PHOTRONICS INC

Previous wording

State-of-the-art production for semiconductor masks is considered to be 4 or 5 nanometer and smaller including EUV lithography for ICs and Generation 8.6 AMOLED display-based process technologies for FPDs. However, we define our high-end product category as 28nm and below for semiconductors and Generation 10.5 plus, Generation 6 and 8 AMOLED and LTPS for displays. This is consistent with current merchant mask industry definitions. Moreover, design nodes above 28nm and FPD processes for standard LCD displays below Generation 10 are considered mainstream or standard products. At these geometries and various high-end nodes, we can produce full lines of photomasks, and there is no significant technology employed by our competitors that is not available to us. We expect advanced-generation designs to continue to move to production throughout fiscal 2026, and we believe we are well positioned to service an increasing volume of this business as a result of our investments in manufacturing processes and technology in the regions where our customers are located.

Current wording

State-of-the-art production for semiconductor masks is considered to be 4 or 5 nanometer and smaller including EUV lithography for ICs and Generation 8.6 AMOLED display-based process technologies for FPDs. However, we define our high-end product category as 28nm and below for semiconductors and Generation 10.5 plus, Generation 6 and 8 AMOLED and LTPS for displays. This is consistent with current merchant mask industry definitions. Moreover, design nodes above 28nm and FPD processes for standard LCD displays below Generation 10 are considered mainstream or standard products. At these geometries and various high-end nodes, we can produce full lines of photomasks, and there is no significant technology employed by our competitors that is not available to us. We expect advanced node designs to continue to move to production throughout fiscal 2026, and we believe we are well positioned to service an increasing volume of this business as a result of our investments in manufacturing processes and technology in the regions where our customers are located.

Previous wording

The photomask industry has been and is expected to continue to be characterized by technological change and evolving industry standards. In order to remain competitive, we will be required to continually anticipate, respond to, and utilize changing technologies. In particular, we believe that, as semiconductor geometries continue to become smaller and/or more complex, and display designs become larger or otherwise more advanced, we will be required to manufacture even more complex products, including photomasks with advanced optical proximity correction, insertion of curvilinear patterning and EUV photomasks. Additionally, demand for photomasks has been, and could in the future be, adversely affected by changes in high-performance electronics fabrication methods that affect the type or quantity of photomasks used, such as changes in semiconductor demand that favor programmable IC devices and other approaches that replace application-specific ICs, or the use of certain chip-stacking methodologies that lessen the emphasis on conventional lithography technology. Furthermore, increased market acceptance of alternative methods of transferring circuit designs onto semiconductor wafers could reduce or eliminate the need for photomasks in the production of semiconductors.

Current wording

The photomask industry has been and is expected to continue to be characterized by technological change and evolving industry standards. In order to remain competitive, we will be required to continually anticipate, respond to, and utilize changing technologies. In particular, we believe that, as semiconductor geometries continue to become smaller and/or more complex, and display designs become larger or otherwise more advanced, we will be required to manufacture even more complex products, including photomasks with advanced optical proximity correction, increase of curvilinear patterning and EUV photomasks. Additionally, demand for photomasks has been, and could in the future be, adversely affected by changes in high-performance electronics fabrication methods that affect the type or quantity of photomasks used, such as changes in semiconductor demand that favor programmable IC devices and other approaches that replace application-specific ICs, or the use of certain chip-stacking methodologies that lessen the emphasis on conventional lithography technology. Furthermore, increased market acceptance of alternative methods of transferring circuit designs onto semiconductor wafers could reduce or eliminate the need for photomasks in the production of semiconductors.

Previous wording

Our revenues have benefited, and our costs, including depreciation, have been affected by the increased demand for high-end-technology photomasks that require more advanced manufacturing capabilities, but generally command higher ASPs. Our year-to-date capital expenditure payments were $93.4 million and $95.7 million in Q2 FY26 and Q2 FY25, respectively. Nonetheless, we intend to continue to make the required investments to support the technological and production requirements of our customers that we believe will continue to enable our growth. This includes investments to replace end-of-life mask-making equipment with higher-performing systems that better serve our customers. In support of this effort, we expect capital expenditure payments to be approximately $330 million in fiscal year 2026.

