On November 24, 2025, UBS downgraded Soitec’s share rating to “neutral” from “buy” following a disappointing Q2 fiscal 2026 performance. The Swiss brokerage significantly lowered its 12-month price target from €80 to €26, citing both ongoing cyclical challenges and mounting structural headwinds. These developments have dampened UBS’s confidence in Soitec’s ability to sustain growth beyond the short term.

UBS Downgrade Highlights Structural Challenges

UBS pointed to Soitec’s persistent underperformance in the mobile segment, where its revenues have declined by an annualized 2% over the past five years. This trend contrasts with rivals Qorvo and Skyworks, which recorded 2% annual growth over the same period. The brokerage also emphasized the termination of Soitec’s decade-long cross-licensing agreement with GlobalWafers in July 2025. This change introduces the risk of new competitors producing SOI wafers without relying on Soitec’s proprietary Smart Cut technology, thereby eroding its competitive advantage.

Additional pressure came from a €41 million impairment booked in Q2 fiscal 2026 related to silicon carbide (SiC) operations. This reflects intensified competition, particularly from Chinese mono-SiC manufacturers, which have disrupted Soitec’s prospects in this promising growth area. UBS concurs with management that near-term recovery in silicon carbide markets—especially for next-generation power supplies and datacenter applications—is unlikely.

Analyst Scenarios: Revenue and Profitability Outlook

Despite structural setbacks, UBS anticipates a cyclical rebound in fiscal 2027, projecting revenues to rise 10% following an expected 33.8% plunge in FY26. Segment forecasts reveal sharp year-over-year declines of 33% in mobile and 60% in automotive/industrial revenues for FY26, driven by ongoing inventory corrections. UBS expects inventory normalization through FY27, likely providing some cyclical support.

Reflecting these challenges, UBS slashed profitability assumptions. It lowered the terminal EBIT margin to 10% from 20%, aligning with the industry’s historical average margin of 9% during 2015–2027. Consequently, earnings per share forecasts fell by 59% for FY27 and 45% for FY28. Revenue estimates stand at €590 million for FY26, down 22% from the previous €756 million projection, and €649 million for FY27, down from €869 million. The gross margin for FY25 was also revised downward to 22.6% from 31.7%, primarily due to lower plant utilization in the latter half of the year.

Downgrade: Market Outlook for Soitec

The downgrade reflects a shifting risk-reward balance as Soitec faces multiple structural headwinds, including heightened competition, technological impacts from die shrink, licensing agreement termination with GlobalWafers, and setbacks in silicon carbide operations. Although a cyclical recovery seems feasible, medium-term doubts about content growth and product traction persist.

UBS’s move to lower Soitec’s rating to “neutral,” alongside the drastic price target reduction to €26, signals subdued confidence in the company’s long-term growth and market positioning. Investors should consider these factors carefully given the significant earnings and revenue downgrades that limit upside potential in the near to medium term.