Daqo New Energy reported second-quarter results on August 20 that reflected diverging trends in its core business and strategic initiatives. Revenue reached $62.7 million, a significant increase from $26.7 million in the first quarter of 2026, following a resumption of normal sales activity in June. Accompanying the revenue growth were improvements across multiple loss metrics: gross loss narrowed to $82.7 million from $139.4 million, net loss declined to $81.2 million from $88.4 million, and EBITDA improved to negative $29.3 million from negative $83.1 million in the prior quarter.
The company’s polysilicon operations remain unprofitable on a unit basis. Average selling prices fell to $4.04 per kilogram in the second quarter from $5.96 in the first quarter, while production costs remained flat at $5.95 per kilogram, resulting in negative gross margins of 132%. Capacity utilization stood at 57%, a level management maintained deliberately rather than pursue volume in a declining market. Operating cash burn accelerated significantly, with net cash used in operations reaching $276.2 million for the first half of 2026, more than double the prior-year figure.
Daqo’s financial flexibility stems from a debt-free balance sheet with $1.92 billion in total liquidity as of quarter-end. This position allows the company to pursue new ventures while navigating the current industry downturn. Management highlighted industry tailwinds including a national energy standard effective January 1, 2027, that will impose strict consumption limits likely forcing weaker producers offline. Forward polysilicon prices have rebounded over 10% from recent lows, and the company participated in an initiative with seven other manufacturers to restrict below-cost selling.
Looking forward, Daqo announced an investment agreement on June 3 to develop manufacturing for artificial intelligence data center power infrastructure, including energy storage systems and 800V DC architecture components aligned with industry standards promoted by Nvidia. The company also identified a gap in semiconductor-grade polysilicon markets, estimating global demand at 75,000 tons against supply of 57,000 tons. Management cautioned that the qualification cycle for semiconductor-grade polysilicon is proceeding more slowly than expected, and the AIDC initiative remains nascent with $30 million to $40 million allocated for 2026.
Institutional investor interest has moderated, with hedge fund ownership declining from 20 funds to 16 in the most recent quarter. Short interest stood at 9.90% of float as of August 26, while the forward price-to-earnings multiple of 21.37 reflects profitability assumptions not yet reflected in current financial results, creating tension with the company’s current triple-digit negative gross margins.
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