Current wording

Our revenues have benefited, and our costs, including depreciation, have been affected by the increased demand for high-end-technology photomasks that require more advanced manufacturing capabilities, but generally command higher ASPs. Our year-to-date capital expenditure payments were $130.4 million and $120.6 million in the nine months ended August 2, 2026 and the nine months ended August 3, 2025, respectively. Nonetheless, we intend to continue to make the required investments to support the technological and production requirements of our customers that we believe will continue to enable our growth. This includes investments to replace end-of-life mask-making equipment with higher-performing systems that better serve our customers. In support of this effort, we expect capital expenditure payments to be in the range of $255 million to $305 million in fiscal year 2026.

Previous wording

All the following tabular comparisons, unless otherwise indicated, are for the three-month and six-month periods ended May 3, 2026 (Q2 FY26), February 1, 2026 (Q1 FY26) and May 4, 2025 (Q2 FY25). The tables in this section may not foot due to rounding.

Current wording

All the following tabular comparisons, unless otherwise indicated, are for the three months ended August 2, 2026, May 3, 2026 and August 3, 2025 and the nine months ended August 2, 2026 and August 3, 2025.

Previous wording

The following tables present changes in revenue disaggregated by product type and geographic origin, in Q2 FY26 from revenue in prior reporting periods.

Current wording

The following tables present changes in revenue disaggregated by product type and geographic origin.

Previous wording

Quarterly Changes in Revenue by Product Type ($ in millions)

Current wording

Changes in Revenue by Product Type ($ in millions)

Previous wording

Quarterly Changes in Revenue by Geographic Origin ($ in millions)

Current wording

Changes in Revenue by Geographic Origin ($ in millions)

Previous wording

IC revenue decreased $17.9 million or 10.8% in Q2 FY26 compared with Q1 FY26, and decreased $8.4 million or 5.4% compared with Q2 FY25, primarily due to delayed design releases. For the first six months of FY26, IC revenue increased $3.0 million or 1.0% compared with the first six months of FY25, primarily driven by increased global demand for high-end products.

Current wording

IC revenue increased by $7.2 million or 4.9% in the three months ended August 2, 2026 compared with the three months ended May 3, 2026, and increased by $6.8 million or 4.6% compared with the three months ended August 3, 2025, as a result of a recovery from previously delayed semiconductor design releases and acceleration of node migration trends. IC revenue increased $9.8 million or 2.1% in the nine months ended August 2, 2026 compared with the nine months ended August 3, 2025, primarily driven by increased global demand for high-end products.

Previous wording

Gross margin decreased to 31.3% in Q2 FY26 from 36.9% in Q2 FY25, primarily due to higher labor and benefits costs, material costs and manufacturing costs.

Current wording

Gross margin decreased to 33.2% in the three months ended August 2, 2026 compared with 33.7% in the three months ended August 3, 2025, primarily due to higher manufacturing costs and increased labor and benefits costs.

Previous wording

Gross margin decreased to 33.2% for the first six months of FY26, compared with 36.3% for the first six months of FY25, primarily due to higher material costs, labor and benefits costs, and other manufacturing costs.

Current wording

Gross margin decreased to 33.2% in the nine months ended August 2, 2026 compared with 35.4% in the nine months ended August 3, 2025, primarily due to higher material costs, labor and benefits costs and manufacturing costs.

Previous wording

For the first six months of FY26, selling, general and administrative expenses were $42.1 million compared with $37.2 million for the first six months of FY25. The increase of $4.9 million was primarily due to higher labor and benefits costs.

Current wording

Selling, general and administrative expenses were $64.6 million in the nine months ended August 2, 2026, compared with $55.6 million in the nine months ended August 3, 2025. The increase of $9.0 million was primarily due to higher labor and benefits costs and professional services.

Previous wording

Research and development expenses, which primarily consist of development and qualification efforts related to process technologies for high-end IC and FPD applications, were $2.8 million in Q1 FY26 and $4.1 million in Q2 FY25. The $0.2 million increase from Q1 FY26 was primarily due to increased qualification activities in Asia. The $1.3 million decrease from Q2 FY25 was primarily due to reduced development activities in the U.S.

Current wording

Research and development expenses, which primarily consist of development and qualification efforts related to process technologies for high-end IC and FPD applications, were $3.7 million in the three months ended August 2, 2026, compared with $2.8 million in the three months ended May 3, 2026 and $4.3 million in the three months ended August 3, 2025. The $0.9 million increase from the three months ended May 3, 2026 was primarily due to increased qualification activities in Asia and the U.S. The $0.6 million decrease from the three months ended August 3, 2025 was primarily due to reduced development activities in the U.S.

Previous wording

Research and development expenses were $5.4 million for the first six months of FY26, compared with $8.3 million for the first six months of FY25. The $2.9 million decrease was primarily due to reduced development activities in the U.S.

