IQE Bets on AI Data-Centre Demand to Drive 20% Sales Growth in 2026
The Welsh chipmaker upgraded its outlook, but full-year results showed how far it still has to climb.
July 21, 2026 – 7:45 am
IQE, the Cardiff-based maker of compound semiconductor wafers, expects revenue to grow by more than 20% in 2026, betting that surging AI data-centre demand for its light-carrying materials will pull it clear of a bruising year. The upgrade landed on July 21 alongside full-year results that showed just how far the company has to climb.
Revenue for 2025 fell 18% to £97.3m, down from £118.0m, while adjusted EBITDA dropped 60% to £3.2m, a margin of roughly 3%.
The rebound case rests on indium phosphide, the substrate behind the optical transceivers that wire AI clusters together, and on tightening Chinese export controls that have made IQE’s Western supply harder to replace.
A Mixed Performance
The business split was stark:
- Photonics revenue, which spans data-centre networking and defence work, rose 15% to £57.1m.
- The wireless division, supplying chips for smartphone sensors, slid 40% to £40.1m as handset demand stayed soft and customers ran down inventory.
Structural Growth Drivers
Much of the photonics strength came from the US, where faster releases of military and defence funding lifted orders through the year. The same optical components that shuttle data between servers also feed sensing and communications kit for aerospace customers, a market IQE has leaned on while consumer demand wobbled.
The growth is structural rather than a one-off, tied to the scale of the AI clusters going up around the world and the fibre links needed to keep them fed.
Financial Outlook
For 2026, the company guided to adjusted EBITDA in the high-single to low-double-digit millions, a deliberately wide range that hangs on how quickly photonics orders convert.
Chief executive Jutta Meier said IQE was “uniquely positioned as a critical enabler of the world’s fastest-growing technology ecosystems,” pointing to “accelerating demand” for its indium phosphide products.
Raw Material Challenges
The materials have become a pressure point in their own right. Shortages and Beijing’s curbs on indium and gallium exports have pushed raw-material costs higher, and Meier said the firm was working with customers “to really ensure that we are sharing the pain of that pricing” rather than passing it on in full.
It is an unusually candid admission that the very shortages driving demand for IQE’s materials are also squeezing what it pays to make them.
Market Reaction
The market took the update coolly. Shares eased roughly 5% on results day, to around 48p, trimming a rally that has made IQE one of the best-performing London stocks of 2026, up close to 900% since January. Investors, put another way, had already bought the recovery the guidance now sets out.
Underpinning the expansion is an £81m fundraise completed in April, including £45m from US chip investors.