IQE plc (AIM: IQE), a leading global supplier of compound semiconductor wafer products, is experiencing robust trading momentum, positioning the company at the upper end of its previously announced FY 2025 forecast range.
This positive performance is fueled by strong demand across key markets, including military and defense, AI, data centers, and handsets. The company's shares surged at the open on Monday, currently up 14.6%.
The company anticipates revenue of approximately £97 million and an adjusted EBITDA of at least £2.0 million for FY 2025. This improved profitability is attributed to enhanced operating leverage as capacity utilization increases. IQE's cash position stands at a healthy £15.6 million as of December 31, 2025, reflecting effective working capital management.
Demand from US military and defense programs, released sooner than expected, significantly boosted H2 2025 results. Additionally, higher-than-forecast photonics demand, driven by the continued growth of AI and data center markets, contributed to the strong performance. Increased sales of wireless products tied to new handset introductions, particularly benefitting the Group's Taiwan operations, further fueled the positive momentum.
IQE has secured a waiver from HSBC in relation to Q4 2025 EBITDA covenant testing, highlighting the supportive relationship with its banking partner. This waiver provides the company with increased financial flexibility as it navigates its strategic review process.
IQE enters 2026 with a strong Q1 order book, reflecting improved demand visibility across core segments. The wireless demand momentum observed in Q4 2025 is expected to persist, supported by existing customer relationships and recent platform wins. Growth in data center deployments and AI-enabled compute, coupled with ongoing strength in consumer mobile, continues to drive demand for the Group's photonics products.
The Board of IQE is actively negotiating non-binding offers for the Group as a whole, as well as separate bids for certain Group assets. This strategic review aims to maximize shareholder value, and the Board is encouraged by the level of interest received, which acknowledges the intrinsic value of the Group and its component parts. However, there is no guarantee that any of these discussions will result in a completed deal.
CEO Jutta Meier commented, “I am pleased to report a positive second half of trading for IQE in 2025. Coupled with a strong Q1 order book and sustained demand across key end markets, the Company is well-positioned to enter 2026.” Meier further noted her confidence in the company's opportunity and commitment to updating the market.
Analyst Summary: Bull and Bear Cases
Bull Case:
- Market Diversification: Strong demand across multiple end markets (military, AI, data centers, handsets) reduces reliance on any single sector.
- Operational Efficiency: Improved capacity utilization is driving enhanced operating leverage and profitability.
- Strategic Partnerships: Continued relationships with key customers and banking partners provide stability and growth opportunities.
Bear Case:
- There is no guarantee that strategic review discussions will result in a completed deal.
- Uncertainty surrounding the outcome of the strategic review warrants careful monitoring by investors.
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