The Israeli contract chipmaker also beat first-quarter estimates and forecast a record $455 million in second-quarter revenue
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Tower Semiconductor signed $1.3 billion in silicon photonics contracts for 2027 revenue with its largest customers in that technology, the Israeli contract chipmaker said Wednesday, as demand for chips used in AI data center infrastructure drives rapid growth at the company.
Silicon photonics chips use light instead of electrical signals to transmit data, which makes them ideal for the high-speed needs of AI data centers. Customers buying silicon photonics capacity paid Tower $290 million upfront and have promised to increase their 2028 orders. Another round of advance payments is expected by January 2027.
"We are confident in our path toward achieving our financial model targets of $2.8 billion in annual revenue and $750 million in net profit in 2028," CEO Russell Ellwanger said in a statement.
The contracts were disclosed alongside Tower's first-quarter results, which showed revenue of $414 million, up 15% from the same period a year earlier. Gross profit rose 52% year over year to $111 million, and net profit reached $65 million, or $0.58 per basic share, compared with $40 million, or $0.36 per basic share, in the first quarter of 2025.
Shares of Tower Semiconductor were trading up more than 17% in premarket activity Wednesday.
Tower's second-quarter revenue guidance of $455 million — a record for the company, given with a plus-or-minus 5% range — came in well above the $436.4 million Wall Street had anticipated, and would mark 22% growth compared with the same quarter last year and a 10% sequential increase from the first quarter.
Tower's silicon photonics business sits within a broader surge of investment in optical technologies for AI infrastructure. Corning, which reported a 36% year-over-year increase in its optical communications segment in the first quarter, has entered long-term fiber-optic supply agreements with multiple hyperscale data center operators. Separately, Nvidia $NVDA and Corning announced a partnership to build optical manufacturing facilities in North Carolina and Texas for AI infrastructure.
Tower operates factories in Israel, the U.S., Japan, and Italy. Its chips are used in industries such as automotive, industrial manufacturing, consumer electronics, and communications. The company aims for steady quarter-over-quarter growth in revenue and margins through 2026, with a long-term goal of $2.8 billion in annual revenue and $750 million in net profit by 2028.
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