Vishay (VSH) Q3 2025: Orders Surge 19% as Automotive and AI Power Demand Rebuilds Backlog
Vishay’s Q3 marked a turning point, with orders up 19% year-over-year and broad-based demand from automotive, AI, and smart grid sectors building backlog despite ongoing margin headwinds. Capacity investments and product portfolio expansion have positioned the company to capture short-cycle and strategic wins, but inflationary metals costs and Newport ramp drag continue to pressure profitability. Management signals a multi-segment upcycle for 2026 as cross-selling and customer engagement accelerate.
Summary
- Backlog Rebuild: Orders climbed across automotive, AI, and infrastructure, signaling early-cycle demand recovery.
- Margin Drag Persists: Elevated metals prices and Newport ramp costs continue to weigh on gross margin.
- Strategic Pivot: Expanded capacity and cross-selling position Vishay to capitalize on multi-segment growth in 2026.
Performance Analysis
Vishay delivered sequential revenue growth of 4%, outperforming guidance midpoint, with nearly all major end markets—automotive, industrial, computing, and medical—showing quarter-over-quarter improvement. Automotive was the standout, up 7% sequentially, driven by increased pull rates from Tier 1 customers and expanded site approvals in the Americas and Europe. Asia led regional growth, benefiting from Q2 order pull-ins ahead of tariffs and ongoing strength in AI server and power demand.
Despite these tailwinds, gross margin remained challenged at 19.5%, flat sequentially and below the midpoint of guidance. The drag stemmed from persistently high metals prices (notably gold and silver), unfavorable FX, and ongoing ramp costs at the Newport facility, which alone reduced the MOSFET segment’s gross margin by 720 basis points. Free cash flow improved but remained negative due to heavy capex on capacity expansion, with the company maintaining its dividend but pausing share buybacks given net borrowing in the U.S.
- Automotive Acceleration: Revenue and customer engagement both increased, with new site approvals and cross-sell wins.
- AI and Infrastructure Tailwinds: Computing and industrial segments benefited from AI server demand and smart grid projects.
- Margin Pressure: Elevated metals costs and Newport ramp continued to offset volume and pricing actions.
Vishay’s book-to-bill dipped slightly below parity for Q3, but October’s run rate rebounded to 1.15, supporting management’s optimism for continued recovery into Q4 and 2026.
Executive Commentary
"Orders are up 19% year over year, indicating that conditions are improving in automotive, smart grid infrastructure, aerospace defense, and AI-related power requirements. However, a very large portion of these orders are still placed with short-term delivery requests... This seems to be the new normal for our business at the moment."
Joel Smekal, President and Chief Executive Officer
"Gross profit was $154 million, resulting in a gross margin of 19.5 percent... The margin performance was driven mostly by elevated metals prices as well as modest currency headwinds. The negative impact from our Newport FAB was approximately 150 basis points, slightly better than our guidance."
Dave McConnell, Chief Financial Officer
Strategic Positioning
1. Capacity Expansion and Quick-Turn Readiness
Vishay’s three-year investment in incremental capacity—notably at Newport for silicon and silicon carbide wafers and in Mexico for passives—now enables the company to reliably fulfill short-term, quick-turn orders, which comprise over half of Asia’s demand. This readiness has proven critical as customers continue to prioritize short delivery windows, positioning Vishay as a preferred supplier for both new and returning clients.
2. Multi-Segment Growth Engines
Automotive, AI, smart grid, and defense are converging as simultaneous growth drivers. Automotive is benefiting from the electrification trend (traction inverters, ADAS, electronic braking), while smart grid and AI data center buildouts are fueling industrial and computing demand. Vishay’s design-in activity spans all these areas, with power management and high-voltage solutions at the center of its cross-segment strategy.
3. Product Portfolio and Channel Deepening
The subcontractor initiative has qualified over 9,000 new part numbers, broadening Vishay’s offering and share of customer bill of materials. The company is adding SKUs with distributors and leveraging cross-selling to deepen engagement, especially in medical and industrial verticals. Recent certifications and audits (IATF for inductors, multiple site approvals) are opening new doors with automotive OEMs and Tier 1s.
4. Metals and Tariff Management
While passing through tariff and metals cost increases remains a work in progress, Vishay is actively negotiating annual contracts to share cost inflation with customers. The company is not stockpiling metals, citing cost, but is leveraging its balance sheet to manage some forward purchases within normal pipeline needs.
Key Considerations
This quarter marks a strategic inflection for Vishay, as order momentum and backlog build signal a broad-based recovery across key verticals, even as margin challenges linger. The company’s ability to serve short-cycle demand and cross-sell into existing accounts is gaining traction, but execution on cost pass-through and manufacturing efficiency remains critical for sustainable margin expansion.
Key Considerations:
- Order Momentum: Sustained order growth across five major end markets increases backlog visibility for 2026.
- Short-Term Demand Normalization: Over 50% of orders in Asia are for short-term delivery, reflecting new customer behavior and requiring operational agility.
- Margin Recovery Path: Newport’s margin drag is expected to diminish by Q1 2026, but metals inflation and FX volatility remain wildcards.
- Capital Allocation Discipline: Heavy capex continues for capacity, with dividends prioritized over buybacks given U.S. borrowing needs.
Risks
Margin expansion is vulnerable to continued metals price inflation, FX headwinds, and operational inefficiencies. Short-term order patterns could reverse if macro conditions deteriorate, while geopolitical disruptions (tariffs, export restrictions) create ongoing uncertainty for both supply chain and customer demand. Liquidity constraints in the U.S. may limit capital return flexibility until free cash flow turns positive.
Forward Outlook
For Q4 2025, Vishay guided to:
- Revenue of $790 million, plus or minus $20 million
- Gross margin of 19.5%, plus or minus 50 basis points (includes tariff and metals impacts)
For full-year 2025, management expects:
- Negative free cash flow due to ongoing capacity expansion, but dividend maintained
Management highlighted:
- October book-to-bill run rate of 1.15, suggesting a strong Q1 setup
- Newport margin drag to be neutralized by end of Q1 2026, with volume and efficiency gains expected to drive margin recovery
Takeaways
Vishay’s order surge and backlog build reflect a multi-segment upturn, but margin recovery will depend on successful cost pass-through and manufacturing gains.
- Order Strength: Automotive, AI, and infrastructure are driving a 19% YoY order increase, with backlog now at 4.4 months.
- Margin Inflection Needed: Newport headwind is set to ease, but metals and FX require vigilant management and customer negotiations.
- 2026 Setup: With capacity in place and customer engagement deepening, Vishay is positioned for above-market growth if execution holds.
Conclusion
Vishay’s Q3 shows the early stages of a cyclical recovery, underpinned by strategic investments and product breadth. Execution on margin levers and cost discipline will determine whether the company can translate topline momentum into sustainable profitability as demand accelerates into 2026.
Industry Read-Through
Vishay’s results highlight a broadening electronics upcycle, with automotive electrification, AI data center buildouts, and smart grid investments driving demand for power management and passive components. Short-cycle order patterns and tariff-driven supply chain shifts are likely to persist, rewarding suppliers with flexible capacity and broad portfolios. Metals inflation and geopolitical volatility remain industry-wide risks, especially for companies exposed to high-value content and global supply chains.