MKS Q3 Revenue Rises 43% on Semiconductor and AI Demand

MKS Inc. reported a 43% year-over-year increase in third-quarter 2026 revenue, as demand strengthened across its semiconductor, electronics and packaging, and specialty industrial markets. Revenue and key profitability measures reached the high end of or exceeded the company’s guidance ranges, while MKS forecast further sequential growth in the fourth quarter.

Revenue totaled $1.413 billion, up from $988 million a year earlier and $1.248 billion in the second quarter. Excluding the estimated effects of foreign exchange and palladium prices, year-over-year growth was 42%.

GAAP net income rose to $236 million, or $3.26 per diluted share, from $74 million, or $1.10 per share, in the prior-year quarter. On a non-GAAP basis, net earnings increased to $292 million, or $4.18 per diluted share, from $130 million, or $1.93 per share.

Gross margin was 47.7%, compared with 46.6% a year earlier. MKS said higher volumes and 30 basis points of tariff recoveries helped lift the margin above the midpoint of its guidance. Non-GAAP operating margin expanded to 27.8% from 20.8%, reflecting operating leverage from the higher revenue base. Adjusted EBITDA reached $434 million, up from $240 million, while adjusted EBITDA margin increased to 30.7% from 24.3%.

Semiconductor and AI-related demand drive growth

Semiconductor revenue climbed 54% year over year to $638 million, or 55% excluding foreign-exchange effects. The business recorded broad-based growth across vacuum and photonics solutions, including power, pressure, microwave, plasma and reactive-gas products. MKS cited strengthening demand in DRAM and logic, along with healthy NAND upgrade activity and design wins.

Electronics & Packaging revenue rose 43% to $415 million. Excluding foreign exchange and palladium-price effects, growth was 39%. The company attributed the increase to AI-related demand for advanced printed circuit boards and flexible-PCB drilling equipment. Chemistry equipment sales increased by more than 75% from a year earlier, reflecting continued demand tied to AI applications.

Specialty Industrial revenue advanced 27% to $360 million. MKS said sequential and year-over-year growth reflected momentum in datacom and improvement in general industrial demand.

Consumables and services represented 36% of total third-quarter revenue. Semiconductor accounted for 45% of revenue, Electronics & Packaging contributed 29%, and Specialty Industrial represented 25%.

Fourth-quarter revenue forecast at $1.49 billion

For the fourth quarter, MKS expects revenue of $1.49 billion, plus or minus $40 million. The outlook includes Semiconductor revenue of $700 million, plus or minus $15 million; Electronics & Packaging revenue of $430 million, plus or minus $15 million; and Specialty Industrial revenue of $360 million, plus or minus $10 million.

Management expects Semiconductor revenue growth to accelerate year over year, supported by strength across the product portfolio. MKS also expects to outgrow wafer-fabrication-equipment spending during the current period of elevated investment, citing order activity and expanding manufacturing capacity.

Electronics & Packaging revenue is expected to grow sequentially and by more than 40% year over year, supported by chemistry equipment, AI-related chemistry products and rigid-PCB laser drilling systems. Specialty Industrial revenue is projected to remain approximately flat sequentially after its third-quarter increase.

The company forecast a fourth-quarter gross margin of 47.5%, plus or minus 100 basis points. Benefits from higher volumes and scale are expected to be partly offset by a greater mix of chemistry equipment and investments in new capacity.

Non-GAAP operating income is projected at $420 million, plus or minus $29 million, with a 28.2% operating margin. Adjusted EBITDA is expected to be $461 million, plus or minus $29 million. MKS forecast non-GAAP net earnings of $352 million, plus or minus $27 million, and non-GAAP diluted earnings of $5.00 per share, plus or minus $0.38. At the midpoint of that guidance, the company said it is positioned to deliver more than 85% annual growth in non-GAAP earnings per share for 2026.

Cash generation supports debt reduction and investment

Operating cash flow was $292 million in the third quarter, while free cash flow totaled $243 million, equal to about 17% of revenue. Capital expenditures were $49 million, and unlevered free cash flow was $279 million.

MKS ended the quarter with $676 million in cash and cash equivalents and an undrawn $1 billion revolving credit facility, providing more than $1.6 billion of liquidity. Debt principal stood at $3.848 billion, down from $4.023 billion at the end of the second quarter.

The company reported a net leverage ratio of 2.4 times, based on net debt of $3.172 billion and trailing-12-month adjusted EBITDA of $1.318 billion. MKS made a voluntary €50 million principal prepayment in September and a further $100 million prepayment in November, bringing year-to-date voluntary prepayments to more than $450 million.

The outlook remains subject to risks including MKS’s substantial indebtedness, manufacturing and sourcing constraints, tariffs and other trade measures, geopolitical conditions, currency and tax-rate fluctuations, cybersecurity issues, and changes in capital spending across the semiconductor, electronics manufacturing and automotive industries. The company also cited risks associated with strategic transactions, including the pending sale of its Ophir Optics business. Third-quarter amounts remain preliminary until MKS files its quarterly report.