Photronics (PLAB) shares edged higher in premarket trading on Friday, recovering slightly from a steep selloff that erased more than a third of the company's market value in the prior session. The stock was quoted at $34.78 at 8:00 a.m. ET, up 2.23% from Thursday's close of $34.02, according to Public.com data.
The modest bounce comes after the photomask maker reported weaker-than-expected fiscal second-quarter results and issued a cautious revenue forecast for the third quarter. The company missed both adjusted earnings per share and revenue estimates, and its third-quarter revenue guidance of $207 million to $215 million fell below the consensus midpoint of $218.5 million.
Photronics, which produces high-precision photomasks used in semiconductor and flat-panel display manufacturing, has been viewed as a leveraged play on chip-design activity rather than just chip production. Photomasks are critical early in the manufacturing chain, so delays in new chip designs can quickly impact orders.
For the second quarter of fiscal 2026, Photronics reported revenue of $209.9 million, down 0.5% year-over-year and 6.7% sequentially. Non-GAAP earnings came in at 42 cents per share, down from 61 cents in the first quarter. Analysts had expected adjusted EPS of 53 cents, according to Investing.com, making the 11-cent miss significant.
Chairman and CEO George Macricostas attributed the weak performance to "temporary headwinds," including delayed design releases, tight memory supply, high fab utilization rates, and geopolitical uncertainty. On the earnings call, President and CFO Eric Rivera noted that visibility is limited, with a typical backlog of only one to three weeks, and that demand became cloudy during the quarter.
The company's results showed a split between its two main segments. Integrated-circuit revenue fell 5% year-over-year to $147.5 million, while flat-panel display revenue rose 13% to $62.4 million, driven by strength in advanced AMOLED displays.
Despite the downturn, Photronics is maintaining its capital expenditure plans. Rivera confirmed that the company's fiscal 2026 capex remains at $330 million, with investments directed toward U.S. and Korean projects, 8-nanometer production support, and tool upgrades. The Allen, Texas, site has begun qualification work and is expected to generate revenue later this year.
Competition in the high-end photomask space remains intense. Toppan Holdings-backed Tekscend Photomask, another key supplier, has been reported to be targeting a Tokyo IPO at a roughly $2 billion valuation, underscoring the strategic value investors still see in the mask supply chain.
However, the risks are clear. If customers continue to delay new chip designs, Photronics has limited cost flexibility. Rivera told analysts that a large portion of costs is fixed and product mix is largely dictated by market conditions, which could keep margins under pressure even if display demand holds up.
The company filed an 8-K with the U.S. Securities and Exchange Commission on May 28 covering the results and related materials. The next test for the stock will be whether an early May order recovery, noted by senior Asia executive Frank Lee, becomes visible enough to reassure investors looking beyond the weak third-quarter guidance.
