Advanced Energy Industries (AEIS) Citi’s 2026 Global TMT Conference summary

Semiconductor business outlook

• Customer confidence and order forecasts have increased, prompting accelerated factory expansion in Thailand, with a 500,000 sq ft facility now opening to serve both semiconductor and data center clients.

• Customers have strong visibility for the next two years, with upside potential tied to new fab build-outs for advanced memory and logic.

• Shipments are closely aligned with customer demand, not inventory build, due to the company's reputation as a reliable supplier and robust supply chain management.

• New products (eVoS, eVerest, NavX) are gaining traction in leading-edge logic and memory, expected to contribute more significantly to revenue from next year, with major impact anticipated in 2027-2028.

• Increasing process complexity in semiconductors is driving higher power demand and advanced metrology, supporting higher product prices.

Data center and hyperscaler growth

• Data center revenue more than doubled in 2025, with over 50% growth guided for 2026, primarily from a key hyperscaler customer; broader customer base expected to contribute meaningfully from 2027-2028.

• Annual product refreshes are driven by rising power density requirements, with higher ASPs linked to new solutions and customer needs.

• Modular product strategy enables flexibility for evolving architectures, including 800V solutions, with significant revenue from 800V expected from 2028 onward.

• Second wave customers are expected to match the scale of a major hyperscaler by 2028-2029, offering improved operating margins due to lower engineering intensity.

Capacity expansion and operational strategy

• Capacity expansion is underway, with the Thailand facility boosting total capacity to over $5 billion by 2028; investments are flexible and payback is rapid.

• Capacity investments were accelerated ahead of plan due to stronger-than-expected demand, with the ability to reallocate resources across markets.

• Gross margins are improving, with expectations to reach 43% next year, despite headwinds from tariffs and rapid ramping costs.

• Efficiency gains and new product mix are expected to further enhance margins beyond current targets as business scales.