Current wording

Research and development expenses were $9.1 million in the nine months ended August 2, 2026, compared with $12.6 million in the nine months ended August 3, 2025. The $3.5 million decrease was primarily due to reduced qualification activities in the U.S.

Previous wording

Other Income decreased $8.0 million in Q2 FY26 compared with Q1 FY26 and increased $37.5 million compared with Q2 FY25, primarily due to foreign currency transaction gains and losses. These foreign currency impacts were primarily driven by fluctuations in the New Taiwan dollar and the South Korean won relative to the U.S. dollar.

Current wording

Other Income decreased $2.3 million in the three months ended August 2, 2026 compared with the three months ended May 3, 2026 and increased $18.8 million compared with the three months ended August 3, 2025, primarily due to foreign currency transaction gains and losses. These foreign currency impacts were primarily driven by fluctuations in the New Taiwan dollar and the South Korean won relative to the U.S. dollar.

Previous wording

Other Income increased by $32.1 million for the first six months of FY26 compared with the first six months of FY25, primarily due to foreign currency transaction gains and losses driven by favorable movements in the New Taiwan dollar and the South Korean won relative to the U.S. dollar.

Current wording

Other Income increased by $51.0 million in the nine months ended August 2, 2026 compared with the nine months ended August 3, 2025, primarily due to foreign currency transaction gains and losses driven by favorable movement in the New Taiwan dollar.

Previous wording

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes significant changes to federal tax law and other regulatory provisions that may impact the Company. As the legislation enacted applies to tax years beginning after December 31, 2024, the impacts are effective starting in FY26. The Company has evaluated applicable provisions of the OBBBA for FY26 and has included the estimated impacts within the FY26 provision.

Current wording

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes significant changes to federal tax law and other regulatory provisions that may impact the Company. As the legislation enacted applies to tax years beginning after December 31, 2024, the impacts are effective starting in our FY26. The Company has evaluated applicable provisions of the OBBBA for FY26 and has included the estimated impacts within the FY26 provision.

Previous wording

The effective income tax rate increased in Q2 FY26, compared with Q2 FY25, primarily due to an increase in foreign taxes as well as changes in the jurisdictional mix of earnings.

Current wording

The effective income tax rate increased in the three months ended August 2, 2026, compared with the three months ended May 3, 2026, primarily due to changes in the jurisdictional mix of earnings.

Previous wording

The effective income tax rate increased in Q2 FY26, compared with Q1 FY26, primarily due to an increase in foreign taxes as well as changes in the jurisdictional mix of earnings.

Current wording

The effective income tax rate decreased in the three months ended August 2, 2026, compared with the three months ended August 3, 2025, primarily due to a decrease in foreign taxes as well as changes in the jurisdictional mix of earnings.

Previous wording

The effective income tax rate decrease in YTD FY26 compared with YTD FY25, is primarily due to an investment tax credit in a non-U.S. jurisdiction in FY26.

Current wording

The effective income tax rate decreased in the nine months ended August 2, 2026 compared with the nine months ended August 3, 2025, primarily due to investment tax credits in a non-U.S. jurisdiction in FY26.

Previous wording

Our primary sources of liquidity are our cash on hand and cash we generate from operations. Cash and cash equivalents were $511.5 million and $492.3 million as of May 3, 2026, and October 31, 2025, respectively. As of May 3, 2026, total cash and cash equivalents included $464.9 million held by foreign subsidiaries, including an aggregate of $389.2 million held by our joint ventures in Taiwan and China (consisting of $323.4 million held by our joint venture in Taiwan and $65.8 million held by our joint ventures in China). In addition, we currently have CNY 200 million or $25 million of borrowing capacity, at our discretion, in China to support local operations. This facility is subject to annual reviews and extensions with a current expiration date of July 31, 2026. As of May 3, 2026, PDMCX had no outstanding borrowings against the facility.

Current wording

Our primary sources of liquidity are our cash on hand and cash we generate from operations. Cash and cash equivalents were $549.5 million and $492.3 million as of August 2, 2026, and October 31, 2025, respectively. As of August 2, 2026, total cash and cash equivalents included $509.9 million held by foreign subsidiaries, including an aggregate of $408.5 million held by our joint ventures in Taiwan and China (consisting of $330.7 million held by our joint venture in Taiwan and $77.8 million held by our joint ventures in China). In addition, we currently have CNY 200 million or $25 million of borrowing capacity, at our discretion, in China to support local operations. This facility is subject to annual reviews and extensions with a current expiration date of August 31, 2027. As of August 2, 2026, PDMCX had no outstanding borrowings against the facility.

