AI And 5G Expansion Will Transform Semiconductor Manufacturing Worldwide

Key Takeaways

• Strong positioning in advanced semiconductor materials enables Entegris to capture outsized growth from technology shifts and heightened demand across digital transformation trends.
  
• Diversified global supply chain and ongoing innovation drive resilience, margin expansion, and increasing customer dependence on its high-value solutions.
  
• Heightened geopolitical risks, industry cyclicality, debt burden, rising operational costs, and shifting customer behaviors collectively threaten Entegris’ profitability, growth, and financial flexibility.

Catalysts

Provides advanced materials and process solutions for the semiconductor and other high-technology industries in North America, Taiwan, South Korea, Japan, China, Europe, and Southeast Asia.

• The expected proliferation of AI and advanced computing applications is leading to significant increases in demand for advanced semiconductor manufacturing, which strongly drives multi-year, secular growth in Entegris’ contamination control, advanced chemical handling, and specialty materials offerings. This structural demand is likely to accelerate both revenue and gross margin expansion, as Entegris’ product content per wafer rises with every next-generation node.
  
• Massive global investments in digital transformation, including 5G, automotive electronics, and IoT, are fueling a robust, long-term expansion in semiconductor capacity. As customers prepare for node transitions to 3D NAND and advanced logic (such as 3nm and 2nm), Entegris is already positioned as a key enabler, capturing increased wallet share at leading-edge fabs and supporting above-industry growth in recurring, high-margin consumables revenue.
  
• The ongoing emphasis by chipmakers and governments on supply chain resilience and onshoring is accelerating wafer fab investments across the US, Europe, and Asia. Entegris’ global manufacturing footprint, with redundant and regionally integrated supply chain clusters (including Colorado, Taiwan, and Japan), is set to not only restore and grow revenue lost from near-term tariff disruptions but also to unlock long-term sales growth and protect EBITDA margins through higher localization and reduced logistics risk.
  
• Innovation and new product launches, such as molybdenum deposition materials and advanced wet chemistries for 3D NAND, are being adopted by top memory and foundry customers in the second half of 2025 and beyond. These technology wins are expected to materially boost Entegris’ revenue and price realization as advanced nodes proliferate, while gross margin growth benefits from increasing product differentiation and complexity.
  
• Accelerating adoption of advanced packaging, heterogeneous integration, and 3D chip architectures is generating incremental need for Entegris’ ultra-high purity filters, purifiers, and process control solutions. With advanced packaging revenue having more than doubled year-over-year and expected to grow over 25% in 2025, Entegris is poised for sustained, outsized earnings growth as its addressable market rapidly expands in tandem with industry innovation cycles.

Entegris Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Entegris compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Entegris's revenue will grow by 6.7% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 9.6% today to 15.1% in 3 years time.
• The bullish analysts expect earnings to reach $596.2 million (and earnings per share of $3.99) by about July 2028, up from $310.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 39.7x on those 2028 earnings, down from 44.9x today. This future PE is greater than the current PE for the US Semiconductor industry at 30.9x.
• Analysts expect the number of shares outstanding to grow by 0.28% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.63%, as per the Simply Wall St company report.

Entegris Future Earnings Per Share Growth

Risks

• Growing geopolitical tensions and new tariffs between the US and China have already led to a pause in shipments of Entegris' US-made products to Chinese customers, with an estimated $50 million revenue impact in a single quarter and increased risk of long-term market share loss, threatening both near-term and recurring revenues.
  
• The company is highly exposed to cyclicality in semiconductor capital expenditure, with marked declines in CapEx-related product revenue such as fluid handling and FOUPs due to the current slowdown in global fab construction, which can negatively impact top-line growth and future earnings.
  
• Entegris is carrying a substantial debt load of approximately $4 billion with a gross leverage ratio above 4, raising concerns about net margin compression and reduced financial flexibility should there be prolonged industry weakness or an increase in interest rates.
  
• Despite recent investments in operational redundancy and supply chain localization, intensifying regionalization, stricter ESG requirements, and inflationary pressures could drive up compliance and operating costs over time, eating into profitability and EBITDA margins.
  
• There is evidence of customers in mainstream segments extending the lifetime of filters and delaying purchases during periods of low utilization, increasing Entegris' vulnerability to shifts in customer behavior and end-market demand, which could further slow revenue growth and strain free cash flow.

Valuation

• The assumed bullish price target for Entegris is $115.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Entegris's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $115.0, and the most bearish reporting a price target of just $85.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $3.9 billion, earnings will come to $596.2 million, and it would be trading on a PE ratio of 39.7x, assuming you use a discount rate of 10.6%.
• Given the current share price of $92.0, the bullish analyst price target of $115.0 is 20.0% 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.