Summary
- IQE’s H1 revenue rose 43% to £64.6m, while photonics revenue increased 45% to £38.5m.
- The company says data centre demand is increasing indium phosphide volumes and development work around optical interconnect and efficient power supplies.
- IQE plans to convert existing tooling to add InP capacity and is preparing to move to the London Stock Exchange Main Market.
IQE reported a 43% increase in first-half revenue as demand from AI and data centre infrastructure helped drive growth in its photonics business and higher utilisation of its semiconductor manufacturing capacity.
Revenue for the six months to 30 June rose to £64.6m from £45.3m a year earlier. Adjusted EBITDA reached £6m, compared with an adjusted EBITDA loss of £0.4m in the first half of 2025.
Photonics delivered the strongest direct data centre exposure. Division revenue increased 45% to £38.5m from £26.6m, driven by a combination of US defence programme funding and continued growth in AI and data centre markets.
The Cardiff-headquartered compound-semiconductor manufacturer produces epitaxial wafers and advanced materials used across optical communications, sensing, wireless, and power applications.
In data centres, those materials sit below the finished server and networking equipment but are increasingly exposed to the physical scaling of AI clusters. Larger accelerator deployments generate more traffic between processors, racks, switches, storage, and other facilities, increasing the demand for high-speed optical links.
IQE said strong demand for indium phosphide is driving volume growth. The material is widely used in lasers and photonic components for high-speed optical communications, making it increasingly important as the bandwidth requirement inside and between data centres rises.
The company is also qualifying gallium arsenide-based optical-interconnect technologies for AI and data centre applications and developing gallium nitride-on-silicon microLED epitaxy with partners supplying hyperscale customers.
A separate programme targets gallium nitride-on-silicon power epitaxy for high-efficiency AI and data centre power-supply units.
Power-conversion efficiency becomes increasingly material as individual AI deployments move into tens or hundreds of megawatts. Electricity passes through several conversion stages between the grid connection and the processor, and losses across those stages ultimately add to facility load and cooling demand.
IQE plans to convert existing manufacturing tooling during the second half to increase indium phosphide capacity. The approach uses existing assets rather than immediately adding a new manufacturing footprint.
The first-half results indicate that increased utilisation is already improving the economics of the manufacturing base. IQE attributed margin expansion to higher revenue, better use of capacity, and a more favourable product mix as photonics represented a larger proportion of sales.
Adjusted loss before tax narrowed to £8.2m from £16m. Cash and cash equivalents rose to £41.6m from £17m, while adjusted net cash stood at £30.2m compared with adjusted net debt of £23.5m a year earlier.
IQE expects full-year revenue growth above 30% and adjusted EBITDA in the low teens of millions of pounds. The company said momentum has continued into the second half, with further opportunity in optical communications for AI and data centre infrastructure.
It is also preparing to move from AIM to the Main Market of the London Stock Exchange, targeting admission during the first half of 2027.
The results illustrate how data centre capacity expansion reaches further into the industrial supply chain than construction contractors and server manufacturers. Higher-density compute requires optical communications, power semiconductors, cooling equipment, switchgear, networking, and specialist materials to expand alongside the buildings.
IQE’s near-term constraint is therefore manufacturing capacity rather than data centre floor space. Converting existing tooling should determine how quickly the company can translate the current increase in indium phosphide demand into additional production without losing the utilisation gains visible in the first half.
