Tower Semiconductor said on Wednesday it expects second-quarter revenue to exceed consensus estimates and disclosed new long-term contracts tied to silicon photonics chips for artificial-intelligence data centers.
The Israeli contract chipmaker reported that customers have signed deals worth $1.3 billion for 2027 to supply chips that use light to shuttle data at high speeds in AI data centers. Alongside those agreements, Tower said it has collected $290 million in customer advance payments to secure production capacity.
Management pointed to robust demand for the company's analog and mixed-signal processors as a driver for the stronger quarterly outlook amid increased investment in data centers and AI. The announcement pushed the company's U.S.-listed shares higher by more than 17% in pre-market trading.
For the second quarter, Tower expects revenue of $455 million, above the analysts' average estimate of $436.4 million compiled by LSEG.
Tower said customers have also committed to larger orders for 2028, with additional advance payments scheduled to be received by January 2027. On the company's strategic targets, CEO Russell Ellwanger said: "We are confident in our path toward achieving our financial model targets of $2.8 billion in annual revenue and $750 million in net profit in 2028."
Results from the first quarter underpin the upbeat tone. Tower reported first-quarter revenue of $414 million, a 15% increase year-on-year, topping estimates of $411 million. Adjusted earnings per share for the quarter were 65 cents, exceeding the consensus estimate of 56 cents.
The company noted that its integrated circuits serve a broad set of end markets, including automotive, industrial, consumer electronics and communications.
Not all near-term developments are commercial: in March, rival GlobalFoundries filed a lawsuit against Tower alleging infringement of 11 patents tied to chip manufacturing technologies used in smartphones and other electronics.
The company communicated a mix of operational momentum and customer-backed demand commitments. The advance payments for 2027 capacity and indications of larger 2028 orders signal customers are seeking to secure supply for silicon photonics production, even as the legal dispute with a competitor remains an unresolved factor.