Bernstein raises Soitec's target to €215 as AI-optics demand accelerates the Photonics-SOI ramp

Overview

Bernstein argues that Soitec's accelerating Photonics-SOI demand, supported by broad AI data-center optics evidence, is shifting the business from a niche opportunity toward a material growth driver. It reiterates Outperform and raises its DCF-based target price to €215 per share from €200.

Core views

Soitec's second guidance increase in six weeks was entirely driven by stronger Photonics-SOI demand. Management lifted 2Q27 revenue-growth guidance to about 50% year on year at constant currency and scope, from more than 30% previously, while describing expectations for RF-SOI, Power-SOI, automotive and industrial applications as broadly unchanged. For Photonics-SOI, management now expects 2Q27 revenue at about three times the prior-year level, first-half FY27 revenue at about 2.3 times the prior-year level, and FY27 revenue at 2.5-3.0 times FY26—roughly $250m-$300m versus prior guidance of at least $200m. Bernstein views this as evidence that Photonics-SOI is becoming a major growth driver rather than a niche contributor. Demand visibility is reinforced by expected multi-year Capacity Reservation Agreements with eight of Soitec's roughly ten major Photonics-SOI customers. Bernstein argues these arrangements should improve visibility on demand and future capacity utilization. It also highlights Soitec's qualified Singapore 300mm line as relevant to meeting the need for qualified optical capacity as supply constraints emerge across the industry. Bernstein supports its company view with optical-networking and silicon-photonics read-throughs. Lumentum reported FY26 fourth-quarter revenue of $1.01bn, up 109% year on year, and guided FY27 first-quarter revenue to $1.225bn-$1.275bn, more than 130% year-on-year growth, citing record 800G shipments, initial 1.6T production and accelerating optical-circuit-switch demand. Coherent reported fourth-quarter revenue up 34% year on year to $2.05bn and cited exceptional customer demand, with a faster-than-expected 1.6T ramp through 2026-27. GlobalFoundries raised its 2026 Communications Infrastructure & Data Center growth outlook to 50-60% from a high-30% expectation and expects silicon-photonics revenue to more than double in 2026. STMicroelectronics reported communication-equipment, computer and peripherals book-to-bill significantly above 2 and lifted its data-center revenue outlook above $1bn for 2026 and well above $2bn for 2027. Tower Semiconductor, a key Soitec customer, reported silicon-photonics revenue up more than 270% year on year and 60% sequentially to a $680m annualized second-quarter 2026 run-rate, targeting $1bn by 4Q26. Bernstein concludes that AI-driven optics demand is broadening from pluggables into NPO, OCS and ultimately CPO, supporting Soitec's reservation agreements and revenue outlook. The institution raises its FY27 Photonics-SOI revenue estimate to $296m from $266m, an 11% increase and near the upper end of management's new range. It expects quarterly Photonics-SOI revenue to approach $100m by 4Q27. Its FY28 estimate of about $400m, up 35% year on year, is described as conservative because it implies only modest growth from the FY27 exit run-rate. Bernstein leaves estimates for Mobile Communications and Automotive & Industrial unchanged because the trading update relates solely to photonics. Its broader model forecasts group revenue of €779.5m in FY27, €999.6m in FY28 and €1,267.2m in FY29, with LFL growth of 35.3%, 27.6% and 26.3%, respectively. The target price rises 8% to €215. Bernstein's updated DCF produces fair value of €214.5 per share, rounded to €215, versus prior fair value of €197.8. Higher photonics-related estimates add €12.1 per share, or 6.1%, to fair value. A 10bp reduction in WACC to 9.2%, reflecting a lower equity risk premium of 4.9% while the risk-free rate remains 3.3%, adds €4.6 per share, or 2.3%. The DCF uses a 3% terminal-growth rate and a 40.0% long-term EBITDA margin.

Analysis framework

Bernstein begins with Soitec's revised guidance and separates the Photonics-SOI upgrade from unchanged outlooks for the other divisions. It then tests the demand signal against results and commentary from optical-component, foundry and silicon-photonics companies, translates the new outlook into revised photonics and group estimates, and values Soitec using a discounted cash flow model.

Methodology notes

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Optical and silicon-photonics supply-chain read-through analysis

  Bernstein uses results, guidance and customer-demand commentary from optical-component makers, foundries and silicon-photonics participants to assess whether Soitec's Photonics-SOI demand strength reflects a broader AI-connectivity cycle.

• Valuation methodsDCF (Discounted Cash Flow)

  Discounted cash flow valuation

  The target price is based on projected free cash flows discounted at a 9.2% WACC, with a 3% terminal-growth assumption and a 40.0% long-term EBITDA margin.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Soitec (SOI.FP)

  Primary covered company and beneficiary of rising AI data-center optical-connectivity demand through Photonics-SOI.

  Strengths

  Raised Photonics-SOI guidance, expected capacity reservation agreements with eight major customers, and a qualified Singapore 300mm line.

  Weaknesses

  Other divisions were described as broadly unchanged in the latest update.

  Comparison

  Bernstein cites supportive demand and growth signals across Lumentum, Coherent, GlobalFoundries, STMicroelectronics and Tower Semiconductor.

  Risks

  Slower technology adoption, end-market weakness or inventory adjustment, and customer concentration could impair growth.

Key data

• FY27 Photonics-SOI guidanceapproximately $250m-$300mRaised from prior guidance of at least $200m; equivalent to 2.5-3.0x FY26 revenue.
• Bernstein FY27 Photonics-SOI estimate$296mRaised 11% from $266m previously.
• Expected 4Q27 Photonics-SOI revenue run-rateclose to $100m per quarterBernstein estimate.
• FY28 Photonics-SOI estimateapproximately $400mImplies 35% year-on-year growth.
• Target price€215Raised from €200; DCF fair value is €214.5 per share.
• WACC9.2%Reduced by 10bp; equity risk premium falls to 4.9% while risk-free rate remains 3.3%.

Impact & implications

Bernstein believes accelerating AI-networking investment and customer efforts to secure optical capacity improve the visibility and scale of Soitec's Photonics-SOI opportunity. The revised target is primarily driven by higher photonics earnings estimates, with a smaller contribution from the lower discount rate.

Risks

• Slower adoption of Soitec technologies, particularly FD-SOI, POI and Photonics-SOI, could materially weaken growth.
• Soitec is exposed to slowdowns or inventory adjustments in smartphone, Cloud/Edge AI, and automotive/industrial end markets.
• The top five customers—STM, GFS, UMC, Tower Semi and TSMC—represent 61% of group sales, creating customer-concentration and technology-choice risk.

What to watch

• Execution of multi-year capacity reservation agreements with eight of roughly ten major Photonics-SOI customers.
• Whether the Photonics-SOI revenue ramp reaches close to $100m per quarter by 4Q27.
• Further demand signals in 800G, 1.6T, NPO, OCS and CPO optical architectures.
• Whether other Soitec businesses remain broadly unchanged as management indicated.