AMKR — Q2 2026 Financial Report Analysis

Record Q2 sales and busier factories lift Amkor's margin by nearly 5 points, while Arizona absorbs the cash

Amkor Technology packages and tests chips for other companies. Its customers design and make the silicon, and Amkor puts it into a finished, connected package and checks that it works. For the quarter ended June 30, 2026, net sales rose 25.6% to $1.90 billion, a record for a second quarter. Net income attributable to Amkor more than tripled to $173.8 million, or $0.70 per diluted share, against $0.22 a year earlier. The main reason profit grew so much faster than sales is that Amkor's factories carry heavy fixed costs (equipment depreciation, labor, building overhead). When more volume runs through the same plants, each extra dollar of sales carries more profit. The quarter also benefited from a lower tax rate and a one-time gain, and the year-ago quarter had its own one-off, so the clean comparison is less dramatic than the headline. It is still a large improvement.

At a glance

• Gross margin 16.8%, up from 12.0%. Gross margin is the share of sales left after direct production costs. The 10-Q puts the gain "primarily" down to "higher factory utilization driven by the increase in net sales," meaning the plants were busier.
• $0.70 EPS, up from $0.22. Each year contains a one-off. About $21 million of 2026 operating income came from a gain on selling equipment, and 2025 included a $32.4 million insolvency receipt tied to the 2017 Nanium acquisition. Leaving out only the 2025 item, EPS still rose from about $0.15 to $0.70.
• Free cash flow was negative $270 million for the first half. Spending on plant and equipment tripled to $688 million while Amkor builds its Arizona plant, and it borrowed $1.15 billion through convertible notes to help pay for it.

The numbers

Operating margin is the share of sales left after running the business, before interest and tax. EBITDA is earnings before interest, tax, depreciation and amortization. Amkor reports it as a non-GAAP measure, meaning it is not defined by standard US accounting rules. "Advanced" products are flip chip, memory and wafer-level packaging. "Mainstream" products are older wirebond packages, where fine wires connect the chip to its package.

For the first six months, net sales were $3.58 billion (+26.5%), net income attributable to Amkor was $257.1 million against $75.5 million, and diluted EPS was $1.03 against $0.30.

Where the growth came from

According to the 10-Q, every end market grew:

Management credits communications and automotive/industrial to "increased supported content in premium tier smartphones and growth in ADAS and industrial applications". ADAS means driver-assistance systems such as lane-keeping and automatic braking. Computing growth was "primarily driven by strength in datacenter." The 10-Q gives no growth rate for consumer. The rounded mix shares (14% of $1.90 billion against 18% of $1.51 billion) put it roughly flat, so most of the growth came from the other three markets.

Customer concentration also fell. The top ten customers produced 66% of sales, down from 72%. The growth was spread more widely than in the past.

Why margins jumped: fixed-cost leverage

The earnings release breaks cost of sales down as a share of net sales, and that shows where the 4.8-point gross-margin gain came from:

Materials, which mostly scale with volume, barely changed as a share of sales. The whole improvement came from the three mostly fixed lines: labor, depreciation and other overhead. Together they fell by 4.5 points. This is what higher utilization looks like in the numbers. The plants did not get cheaper to run. They ran more output. Utilization works in both directions, and in a downturn the same fixed costs would weigh on margins just as quickly.

