SQM (SQM) Q1 2026 earnings review
Lithium Surge and JV Execution Drive a Blowout Quarter
SQM delivered a massive beat in Q1 2026, breaking out of a volatile 2025 with revenues surging 70% YoY and net income soaring 165%. The primary engine was lithium: sales volumes hit 69k MT as Battery Energy Storage Systems (BESS) demand accelerated rapidly, prompting management to raise full-year volume guidance to 15%. The new Nova Andino Litio joint venture with Codelco proved highly accretive in its first full quarter, generating over $1.1B in revenue. However, this lithium focus comes at a direct cost to the Potassium segment, where volumes collapsed 31% YoY. While overall margins expanded dramatically (Adjusted EBITDA margin hit 47.6%), the intentional sacrifice of potassium volumes and looming demand destruction risks in SPN remain key points to monitor.
🐂 Bull Case
Record volumes of 69k MT and upgraded 15% annual growth guidance indicate intense BESS and EV demand. Realized prices jumped 95% YoY to $17.8/kg, and management expects sequential price improvements in Q2.
The Nova Andino Litio partnership is fully operational and executing flawlessly. It contributed 62.4k MT of LCE in Q1, derisking the Salar Atacama asset and clearing the path for the Salar Futuro permitting process.
🐻 Bear Case
Potassium volumes fell 31% YoY as the company deliberately limited brine extraction to prioritize higher lithium-content brines. Management is guiding for a massive 50% YoY volume decline for FY26.
While China's export ban currently benefits SQM's Specialty Plant Nutrition (SPN) volumes, management warned that high market prices could trigger a 5% contraction in global demand as farmers deplete existing inventories.
⚖️ Verdict: 🟢
Bullish. The sheer magnitude of the lithium volume and pricing recovery overshadows the localized weakness in Potassium. The successful operational transition to the Codelco JV removes a massive structural overhang.
Key Themes
BESS Demand Supercharging Lithium Recovery
Lithium segment revenues exploded by 136% YoY to $1.18B, driven by a 25% increase in volumes (69k MT). Management explicitly cited the rapid expansion of the Battery Energy Storage Systems (BESS) market as a primary catalyst, raising global lithium demand forecasts to 1.9M MT for 2026. Given the tight supply-demand balance and average realized prices hitting $17.8/kg (+95% YoY), SQM upgraded its full-year volume growth guidance from 10% to 15%.
Nova Andino Litio Delivers Immediately
Q1 marked the first full quarter operating alongside Codelco under the Nova Andino Litio JV. The operational transition appears seamless: the JV produced 62.4k MT of LCE and generated $1.11B in revenue while contributing over $530M to the Chilean state. This successful integration derisks the Atacama asset and sets a stable foundation for the upcoming Salar Futuro environmental permitting process expected in the coming months.
SPN Capitalizes on Geopolitical Supply Gaps
Specialty Plant Nutrition (SPN) sales volumes rose 7% YoY, fueled by China halting potassium nitrate exports in late March. SQM is stepping in to fill this global supply gap, leveraging its available capacity. Management upgraded its FY26 segment volume guidance to 10%+ growth, expecting average prices and margins to climb further in Q2.
Potassium Segment Sacrificed for Lithium
Potassium revenues dropped 19% YoY to $34.4M as volumes fell 31% to 69.1k MT. This represents a deliberate but painful strategic shift: SQM is limiting brine extraction at the Atacama salt flat to prioritize higher lithium-content brines. Management downgraded FY26 volume guidance, now expecting a severe 50% collapse compared to FY25 levels.
SPN Demand Destruction Risk
Despite the bullish near-term SPN narrative driven by China's export halt, management explicitly warned that global potassium nitrate demand could shrink by ~5% this year. The sharp rise in market prices may induce demand destruction, forcing farmers to reduce purchases and draw down existing inventories.
Iodine Pipeline Completion Imminent
Iodine continued its steady performance with volumes and revenues up 7% and 8% YoY, respectively. Realized prices ticked up to $72.3/kg. The critical driver forward is the seawater pipeline, which is currently in the commissioning phase and expected online in H2 2026. This will unlock production capacity above 15,000 tons this year.
Other KPIs
Margin expanded massively to 47.6%, up from 34.7% in 25Q1 and heavily outperforming the 24%-30% range seen throughout 2025. This underscores the intense operating leverage SQM commands when lithium prices rebound and the Atacama asset operates at full capacity.
Representing 44.2% of revenues, a sharp acceleration from the 29.4% recorded in 25Q1. The Lithium and Derivatives segment accounted for a staggering 75% of this consolidated gross profit, reaffirming its position as the ultimate driver of company profitability.
Guidance
Accelerating. Upgraded from prior guidance of 10% growth. Driven by robust BESS adoption and tight market supply. Global demand is expected to hit 1.9M MT LCE.
Accelerating. Upgraded due to sudden supply gaps in international markets caused by China halting potassium nitrate exports.
Decelerating severely. A downward revision from prior guidance, as operations ruthlessly prioritize lithium-rich brines at the expense of potassium output.
Stable. Volumes will moderate in H2 as expected third-party supply enters the market, though SQM's seawater pipeline will unlock maximum capacity.
Key Questions
SPN Demand Sustainability
Given your expectation for a 5% contraction in global potassium nitrate demand due to high prices, how confident are you in sustaining your 10%+ volume growth guidance once Chinese export restrictions eventually ease?
Potassium Structural Rebasing
Potassium volumes are guided down 50% as you prioritize lithium brines. Is this a permanent structural rebasing of the Potassium business footprint, or a temporary cyclical adjustment?
Kwinana Refinery Economics
With the International Lithium Division realizing $1,461/MT for spodumene, how does the ongoing ramp-up of the Kwinana refinery impact your integrated margin profile for the remainder of 2026?