacturing footprint as competitive moat and supply security playProcess-of-record (POR) wins driving multi-year content expansion visibilityICS segment (advanced packaging, interconnects, thermal) as faster-growth diversifier to commodity SEMI exposures

Risks management surfaced:

Memory market pricing pressure and potential demand destruction in consumer electronics, particularly ChinaCapacity constraints in advanced node scaling if customers cannot bring incremental capacity online as plannedTax rate still above peer average in high 20% range despite improvement from 25%China normalization to mid-single-digit growth vs. double-digit in rest of Asia and AmericasExecution risk on $100M transformation plan requiring $140M in cost-to-achieve spend through 2028

Answers to last quarter's watch list

Interconnect Solutions growth sustainability: ICS grew 9.1% YoY in Q4 FY2025, below the low-double-digit floor that supported the bull case. Management nonetheless guided ICS to outperform SEMI again in FY2026, but the Q4 FY2025 print is the first soft data point against the advanced-packaging acceleration thesis. Status: Resolved negatively
EBITDA margin step-up to ~30% in Q4 FY2025 to land the FY guide: Q4 FY2025 Adj. Pro Forma Op. EBITDA margin came in at 29.3% and FY2025 landed at 29.5% — a ~50bps miss vs. the ~30% reaffirmation, though absolute FY2025 EBITDA of $1.402B was in line with the ~$1.4B target. Status: Resolved mixed
First standalone 2026 framework: Delivered in full — FY2026 revenue ($4.97–5.17B), EBITDA ($1.465–1.575B), EPS ($3.55–3.95), and FCF ($450–550M) all guided, plus a Q1 FY2026 sequential growth bookend. The framework is the most material disclosure of the print. Status: Resolved positively (on disclosure quality; the FCF number itself is a separate issue)
Segment disclosure depth (advanced packaging vs. legacy split within ICS): No sub-segment split disclosed within Interconnect Solutions; management continues to report ICS as a single line. Advanced packaging was quantified at ~10% of total CUNY net sales but not broken out within ICS. Status: Not resolved
Free cash flow conversion: FY2025 Adjusted Pro Forma FCF of $706M (~15% of sales) was disclosed cleanly — but FY2026 FCF guidance steps down to $450–550M (~9–11% margin) on elevated capex (9% of sales) and transformation cost-to-achieve. The Q4 FY2025 print resolved the disclosure question positively while opening a larger question about FY2026 cash generation. Status: Resolved negatively

What to watch into next quarter

FY2026 FCF guide credibility: management has guided capex to 9% of sales in FY2026 with a return to ~6% in future years. Watch for explicit capex dollars and a transformation cost-to-achieve cadence on the Q1 FY2026 call. The key triangulation is whether 2027 sees FCF rebound toward the mid-teens % of sales management has positioned as through-cycle, or whether elevated capex extends.

ICS reacceleration: Q4 FY2025 ICS at +9.1% YoY is below the low-double-digit trajectory that defined the spin thesis. Watch whether Q1 FY2026 ICS prints back into double digits or whether management formally walks down the "ICS > SEMI" framing.

M&A pipeline execution: management flagged an active pipeline alongside a $500M buyback and a stepped-down FCF guide. Watch whether the first transaction lands within 2-3 quarters and whether it is funded with cash or balance sheet — a debt-funded deal on top of the FCF compression would materially change the credit story.

Transformation plan early proof points: the $100M-by-2028 EBITDA target implies roughly $25M/year of run-rate benefit, split across productivity, commercial innovation, and local-for-local. Management indicated a "small amount" of FY2026 benefit is in the guide with the remainder in 2027–2028. Watch for any quantified FY2026 contribution.

EMEA stabilization: EMEA at −1.2% YoY in Q4 FY2025 is the only negative geography. Watch whether Q1 FY2026 EMEA returns to growth or whether weakness is broadening.

Sources

  1. Qnity Electronics Q4 FY2025 press release / supplemental schedules (SEC Exhibit 99.1): https://www.sec.gov/Archives/edgar/data/2058873/000205887326000007/exhibit991supplementalsche.htm
  2. Qnity Electronics Q4 FY2025 earnings call — prepared remarks

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