SOI: Future AI Momentum Will Drive Share Recovery Amid Sector Uncertainty

Key Takeaways

• Rising AI, wireless, and connected device trends are driving strong, diversified demand for Soitec's advanced substrates, supporting long-term growth and reduced revenue volatility.
  
• Disciplined expansion, automation, and ongoing innovation strengthen technological leadership, enable profitability gains, and reinforce high barriers to entry.
  
• Excess inventories, slowing content growth, rising competition, weak end markets, and macro headwinds are pressuring Soitec's revenue growth, margins, and financial visibility.

Catalysts

Designs and manufactures semiconductor materials worldwide.

• The ongoing large-scale transition to AI, data center expansion, and proliferating connected devices (including IoT) is driving robust and accelerating demand for advanced substrates like those Soitec produces, supporting long-term revenue visibility and potential 2x revenue opportunity as their addressable market is projected to grow from 5 million wafers in 2024 to 12 million by 2030.
  
• The rollout of 5G/6G, next-gen wireless, and increased demand for high-performance and energy-efficient chips-especially for mobile, automotive, data center, and edge AI-are likely to boost demand for Soitec's leading-edge SOI, POI, and Photonics-SOI substrates, setting the stage for volume-driven revenue and margin expansion as industry trends normalize.
  
• Strategic and disciplined capacity expansion (using existing assets), increased automation, and ongoing process/yield improvement allow Soitec to scale profitably while limiting capital intensity-so when demand recovers, operating leverage should drive EBIT margin significantly higher (towards 25%) and strengthen free cash flow generation.
  
• Strong product and customer diversification-moving beyond dependence on RF-SOI or a few major clients-means Soitec is positioned to capture secular growth in high-value segments like automotive, photonics, power electronics, and AI, which should mitigate future revenue volatility and expand market share.
  
• Continued R&D and innovation (e.g., in SmartSiC, POI, Photonics-SOI, and new materials) anchor Soitec's technological leadership and high barriers to entry, supporting premium pricing and stable/high net margins as demand for heterogeneous integration and specialty substrates accelerates across end markets.

Soitec Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Soitec's revenue will grow by 1.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 10.2% today to 10.3% in 3 years time.
• Analysts expect earnings to reach €95.2 million (and earnings per share of €2.75) by about September 2028, up from €91.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €152 million in earnings, and the most bearish expecting €64 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.4x on those 2028 earnings, up from 12.9x today. This future PE is lower than the current PE for the GB Semiconductor industry at 33.4x.
• Analysts expect the number of shares outstanding to decline by 0.06% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.1%, as per the Simply Wall St company report.

Soitec Future Earnings Per Share Growth

Risks

• The company faces continuing risks from excess customer inventories and significant inventory corrections in RF-SOI and other product lines, which are leading to suppressed short
• and potentially medium-term revenues and increased working capital requirements; if inventory normalization is delayed or "new normal" inventory levels remain structurally higher, any near-term rebound in revenue and earnings could be restrained.
  
• Secular shifts such as "shrink" (chip size reduction) and module optimization in the smartphone industry are reducing SOI content growth per end device, creating a headwind for Soitec's largest business line and capping its ability to fully benefit from overall smartphone market recovery; this could pressure both top-line revenue growth and gross margins as high-margin legacy products decelerate.
  
• The competitive landscape for silicon carbide (SiC) and other compound substrates is intensifying, with aggressive price declines driven by Chinese suppliers and the proliferation of new licenses; elevated competition could erode Soitec's pricing power, compress margins, and challenge the commercial ramp-up of SmartSiC, especially as automotive and power markets experience delays and more stringent qualification cycles.
  
• Sluggish demand in the automotive and industrial sectors, coupled with specific customer order pauses and a broader weakness in EV adoption, introduces material uncertainty for segmental revenue, delays the expected ramp in high-growth areas like Power-SOI and SmartSiC, and may lead to underutilized capacity and lower operating leverage in these segments.
  
• Persistent macro and geopolitical headwinds, including tariff uncertainty, customer pushouts, FX volatility, and trade tensions, present ongoing risks to both revenue visibility and supply chain stability; these could result in continued quarterly guidance withdrawals, capital expenditure deferrals, and volatility in Soitec's revenues, margins, and free cash flow.

Valuation

• The analysts have a consensus price target of €52.944 for Soitec based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €99.0, and the most bearish reporting a price target of just €32.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €928.3 million, earnings will come to €95.2 million, and it would be trading on a PE ratio of 27.4x, assuming you use a discount rate of 12.1%.
• Given the current share price of €33.05, the analyst price target of €52.94 is 37.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.