Cardiff semiconductor-materials manufacturer IQE has reported a 43% rise in first-half revenue as demand from AI data centres, optical communications, defence, and wireless systems increased manufacturing utilisation and helped the company return to positive adjusted EBITDA.

Revenue reached £64.6 million for the six months to 30 June, up from £45.3 million a year earlier, while adjusted EBITDA improved from a £0.4 million loss to a £6 million profit. The reported pre-tax loss narrowed from £18.3 million to £12.6 million, leaving the company’s recovery incomplete despite the much stronger operating performance.

Photonics revenue increased 45% to £38.5 million, helped by growth in AI and data-centre markets alongside releases of funding for US military and defence programmes. Wireless revenue rose 40% to £26 million as IQE gained market share and increased shipments into newly qualified customer platforms.

Chief executive Jutta Meier said demand was being supported by AI-driven data-centre infrastructure, sensing, wireless, and defence applications, while the company is converting existing equipment during the second half to increase capacity for indium-phosphide products. IQE also expects optical communications serving AI infrastructure to provide further upside following new supply agreements.

AI infrastructure stretches beyond processors

The results illustrate how spending on artificial intelligence is spreading through parts of the semiconductor supply chain that sit well beyond GPUs and leading-edge processors. Large computing clusters also depend on optical links to move data, power electronics to improve energy efficiency, communications hardware, and specialised materials that allow those components to operate at higher speeds or frequencies.

IQE produces epitaxial wafers and related compound-semiconductor materials rather than complete processors. Its manufacturing portfolio includes indium phosphide, gallium nitride, gallium arsenide, gallium antimonide, and indium antimonide, which are used across communications, photonics, power, sensing, aerospace, and other specialist applications.

Indium phosphide has become particularly important in IQE’s current data-centre pipeline because of demand around optical communications. The company says strong InP requirements are driving volume growth and that existing manufacturing tooling will be converted to add capacity, giving it a way to respond without building an entirely new production footprint before demand is proven.

Other programmes show how the same infrastructure cycle can create demand across several material systems. IQE is qualifying gallium-arsenide technologies for optical interconnects and gallium-nitride-on-silicon epitaxy for more efficient data-centre power supplies, while work on microLED components is aimed at high-bandwidth data transfer among hyperscale customers.

Higher utilisation changes the economics

For a semiconductor-materials company with expensive manufacturing facilities, rising volumes can change profitability disproportionately because more production is pushed through equipment whose costs already exist. IQE attributes part of its EBITDA improvement to better factory utilisation and production yields, alongside a more favourable sales mix weighted towards photonics.

That operating leverage works in both directions. When demand weakens or customers delay qualification programmes, under-used manufacturing capacity can become a substantial drag, which helps explain why the company has spent recent years restructuring and reviewing its portfolio rather than simply adding capacity in anticipation of future markets.

The stronger balance sheet also reflects financing rather than operations alone. IQE ended June with £41.6 million of cash and adjusted net cash of £30.2 million, compared with adjusted net debt of £23.5 million a year earlier, following completion of its strategic review and receipt of fundraising proceeds.

Operating cash generation remained more modest, with reported net cash flow from operations falling from £3.6 million to £1.2 million because improved revenue and EBITDA were partly offset by working-capital movements and restructuring costs. Those figures provide a useful counterweight to the headline growth rate: semiconductor demand has improved sharply, but IQE is still moving through a financial and operational reset.

A Main Market move follows the reset

The company intends to leave AIM and seek admission to the London Stock Exchange Main Market during the first half of 2027. IQE says the move should broaden its institutional investor base, improve liquidity, increase its profile, and potentially support inclusion in FTSE indices.

For a capital-intensive technology manufacturer, access to deeper pools of finance can be more than a listing-status question. Compound-semiconductor capacity requires equipment, engineering expertise, customer qualification, and long planning cycles, while the markets IQE serves can shift between periods of shortage and weak demand before expensive factories have had time to adjust.

The company is currently choosing conversion of existing tooling over aggressive new expansion in some AI-related products, suggesting management is trying to capture demand without rebuilding the overcapacity risk that has hurt semiconductor companies during previous cycles. Long-term supply agreements are also intended to give better visibility over orders before capacity decisions are made.

IQE expects full-year revenue to rise by more than 30% and adjusted EBITDA to reach the low teens of millions of pounds. Those remain company forecasts, and a reported pre-tax loss means the business has not completed its turnaround, although the first half demonstrates that AI infrastructure demand is now appearing in parts of the UK semiconductor industry that receive less attention than processor design.

As data-centre builders push for faster links and more efficient power delivery, compound materials are becoming part of the physical constraints around AI deployment. IQE’s next challenge is to turn that demand into sustained utilisation, cash generation, and customer commitments long enough to justify the larger-market ambitions that now accompany its operating recovery.