What the headline numbers hide

• One-offs in both years. Q2 2025 operating income included a $32.4 million net benefit from the Nanium insolvency receipt. Excluding it, operating income was about $59.6 million, a 3.9% margin. Q2 2026 included a gain of about $21 million on disposed fixed assets, booked as a reduction in SG&A (selling, general and administrative costs). Excluding it, operating income was about $179 million, a 9.4% margin. On that basis the margin gain is roughly 5.5 points, which is bigger than the reported 4.4. The release says Nanium added $16 million, or $0.07, to 2025 net income and EPS. The filing does not give the after-tax value of the 2026 gain, so we don't estimate it.
• A much lower tax rate. Income tax was almost unchanged at $28.3 million against $28.2 million, even though pre-tax income rose from $83.2 million to $203.2 million. That puts the effective tax rate at about 14%, down from about 34%. The 2025 rate was inflated by "discrete tax expense associated with the Nanium Insolvency Receipt." So a meaningful part of the jump in EPS comes from tax and not from operations. The 10-Q also warns that reduced tax rates in Korea expired in 2025, and that Singapore and Vietnam operate under conditional reduced rates, which could raise the effective rate as they expire.
• Below-the-line help. Total other items swung from an $8.8 million expense to a $3.3 million income. Interest income rose to $20.2 million from $15.0 million on higher cash balances, and the foreign-currency loss shrank to $0.1 million from $7.0 million.
• No help from buybacks. Diluted shares rose slightly, to 250.0 million from 247.8 million. The $300 million repurchase program approved in April 2026 had not been used by June 30.
• Cash conversion is good, but capex absorbs it. First-half operating cash flow of $381.6 million was about 1.5 times net income, helped by $350.6 million of depreciation. Working capital still used $190.5 million. Payments for plant and equipment rose to $688.4 million from $226.1 million, which left free cash flow at -$269.9 million against +$63.1 million a year earlier. Unpaid capex bills (capital expenditures payable) rose to $621.3 million from $243.5 million in December, so more of that spending will become cash outflows in coming quarters.
• Inventory grew faster than receivables. Inventories rose 28% in six months, to $560.7 million from $437.8 million. Accounts receivable rose 4.8%, to $1.42 billion. The filing doesn't explain the inventory build. It is worth watching, but in a quarter with 26% sales growth and guidance for more, it does not look alarming.
• The balance sheet has turned. Long-term debt rose to $2.33 billion from $1.28 billion after the $1.15 billion 0% convertible notes due 2031. Total debt of about $2.5 billion now roughly equals cash plus short-term investments of $2.5 billion, so Amkor is no longer meaningfully net-cash.

Takeaway: Amkor's margin gain this quarter came almost entirely from fixed-cost leverage, with labor, depreciation and overhead together 4.5 points lower as a share of sales, rather than from pricing or mix. That is the cyclical part of this business, and the company is now spending $2.5–3.0 billion this year, funded partly by new debt, to add more fixed capacity. Earnings from here depend on keeping those plants full.

Outlook

Guidance for Q3 2026:

• Net sales of $1.95–2.05 billion, a midpoint about 5% above Q2's $1.90 billion
• Gross margin of 18.5–19.5%, up from 16.8% in Q2
• Net income of $180–205 million, or $0.72–0.82 per diluted share
• Full-year 2026 capital expenditures of about $2.5–3.0 billion. The 10-Q says "the increase from 2025 is primarily due to the construction of the Arizona Facility." At June 30, Arizona construction costs to date were $333.6 million, and Amkor agreed in May to buy about 67 more acres for about $33 million.

Two items in the liquidity section stand out. Amkor expects about $300 million of customer advance payments over two years, of which $100 million arrived in July. Separately, in July it signed an advance-payment agreement with a customer under which it expects about $1.5 billion in 2027. A customer prepaying that much is a strong sign of committed demand for future capacity, and it would cover a large part of the Arizona bill. The 10-Q does not name the customer.

Our read: first-half capex was $688 million against a full-year plan of $2.5–3.0 billion. That leaves roughly $1.8–2.3 billion to spend in the second half, so free cash flow is likely to stay clearly negative for 2026, unless the timing of customer advances offsets it. On profit, the Q3 gross-margin guide of up to 19.5% on only about 5% more sales means management expects utilization to keep rising. In Q3 results, watch three things: whether gross margin lands inside that range, whether the tax rate stays near 14%, and whether consumer sales start growing again or stay flat. The full 10-Q for the quarter ended September 30 should show all three.