Vishay (VSH) Q4 2025 earnings review
Top-Line Liftoff, Bottom-Line Drag
Vishay has successfully pivoted from inventory correction to growth mode. Revenue grew 12% YoY to $801M, capping a year of sequential improvements. The headline metric is the book-to-bill ratio hitting 1.20—the highest in three years—signaling strong future demand. However, profitability remains anemic. GAAP Operating Margin is a thin 1.8%, weighed down by the Newport fab integration (130 bps impact). While management claims the company is 'ready to take off,' the divergence between surging orders and stagnant margins defines the current investment thesis.
🐂 Bull Case
Book-to-bill reached 1.20 (Semis 1.27), a significant jump from 0.97 last quarter and near parity a year ago. Backlog extended to 4.9 months. This indicates genuine end-market demand, particularly in industrial and AI power applications, rather than just channel refill.
The Newport fab gross margin impact reduced to 130 bps in Q4 and is guided to drop further to 50-75 bps in 26Q1. As this facility ramps and overhead absorbs, it transitions from a profitability anchor to a margin tailwind.
🐻 Bear Case
Despite 12% YoY revenue growth, Operating Margin is stuck at 1.8% (GAAP). Gross Margin (19.6%) actually compressed 30 bps YoY. The company is generating volume without efficient value capture, leaving little room for error.
GAAP EPS is just $0.01. Even with recovery, the company posted a full-year net loss of $9M. The recovery narrative is priced in, but the earnings power to justify it has yet to materialize on the P&L.
⚖️ Verdict: 🟢
Bullish Trend. The 1.20 book-to-bill and sequential revenue growth confirm the cycle has turned. Profitability is the lagging indicator, but with the Newport drag halving in the Q1 guidance, earnings leverage should follow the volume in 2026.
Key Themes
Demand Inflection Point
Accelerating. The most critical data point in the report is the book-to-bill ratio surging to 1.20 (Semis 1.27, Passives 1.13). Orders hit a three-year high. This is a definitive break from the ~1.0 hovering seen in prior quarters and signals that the 'Vishay 3.0' capacity expansion is meeting a real market upcycle.
Gross Margin Stagnation
Stable/Low. Gross margin came in at 19.6%, effectively flat vs Q3 (19.5%) and down vs 24Q4 (19.9%). Despite higher volumes, the Newport fab continues to weigh on results (130 bps impact). While guidance suggests improvement to 19.9% in Q1, the pace of margin expansion is lagging significantly behind top-line recovery.
Free Cash Flow Pivot
Reversing. After burning cash for most of FY25 ($143M burn in first 9 months), Vishay generated ~$55M in Free Cash Flow in Q4 (Operating Cash $149M - CapEx $95M). This marks a crucial pivot to self-funding its ambitious CapEx plans and reducing reliance on the revolver.
AI & Industrial Power Tailwinds
Management explicitly cited 'growing demand for a broad range of industrial and AI-related power applications' as the driver for the Q4 beat. With Semiconductors showing a stronger book-to-bill (1.27) than Passives (1.13), the mix shift toward active power management for high-compute environments is evident.
Other KPIs
Accelerating. Increased from 4.4 months in 25Q3 and 4.4 months in 24Q4. This indicates improved visibility and pricing power heading into 2026.
Stable. Inventory grew slightly from $754M in Q2 and $689M a year ago. However, given the 12% revenue growth, this build is controlled and likely necessary to support the 4.9-month backlog.
Reversing. Turned positive after losses in 25Q3 and 24Q4. While $0.01 is minimal, it marks the end of the loss-making streak on a GAAP basis.
Guidance
Accelerating. The midpoint ($815M) implies ~14% YoY growth (vs $715M in 25Q1) and continued sequential growth (+1.8%). This validates the 'take off' narrative.
Accelerating. Guidance implies a 30 bps sequential improvement and a 90 bps YoY improvement (vs 19.0% in 25Q1). Crucially, the Newport drag is expected to drop to 50-75 bps, the lowest level since the acquisition.
Key Questions
Newport Breakeven Timeline
With the drag reducing to 50-75 bps in Q1, in which specific quarter of 2026 do you expect the Newport facility to become accretive to Gross Margin?
Pricing Power in Upturn
With book-to-bill at 1.20 and backlog extending, are you implementing price increases for non-contract customers, and when will this show up in the Gross Margin line?
AI Revenue Mix
You mention AI-related power applications driving demand. Can you quantify the percentage of revenue now derived from AI/Data Center end markets compared to a year ago?