Previous wording

We continually evaluate alternatives for efficiently funding our capital expenditures and ongoing operations. These reviews may result in our engagement in a variety of investing and financing transactions, in the transfer of cash among subsidiaries, and/or the repatriation of cash to the U.S. The transfer of funds among subsidiaries could be subject to foreign withholding taxes; in certain jurisdictions, repatriation of these funds to the U.S. may subject them to U.S. state income taxes and/or local country withholding taxes. We believe that our liquidity, including available financing, is sufficient to meet our requirements through the next twelve months and thereafter for the foreseeable future. Through the utilization of our existing liquidity, the cash we generate from operations and short-term investments, we plan to continue to invest in our business, with investments targeted to align with our customers’ technology road maps. In addition, we stand ready to invest in mergers, acquisitions, or strategic partnerships, should a suitable opportunity arise.

Current wording

We continually evaluate alternatives for efficiently funding our capital expenditures and ongoing operations. These reviews may result in our engagement in a variety of investing and financing transactions including borrowings, the transfer of cash among subsidiaries, and/or the repatriation of cash to the U.S. The transfer of funds among subsidiaries could be subject to foreign withholding taxes; in certain jurisdictions, repatriation of these funds to the U.S. may subject them to U.S. state income taxes and/or local country withholding taxes. We believe that our liquidity, including available financing, is sufficient to meet our requirements through the next twelve months and thereafter for the foreseeable future. Through the utilization of our existing liquidity, the cash we generate from operations and short-term investments, we plan to continue to invest in our business, with investments targeted at aligning with our customers’ technology road maps. In addition, we stand ready to invest in mergers, acquisitions, or strategic partnerships, should a suitable opportunity arise.

Previous wording

We estimate our capital expenditures for fiscal year 2026 will be approximately $330 million mainly in Asia and the U.S.; these investments will be targeted towards high-end and mainstream capacity that will increase the operating capability and efficiency, and enable us to support our customers’ near-term demands. As of May 3, 2026, we had outstanding capital commitments of approximately $172.0 million and accrued liabilities related to capital equipment purchases of approximately $39.3 million. Although payment timing could vary, primarily as a result of the timing of tool delivery, installation and testing, we currently estimate that we will fund $199.0 million of our total $211.3 million committed and recognized obligations for capital expenditures over the next twelve months.

Current wording

We estimate our capital expenditures for fiscal year 2026 to be in the range of $255 million to $305 million mainly in Asia and the U.S.; these investments will be targeted towards high-end and mainstream capacity that will increase operating capability and efficiency, and enable us to support our customers’ near-term demands. As of August 2, 2026, we had outstanding capital commitments of approximately $215.3 million and accrued liabilities related to capital equipment purchases of approximately $48.9 million. Although payment timing could vary, primarily as a result of the timing of tool delivery, installation and testing, we currently estimate that we will fund $257.3 million of our total $264.2 million committed and recognized obligations for capital expenditures over the next twelve months.

Previous wording

On August 28, 2024, the Board of Directors authorized an increase to the Company’s existing share repurchase program from the remaining $31.7 million to $100 million. In June 2025, the Board of Directors authorized an additional $25 million of share repurchases. During the fiscal year ended October 31, 2025, the Company repurchased 5.0 million shares for $97.4 million. During the three-month and six-month periods ended May 3, 2026, the Company did not repurchase any shares. As a result, $27.6 million remained available under this authorization as of May 3, 2026. Depending on market conditions, we may utilize some or the entire remaining approved amount to reacquire additional shares.

Current wording

On August 28, 2024, the Board of Directors authorized an increase to the Company’s existing share repurchase program from the remaining $31.7 million to $100 million. In June 2025, the Board of Directors authorized an additional $25 million of share repurchases. During the fiscal year ended October 31, 2025, the Company repurchased 5.0 million shares for $97.4 million. During the three months and nine months ended August 2, 2026, the Company did not repurchase any shares. As a result, $27.6 million remained available under this authorization as of August 2, 2026. Depending on market conditions, we may utilize some or the entire remaining approved amount to reacquire additional shares.

