China-based photovoltaic-grade polysilicon manufacturer Daqo New Energy reported a revenue of $62.66 million in the second quarter (Q2) of 2026, a 16.7% year-over-year (YoY) decline from $75.19 million.

The quarterly revenue beat analysts’ estimates by $6.59 million.

Revenue, however, increased 134.5% from $26.72 million in the first quarter (Q1) of 2026.

The company attributed the sequential revenue increase primarily to higher sales volumes after it resumed normal sales activities in June, following a prolonged period with no new policy developments.

Net loss widened to $81.2 million during the quarter from $76.5 million in the corresponding period last year. In Q1 2026, the net loss was $88.4 million.

Diluted loss per share was $1.20 during the quarter, compared with a diluted loss per share of $1.14 in Q2 2025 and $1.31 in Q1 2026. The EPS missed analysts’ estimates by $0.63.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at a negative $29.3 million, compared with a negative $48.2 million in the same quarter last year and a negative $83.1 million in the previous quarter.

Daqo produced 43,675 metric tons (MT) of polysilicon during the quarter, exceeding its guidance of 35,000 MT to 40,000 MT and marginally higher than the 43,402 MT produced in Q1 2026. Sales volume increased to 15,190 MT from 4,482 MT in the previous quarter.

The average selling price declined to $4.04/kg from $5.96/kg in Q1. Average total production cost remained unchanged at $5.95/kg, while average cash cost declined slightly to $4.57/kg from $4.59/kg.

Daqo Chairman and CEO Xiang Xu said polysilicon prices remained below production costs from Q1 and that the company initially avoided below-cost sales in accordance with industry self-discipline guidelines. The company adopted a more market-oriented sales strategy in June after policy implementation took longer than anticipated.

1H 2026

For the first half (1H) of 2026, Daqo’s revenue fell 55.1% YoY to $89.4 million from $199.1 million.

Net loss widened to $169.5 million from $148.3 million during the corresponding period of 2025.

Diluted loss per share stood at $2.51, compared with $2.21 during 1H 2025.

EBITDA was a negative $112.5 million during 1H 2026, compared with a negative $96.6 million in the same period last year.

Polysilicon Prices and Capacity Rationalization

During the earnings call, Xu said the China Photovoltaic Industry Association’s cost model estimates the industry’s average polysilicon production cost at approximately RMB50 (~$7.43)/kg. However, weak demand and industry inventories of approximately 500,000 MT to 600,000 MT could mean that the price recovery takes longer than initially expected.

Polysilicon producers were quoting prices above RMB40 (~$5.95)/kg, while some transactions were already occurring at around RMB40 (~$5.95)/kg, although volumes remained low, Xu said. Wafer manufacturers with low or no inventories were among those procuring material at the higher price.

Xu said the company expects the practice of selling polysilicon below production cost to decline as China implements anti-involution measures and price regulations. He said the latest effort differs from previous industry self-regulation because it is being driven by the State Administration for Market Regulation rather than through coordination among manufacturers on prices or sales volumes.

New energy use requirements could also force a significant amount of inefficient polysilicon capacity to exit the market, according to Xu. Although nearly 3 million MT of polysilicon manufacturing capacity has been built, he estimated that effective capacity has already fallen below 2 million MT and could decline further as idled facilities struggle to restart operations.

In July, China introduced mandatory energy-consumption standards under which polysilicon manufacturers consuming more than 6.3 kgce/kg must make corrective improvements by January 1, 2027, or risk shutting down their plants. The threshold is stricter than the 6.4 kgce/kg proposed in an earlier draft.

Daqo and seven other polysilicon manufacturers also signed an initiative on August 6 to eliminate below-cost sales and comply with energy consumption standards. Daqo said spot prices had begun stabilizing and forward prices had rebounded by more than 10% from recent lows.

Xu expects high-cost manufacturers and companies with weaker cash positions to face forced or market-driven exits over the next six to 18 months. Daqo expects to maintain an approximately 15% polysilicon market share and anticipates a significantly improved market environment in 2027. The company also intends to reduce its inventories to relatively low levels.

AI Data Center Business

Daqo is also diversifying into power infrastructure equipment for artificial intelligence data centers to reduce its exposure to polysilicon market cycles.

Xu said the company expects relatively low polysilicon volume-demand growth in the future and is consequently looking for additional growth businesses. Daqo is initially targeting solid state transformers and solid-state circuit breakers for next-generation 800 V DC data center power infrastructure.

The company has established an R&D team in Shanghai and expects to have its initial product ready by the end of 2026, with prototypes and initial sales targeted for 2027. Daqo expects the AIDC power infrastructure market to enter a higher-growth phase between 2028 and 2030.

The overall planned investment in the AIDC project is RMB6 billion (~$892.56 million), but Daqo has committed only RMB2 billion (~$297.52 million) for the first phase. The first phase will cover solid-state transformers, solid-state circuit breakers, an e-house package solution for AI power infrastructure, and energy storage-related equipment. The remaining RMB4 billion (~$595.04 million) has not yet been committed.

Chief Financial Officer Ming Yang said Daqo expects to spend approximately $30 million to $40 million on the initiative in 2026, with the remaining first-phase investment planned over the following two years.

Outlook

Daqo expects to produce between 40,000 MT and 45,000 MT of polysilicon in Q3 2026. For the full year, it expects production of between 160,000 MT and 180,000 MT, including the impact of annual facility maintenance.