UK chipmaker IQE pins recovery on AI data centre demand

TL;DR:

  • Cardiff-based IQE, which supplies the wafer products used in the iPhone’s facial-recognition sensor, forecasts 2026 profit growth driven by AI data centre construction and defence demand.
  • The outlook follows a tough 2025: adjusted core profit fell 60% to £3.2 million amid weak mobile handset demand, US tariff disruption and a strategic review.
  • Shares fell 5.2% to 48.05 pence on the update, giving back some of a roughly 900% gain this year, as the CEO warned of supply shortages and rising raw material costs.

IQE has offered a concrete example of a UK-listed company repositioning around the AI infrastructure build-out. The semiconductor wafer maker expects profit to grow into the high-single to low-double-digit millions this year, with revenue up around 20%, citing demand for the compound-semiconductor materials used in data centre equipment and aerospace and defence systems.

A recovery story with caveats

The forecast comes after a punishing year. IQE reported adjusted core profit of £3.2 million for 2025, down 60%, as softness in mobile handsets and US tariff disruption prompted a strategic review and exposed overcapacity. CEO Jutta Meier warned that supply shortages and Chinese export restrictions have sharply increased prices for raw materials such as indium phosphide and gallium — inputs now in demand precisely because of data centre construction. IQE is “sharing the pain of that pricing” with customers, she said, partly by increasing volumes rather than simply passing on costs.

Investors reacted cautiously, with shares slipping 5.2% to 48.05 pence. Peel Hunt analyst Damindu Jayaweera read the dip as a pause after a rally fuelled by a £13 million share sale backed by US chipmaker MACOM — a reminder that this year’s roughly 900% share gain leaves limited room for disappointment.

Looking forward

IQE matters as a rare UK pure-play exposed to the AI hardware supply chain, rather than another firm buying in AI tools. Its fortunes now hinge on the durability of data centre and defence demand offsetting volatile consumer electronics — and on managing materials costs that the AI boom is itself inflating. For UK investors weighing where domestic value sits in the AI stack, IQE is a test of whether Britain can profit from supplying the build-out, not just consuming its outputs.

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