DAQO New Energy (NYSE:DQ) reported sharply higher third-quarter revenue and a narrower net loss as polysilicon shipments rose following a shift toward a more market-oriented sales strategy, while management said the company is considering lower utilization rates amid high industry inventories and uncertain policy enforcement.
Revenue increased to $194.2 million in the third quarter of 2026 from $62.7 million in the second quarter and $44.6 million a year earlier. The increase was primarily driven by sales volume, which rose to 46,910 metric tons from 15,190 metric tons in the prior quarter.
Net loss attributable to shareholders narrowed sequentially to $52.9 million, or $0.78 per basic American depositary share, from a loss of $81.2 million, or $1.20 per ADS, in the second quarter. The company had reported a $14.9 million net loss in the third quarter of 2025.
Margins Improve as Costs Fall
The company’s gross loss improved to $60.6 million from $83.7 million in the second quarter, while gross margin improved to negative 31% from negative 132%. The gross margin remained below the 4% positive margin reported a year earlier.
Deputy CEO Anita Zhu said the company’s average selling price rose 2% sequentially to $4.12 per kilogram. The increase lagged broader market pricing because third-quarter deliveries included orders signed before late July, she said.
Average total production cost declined 9.7% sequentially to a record low of $5.37 per kilogram, while cash cost fell 7.4% to $4.23 per kilogram. Zhu attributed the reductions to manufacturing-efficiency gains and cost control. CFO Ming Yang said the company expects fourth-quarter costs to be broadly similar to third-quarter levels, with potentially modest further reductions in 2027.
Inventory impairment provisions totaled $30.9 million, down from $55.7 million in the prior quarter. Yang said the company expects fourth-quarter provisions to be below third-quarter levels if selling prices remain near current levels and average selling prices increase from the third quarter.
- Loss from operations was $78.6 million, compared with $98.1 million in the second quarter.
- EBITDA was negative $9.2 million, improving from negative $29 million in the previous quarter.
- Selling, general and administrative expenses were $16.3 million, compared with $15.8 million in the second quarter.
- Research and development expense rose to $2.7 million from $1.6 million, primarily due to work on next-generation energy solutions for artificial-intelligence data centers.
Production Outlook Reflects Inventory Concerns
Daqo produced 53,469 metric tons of polysilicon during the quarter, within its guidance range of 50,000 to 55,000 metric tons, at an approximately 70% nameplate capacity-utilization rate.
For the fourth quarter, the company expects production of approximately 35,000 to 45,000 metric tons and maintained its full-year production outlook of 175,000 to 185,000 metric tons. Management said it is evaluating reductions in near-term utilization to align output with demand and support industry destocking.
Yang said fourth-quarter production remains “fairly fluid.” The company is operating at roughly 15,000 metric tons per month, a level that he said has supported stable production processes, improved quality and lower costs. However, he said Daqo would support and potentially follow an industrywide reduction in utilization rates if peers jointly act to lower utilization to about 35%.
Zhu said industry polysilicon inventories were around 700,000 metric tons, with approximately half held by manufacturers and half held by downstream wafer customers. The company expects fourth-quarter shipments to exceed fourth-quarter production, reducing its inventory. Yang also said approximately $140 million in customer advances had been contracted for delivery in the fourth quarter.
Policy Developments and Pricing
Management cited Chinese policy initiatives aimed at addressing below-cost sales and what it described as disorderly competition across the solar supply chain. Zhu said N-type polysilicon prices recovered from roughly 30.5 yuan to 33 yuan per kilogram in the second quarter to about 40 yuan to 43 yuan per kilogram by the end of the third quarter.
Zhu said Daqo’s third-quarter all-in cost, including depreciation and value-added tax, was about 43 yuan per kilogram, which the company views as a pricing benchmark. She said a recovery to prices above cash cost, production cost and ultimately full cost would likely be gradual and could take at least several months, depending on policy implementation and supply-demand rebalancing.
For 2027, Zhu said management’s goal is to maintain approximately 15% market share. She said China’s solar demand could be relatively flat to modestly lower year over year, while global demand could grow at a high-single-digit rate.
Balance Sheet and AIDC Expansion
As of Sept. 30, Daqo reported $546.5 million in cash and cash equivalents, $267 million in short-term investments, $161.5 million in bank notes receivable, $51.6 million in held-to-maturity investments and $965 million in fixed-term deposits due within one year. Zhu said readily convertible assets totaled $2.06 billion and that the company remained debt-free.
The company is also expanding beyond polysilicon into power infrastructure for AI data centers, or AIDC. Zhu said construction has begun on the planned manufacturing base for energy-storage systems, solid-state transformers, solid-state circuit breakers and related equipment, with completion expected in the first half of next year.
Management expects the AIDC business to begin generating sales next year, led by integrated electrical equipment solutions including transformers, busbars, bus ducts and switchgear. Zhu said expected capital expenditures for the initiative next year are roughly 1 billion yuan, while Yang said committed AIDC capital expenditures currently total about $20 million. Management expects gross margin for the business to be approximately 15% to 20%, with net profit margin in the high single digits.
Zhu also said the board and management are considering potential shareholder-return measures, including share repurchases or dividends, but want greater clarity on policy enforcement, industry pricing and cash-generation conditions before deciding on the timing and scale of any action.
About DAQO New Energy (NYSE:DQ)
Daqo New Energy Corp. (NYSE: DQ) is a China-based manufacturer of high-purity polysilicon, a key raw material used to produce solar photovoltaic wafers, cells and modules. Through its operating subsidiaries, the company produces polysilicon in grades used primarily for monocrystalline and multicrystalline solar applications.
The company’s production operations are located in China, including facilities in Xinjiang. Its products are supplied to manufacturers in the solar photovoltaic industry, primarily within China’s extensive solar manufacturing supply chain, with the company serving customers in other markets through industry sales and distribution relationships.
Daqo New Energy was founded in 2007 and completed its initial public offering on the New York Stock Exchange in 2010.