Previous wording

As discussed in Note 6– PDMCX Joint Ventureof the Company’s condensed consolidated financial statements, DNP, the noncontrolling interest in the Company’s China-based joint venture has, under certain circumstances, the right to put its interest in the joint venture to Photronics, or to purchase the Company’s interest in the joint venture. Under all such circumstances, the sale of DNP’s interest would be at its ownership percentage of the joint venture’s net book value, with closing to take place within three business days of obtaining required approvals and clearance. As of the date of issuance of this report, DNP had not indicated its intention to exercise this right. As of May 3, 2026, Photronics and DNP each had net investments in this joint venture of approximately $177.1 million.

Current wording

As discussed in Note 6*– PDMCX Joint Venture*of the Company’s condensed consolidated financial statements, DNP, the noncontrolling interest in the Company’s China-based joint venture has, under certain circumstances, the right to put its interest in the joint venture to Photronics, or to purchase the Company’s interest in the joint venture. Under all such circumstances, the sale of DNP’s interest would be at its ownership percentage of the joint venture’s net book value, with closing to take place within three business days of obtaining required approvals and clearance. As of the date of issuance of this report, DNP had not indicated its intention to exercise this right. As of August 2, 2026, Photronics and DNP each had net investments in this joint venture of approximately $183.3 million.

Previous wording

Operating Activities: Net cash from operating activities reflects net income adjusted for certain non-cash items, including depreciation and amortization, share-based compensation, and the effects of changes in operating assets and liabilities. Net cash provided by operating activities increased by $34.4 million in YTD FY26, compared with the same period of FY25, primarily due to the increased net income and positive changes in working capital.

Current wording

Operating Activities: Net cash from operating activities reflects net income adjusted for certain non-cash items, including depreciation and amortization, share-based compensation, and the effects of changes in operating assets and liabilities. Net cash provided by operating activities increased by $60.6 million in the nine months ended August 2, 2026, compared with the nine months ended August 3, 2025, primarily due to the increased net income and positive changes in working capital.

Previous wording

Investing Activities: Net cash flows used in investing activities increased by $37.0 million in YTD FY26, compared to the same period in FY25, primarily driven by an increase in purchases of short-term investments of $78.1 million, partially offset by $37.4 million increase in proceeds from maturities and sales of short-term investments.

Current wording

Investing Activities: Net cash flows used in investing activities decreased by $22.9 million in the nine months ended August 2, 2026, compared with the nine months ended August 3, 2025, primarily driven by an increase in proceeds from maturities and sales of short-term investments of $113.7 million, partially offset by an $82.1 million increase in purchases of short-term investments.

Previous wording

Financing Activities: Net cash used in financing activities decreased by $94.7 million in YTD FY26, compared to the same period in FY25. This was primarily driven by a decrease in debt repayments of $18.0 million and common stock repurchases of $76.7 million.

Current wording

Financing Activities: Net cash used in financing activities decreased by $115.0 million in the nine months ended August 2, 2026 compared with the nine months ended August 3, 2025. This was primarily driven by a decrease in common stock repurchases of $97.4 million and debt repayments of $18.0 million.

Previous wording

The Company’s cash, cash equivalents, and restricted cash balances were negatively impacted by changes in foreign currency exchange rates in YTD FY26 by $6.7 million.

Current wording

The negative impact of changes in foreign currency exchange rates on cash, cash equivalents, and restricted cash balances was $12.3 million in the nine months ended August 2, 2026.

Previous wording

Our current business outlook and guidance was provided in the Photronics Q2 FY26 earnings press release, earnings presentation, and financial results conference call, but is not incorporated herein. These can be accessed in the investor section of our website -www.photronics.com. Information included on our website is not incorporated in this Form 10-Q.

Current wording

Our current business outlook and guidance was provided in the Photronics third quarter fiscal year 2026 earnings press release, earnings presentation, and financial results conference call, but is not incorporated herein. These can be accessed in the investor section of our website -www.photronics.com. Information included on our website is not incorporated in this Form 10-Q.

Previous wording

Our future results of operations and the other forward-looking statements contained in this filing and in the Photronics Q2 FY26 earnings press release, and the related financial results conference call and earnings presentation involve a number of risks and uncertainties, some of which were discussed in Part I, Item 1A of our 2025 Form 10-K. These factors and a number of other unforeseeable factors could cause actual results to differ materially from our expectations.

Current wording

Our future results of operations and the other forward-looking statements contained in this filing and in the Photronics third quarter fiscal year 2026 earnings press release, and the related financial results conference call and earnings presentation involve a number of risks and uncertainties, some of which were discussed in Part I, Item 1A of our 2025 Form 10-K. These factors and a number of other unforeseeable factors could cause actual results to differ materially from our expectations.