Start here if you're new
what it is
Tower makes specialized chips for customers that need custom manufacturing, especially in consumer, industrial, and automotive markets.
how it gets paid
Last year Tower Semi made $1.6B in revenue. Consumer chips was the main engine at $0.56B, or 35% of sales.
why it's growing
Revenue grew 9.1% last year. Q4 revenue reached $440 million, up 14% vs. prior year, driven mainly by silicon photonics.
what just happened
Tower posted Q4 EPS of $0.78, beating the $0.70 consensus by 11.4%.
At a glance
B++ balance sheet — above average — nothing keeping you up at night
60/100 earnings predictability — reasonably predictable
53.0x trailing p/e — you're paying up for this one
16.0% return on capital — nothing to write home about
xvary composite: 68/100 — average
What they do
Tower makes specialized chips for customers that need custom manufacturing, especially in consumer, industrial, and automotive markets.
If your chip needs a custom manufacturing recipe, switching fabs is painful. Tower sells specialty processes like RF and high-performance analog, and that customization helps it keep earning a 16.0% return on capital. In plain English: your chip is built around Tower's process, so leaving costs time, money, and redesign risk.
How they make money
$1.6B
annual revenue · their business grew +9.1% last year
Consumer chips
$0.56B
+9.1%
Industrial chips
$0.40B
+9.1%
Automotive chips
$0.32B
+9.1%
Silicon photonics
$0.19B
+14.0%
RF and high-performance analog
$0.13B
+9.1%
The products that matter
specialty foundry manufacturing
Analog, Mixed-Signal and Silicon Photonics
$1.6B revenue · 23.4% net margin
it's the whole business: $1.6B of revenue, +9.1% growth last year, and a 23.4% net profit margin that says this is not commodity wafer capacity.
entire business
high-speed optical chip manufacturing
Silicon Photonics
$228M in 2025 · more than doubled
this niche produced $228M in 2025 revenue, or about 14% of annual sales, and management says demand ran ahead of forecasts. That's why the capex number suddenly matters.
growth engine
1.6T optical interconnect process
1.6T PIC supply position
majority supplier status
Tower says it is the majority supplier of 1.6T silicon photonic integrated circuits. That's not a full segment breakout, but it is the clearest sign that customers need a specific process, not just any fab with spare room.
niche moat
Key numbers
$4.80
fy2027 eps est
$3B
fy2029 rev est
53.0x
trailing p/e
24.8%
gross margin
Gross profit kept about 24.8% of each revenue dollar.
Financial health
B++
strength
- balance sheet grade B++ — above average financial health
- risk rank 3 — safer than 50% of stocks
- price stability 35 / 100
- long-term debt $133M (1% of capital)
- net profit margin 20.0% — keeps 20 cents of every dollar in revenue
- return on equity 16% — $0.16 profit for every $1 investors have put in
B++ — functional but not a standout on the balance sheet.
Total return vs. market
You invested $10,000 in TSEM 3 years ago → it's now worth $27,990.
The index would have given you $14,540.
source: institutional data · total return
What just happened
beat estimates
Tower posted Q4 EPS of $0.78, beating the $0.70 consensus by 11.4%.
Q4 revenue reached $440 million, up 14% vs. prior year, driven mainly by silicon photonics. Better product mix helped more of that revenue turn into profit.
$440M
revenue
$0.78
eps
24.8%
gross margin
the number that mattered
The 14% Q4 revenue growth matters most because management tied it directly to silicon photonics, the area investors care about most.
-
tower semiconductor closed 2025 on a record note.
-
december quarter revenue of $440 million increased by 14% vs. prior year, mainly driven by strong demand for silicon photonics components used in 1.6terabit-per-second ai data center transceivers.tower describes itself as the majority supplier of 1.6t silicon photonic integrated circuits, and the figures confirm this. sipho revenues more than doubled to $228 million for the full year, with the segment reaching an estimated $380 million annualized by december.
-
the change in product mix improved margins.
-
incremental photonics revenue dropped down to net profit at nearly a 49% rate, pushing net margins from 11% in the march quarter to 18% by year-end.
-
the company is investing in its future.to meet demand that has outpaced its previous forecasts, tower is allocating a total of $920 million in capital spending, up from the previously announced $650 million. this funding aims to expand sipho capacity to over five times its december-quarter run rate by the end of 2026. the additional $270 million, announced alongside earnings, focuses on both capacity expansion and nextgeneration sipho capabilities.
source: company earnings report, 2026
Get this snapshot in your inbox
This page, delivered free — plus weekly updates when the numbers change. plain english, no spam.
weekly updates
earnings alerts
plain english
no spam
What could go wrong
the #1 risk is $920M of silicon photonics capex needing to earn its keep.
med
the spending jump is real
Tower is taking capex to $920M from $650M. That's an extra $270M of execution pressure in a business that generated $1.6B of annual revenue.
If that new capacity ramps slower than expected, returns can lag long before the equipment is fully paid for.
med
the growth story is getting concentrated in photonics
Silicon photonics revenue more than doubled to $228M in 2025. That's roughly 14% of total revenue — enough to matter, not enough to carry the whole company if demand cools.
A slowdown here would pressure the segment investors are using to justify the premium multiple.
med
mix is doing more than you think
The latest quarter showed a 15.2% net margin. Full-year margin was 23.4%. That spread tells you profitability can move a lot when the revenue mix changes.
If high-margin photonics growth fades, earnings can fall faster than revenue.
med
the stock already gives management credit
At $115.46, the shares trade 16% above the $97 target midpoint and at 53.0x trailing earnings.
When expectations are this full, good results help. Anything less than very good can hurt.
Combined, the risk picture is simple: the company is spending an extra $270M on growth while the market is already valuing the equity at about 8.1x sales and 53.0x trailing earnings.
source: institutional data · regulatory filings · risk analysis
Pay attention to
risk
whether $920M in capex starts showing up in revenue
Management is spending $270M more than the prior $650M plan. If the revenue line does not respond, the valuation argument gets thin fast.
trend
silicon photonics after the $228M breakout year
That business more than doubled in 2025. The next few quarters tell you whether that was the start of a curve or a very strong burst.
metric
net margin versus the 23.4% full-year mark
The latest quarter printed 15.2%. If margins stay closer to that lower level, the earnings multiple will look even less comfortable.
calendar
the next quarter's revenue pace
A december quarter at $440M set a high bar. You want to see whether Tower can defend that level as new capacity ramps.
Analyst rankings
short-term outlook
top 20%
momentum score 2 — analysts still see above-average price performance in the year ahead. in human-speak: the ranking model likes the tape more than the valuation.
risk profile
average
stability score 3 — this sits in the middle of the pack on risk. Not a bunker stock. Not chaos either.
chart momentum
top 20%
technical score 2 — price action has been stronger than most stocks, which helps until the fundamentals stop confirming it.
earnings predictability
60 / 100
the earnings stream is decent, not clockwork. Expect some noise around quarters when mix shifts.
source: institutional data
Institutional activity
institutions have been net buying for 2 consecutive quarters — 159 buyers vs. 140 sellers in 4q2025. net buying for 2 quarters.
source: institutional data
Price targets
3-5 year target range
$41
$153
$115
current price
$97
target midpoint · 16% from current · 3-5yr high: $230 (+100% · 19% ann'l return)
Want the deeper analysis?
The full deep dive: dcf model, scenario analysis, competitive moat breakdown, and quarterly tracking — everything on this page, taken further.
see plans from $5/moThe deep dive