Tower Semiconductor is expanding its long-term financial model after a record third quarter, with silicon photonics at the center of its planned growth. Management now targets annual revenue of $3. 6 billion and expects silicon-photonics annualized revenue to exceed $1. 1 billion in the fourth quarter of 2026.
The company is guiding for fourth-quarter revenue of about $600 million, plus or minus 5%, which would put 2026 revenue near $2 billion if the midpoint is achieved.
The silicon-photonics expansion is planned in stages. Capacity is expected to be about twice the third-quarter level by the end of 2026 and could reach roughly three times that level when the first 300mm expansion reaches full production, targeted for the third quarter of 2027. Based on announced capacity, management said the silicon-photonics starts rate could eventually support revenue somewhat above $2. 8 billion on an annualized basis, although that is a capacity measure rather than a revenue forecast.
Tower said capacity for both 200mm and 300mm production is covered by signed agreements or contracts in advanced negotiation, with customer commitments extending through 2029. Tower has said it intends to fund the expansion itself, while warning that construction, equipment qualification, financing and demand could affect the expected returns.
The longer-term incremental gross-profit range is expected to be 55% to 58%, and additional depreciation will begin affecting results as more production tools enter service.
Tower is also prototyping near-packaged-optics products with more than 10 customers and has started initial production of silicon-photonics dies with integrated indium-phosphide lasers. Management expects meaningful near-packaged-optics shipments only if the market adopts the format, while acknowledging that new competitors could use aggressive discounts. The company’s growth plan therefore depends on converting long-term commitments into orders, qualifying expanded manufacturing capacity and maintaining pricing as new technologies and competitors enter the market.