TOK Q2 FY2026: Revenue up 25%, operating profit up 45% on AI chip demand

TOK posted record profits for the first half of fiscal 2026, with revenue climbing 25.1% year-on-year to 139,668 million yen and operating profit surging 45.4% to 28,854 million yen. Recurring profit was up 48.5% at 30,272 million yen, and net income attributable to owners of the parent rose 49.9% to 20,409 million yen.

The sharp growth was driven by a broad recovery in the global semiconductor market, particularly surging demand for AI servers in data centers. This boosted sales of the company’s mainstay photoresist materials used in chip manufacturing. A weaker yen also provided a tailwind, supporting overseas earnings.

In February 2025, TOK revised some quantitative targets in its medium-term plan to reflect exchange rate movements and semiconductor market trends. The strong interim results suggest the strategy is paying off. For the full year, the company maintained its previously raised forecasts: revenue of 291,000 million yen (up 22.8%) and operating profit of 60,600 million yen (up 27.9%).

TOK operates under a single reporting segment but breaks down revenue into three product categories: photoresist functional materials, high-purity chemicals, and others. All three posted year-on-year growth in the first half.

Photoresist functional materials, particularly EUV and ArF resists essential for cutting-edge chip miniaturization, led the charge as AI chip demand for data centers surged. The expanding market and higher-margin advanced products also lifted profitability.

High-purity chemicals, used in semiconductor fabrication processes, saw increased sales volumes thanks to higher fab utilization rates. The proportion of high-end chemicals for advanced nodes rose, improving profit margins.

Others, including display materials and functional chemicals, provided stable contributions and benefited from the overall market recovery.

While specific sales figures by product are not disclosed, management said photoresist materials drove the overall growth.

Total assets at the interim period-end stood at 359,911 million yen, up 24,619 million yen from the previous fiscal year-end. The increase primarily reflected higher trade notes and accounts receivable of roughly 11,000 million yen due to sales expansion, and a rise in property, plant and equipment of about 8,000 million yen from active capex. The equity ratio remained high at 68.9%, underscoring financial strength.

Cash flows from operations were robust, reflecting strong profit growth. Investing cash outflows increased as the company invested in production capacity for semiconductor materials and upgraded R&D facilities.

Shareholder returns were enhanced: the interim dividend was raised to 40 yen per share from 35 yen a year ago, and the full-year dividend is planned at 80 yen, up 8 yen. This marks the sixth consecutive year of dividend increases. No share buyback was announced, with management emphasizing a balanced approach between an appropriate payout ratio and retaining earnings for growth investments.

For the full fiscal year ending December 2026, TOK left its earnings forecasts unchanged from the upward revision announced on August 6, 2026. It expects revenue of 291,000 million yen (up 22.8% year-on-year), operating profit of 60,600 million yen (up 27.9%), recurring profit of 63,000 million yen (up 27.9%), and net profit of 42,600 million yen (up 27.8%). All metrics are forecast to rise by over 20%.

The forecast assumes continued solid semiconductor demand and sustained AI-related investments, with an assumed exchange rate of 140 yen to the U.S. dollar. First-half progress against the full-year forecast was 48.0% for revenue and 47.6% for operating profit, putting the company well on track.

TOK is implementing its three-year medium-term plan, “tok Medium-Term Plan,” covering fiscal years 2024 through 2026. In February 2025, the company revised revenue and profit targets upward to reflect the rapidly expanding semiconductor market and exchange rate changes.

Key initiatives include: (1) accelerating development of cutting-edge photoresists and expanding market share, (2) strengthening global production networks in Japan, Taiwan, South Korea, and the U.S., and (3) investing in R&D for next-generation materials such as those for advanced packaging.

During the first half, TOK made micro resist technology GmbH, a German company, a consolidated subsidiary, expanding its R&D and sales base in Europe. The move is strategically aimed at acquiring next-generation EUV resist technology and boosting global competitiveness. Capital expenditure rose year-on-year, with capacity expansion underway at the Kumamoto plant and construction of a new plant in Taiwan.

While near-term margins may face pressure from higher investment, the market sees the long-term growth trajectory as intact.

The company acknowledges the following key risks:

• Semiconductor supply-demand swings: While AI demand is robust, a downturn in memory or smartphone demand could adversely affect results.
• Foreign exchange volatility: With high overseas sales, a stronger yen beyond the assumed 140 yen per dollar would pressure earnings.
• Technology innovation race: As chip miniaturization intensifies, any delay in developing next-generation EUV resists could erode TOK’s competitive position.
• Intensifying competition: Rivals including JSR and Shin-Etsu Chemical are also racing for market share.
• Rising raw material costs: Higher prices for chemical inputs and energy could compress margins.

TOK counters these risks by expanding high-value-added products, optimizing global production, and using currency hedging. Its leadership in advanced resist technology is seen as a key risk mitigant.