Tower Semiconductor Secures $1.3 Billion Silicon Photonics Agreements and Reports Strong Q1 2026 Growth

Tower Semiconductor announced that it has signed silicon photonics agreements valued at $1.3 billion for 2027 with its largest customers in the field, while also reporting 15% year-over-year revenue growth for the first quarter of 2026 and providing guidance for record quarterly sales in Q2 2026.

The company said it has already received $290 million in customer prepayments to secure manufacturing capacity for its silicon photonics platforms. In addition, Tower signed even larger agreements for 2028, with additional customer prepayments expected by January 2027. According to the company, the reserved production capacity reflects only the contractual commitments from these customers, while total demand remains significantly higher. Tower also noted that its broader silicon photonics customer base includes more than 50 active customers serving a wide range of end applications.

The company attributed the growing demand primarily to the rapid expansion of AI infrastructure, hyperscale data centers, and next-generation optical connectivity architectures, including Near-Packaged Optics (NPO) and Co-Packaged Optics (CPO). Tower said it is currently executing a significant global expansion of its silicon photonics manufacturing capacity as part of its strategy to achieve annual revenue of $2.8 billion and net profit of $750 million by 2028.

Russell Ellwanger, CEO of Tower Semiconductor, said the long-term agreements reinforce Tower’s strategic position at the center of the rapidly growing optical communications market. He added that the multi-year customer commitments reflect confidence in the company’s ability to support advanced silicon photonics technologies for AI infrastructure, high-bandwidth optical interconnects, and next-generation data center architectures.

Alongside the silicon photonics announcement, Tower reported first quarter 2026 revenue of $414 million, representing 15% growth compared to $358 million in the first quarter of 2025. Gross profit reached $111 million, up from $73 million a year earlier, while operating profit nearly doubled to $65 million.

Net profit for the quarter totaled $65 million, compared to $40 million in the same quarter last year. Tower noted that operating cash flow included the $290 million silicon photonics customer prepayments, while net capital expenditures reached $156 million.

For the second quarter of 2026, the company provided revenue guidance of $455 million, which would mark the highest quarterly sales level in Tower’s history. The guidance reflects 22% growth compared to the second quarter of 2025 and 10% sequential growth over Q1 2026. The company also expects continued quarter-over-quarter growth in both revenue and profitability throughout the year.

Ellwanger added that the restructuring of Tower’s operations in Japan and the planned transition to full ownership of Fab 7 represent another key step in advancing the company’s 300mm wafer strategy and supporting long-term customer growth.

In addition, Tower announced that S&P Maalot reaffirmed the company’s “ilAA” credit rating and upgraded its outlook from stable to positive.

Credit: Tower Semiconductor Press Release