Daqo New Energy Earnings Call Signals Early Turnaround

Daqo New Energy ((DQ)) has held its Q4 earnings call. Read on for the main highlights of the call.

Daqo New Energy’s latest earnings call struck a cautiously constructive note, as management framed 2025 as a year of stabilization rather than full recovery. They pointed to positive EBITDA, restored operating cash flow, record low cash costs and ample liquidity, even as revenues, production and margins remained under pressure and the company stayed in net loss territory.

Utilization and production recovery

Utilization rates improved meaningfully through 2025, rising from just 33% in the first quarter to 55% by the fourth quarter. Full‑year polysilicon production reached 123,652 metric tons, landing squarely within guidance of 121,000 to 124,000 metric tons and signaling tighter operational discipline.

Sales volumes outpace output

Daqo sold 126,707 metric tons of polysilicon in 2025, slightly above its annual production, which helped reduce inventories to what management called a reasonable level. This inventory drawdown suggests the company is aligning supply with demand and avoiding the stock build‑ups that can worsen pricing downturns.

Profitability metrics turn a corner

EBITDA turned positive in 2025, reaching $1.7 million versus a loss of $337.4 million the year before, as margins began to recover. The fourth quarter underscored the turnaround, with EBITDA of $52 million compared with a loss of $235 million in the same quarter of 2024.

Net and operating losses narrow sharply

Net loss attributable to shareholders was cut roughly in half to $170.5 million in 2025 from $345.2 million in 2024, reflecting better pricing and tighter costs. Loss from operations also improved significantly, shrinking to $270 million from $564 million a year earlier, though profitability remains elusive.

Operating cash flow turns positive, liquidity strong

Operating cash flow swung decisively into positive territory, with net cash provided by operations of $56.1 million for 2025 versus an outflow of $435 million in 2024. Management highlighted a robust liquidity cushion, with about $2.27 billion in cash, short‑term investments, notes receivable and fixed‑term deposits on the balance sheet.

Costs hit record lows

Production costs continued to fall, with fourth‑quarter unit costs down 9% quarter‑on‑quarter to $5.83 per kilogram. Cash costs reached a record low of $4.46 per kilogram, while idle‑related costs dropped from $1.18 to $0.74 per kilogram, underscoring substantial efficiency gains.

Industry tailwinds and 2026 volume guidance

Management pointed to a supportive solar backdrop, noting China’s installed PV capacity grew 14% year on year to 317 GW in 2025. Against this backdrop, Daqo guided 2026 production to between 140,000 and 170,000 metric tons, with first‑quarter output expected at roughly 35,000 to 40,000 metric tons.

Regulatory shift favors stronger players

Executives emphasized new Chinese regulatory efforts, labeled “anti‑involution,” that seek to curb below‑cost selling and rein in overcapacity. They argued these measures, along with updated pricing laws, should stabilize polysilicon prices over time and favor financially stronger, higher‑quality producers such as Daqo.

Revenue under pressure

Despite operational progress, the top line weakened sharply, with full‑year revenue falling 35.4% to $665 million from $1.03 billion in 2024. The decline was driven by a mix of reduced sales volume earlier in the year and lower average selling prices, reflecting the cyclical downturn in the sector.

Deliberate production cuts deepen YoY decline

Annual polysilicon production fell 39.7% to 123,652 metric tons from 205,068 metric tons in 2024 as Daqo managed capacity through the downturn. Management framed the reduction as a deliberate strategy to avoid selling at uneconomic prices and to help rebalance a market suffering from oversupply.

Gross margins still in the red

Even with cost progress, unit economics remain challenging, with a full‑year gross loss of $137.9 million in 2025. Gross margin stayed negative at 20.7%, signaling that current market prices are still insufficient to fully cover production costs on a yearly basis.

Net losses remain significant

The company’s improvement in 2025 did not yet translate into bottom‑line profitability, with a net loss attributable to shareholders of $170.5 million. Loss per basic ADS was $2.53, reminding investors that the recovery is still in mid‑stage and subject to further market normalization.

Pricing pressure and volatility linger

Average polysilicon selling prices slipped 7.2% year on year to $5.25 per kilogram from $5.66, as oversupply persisted. Management also noted ongoing volatility in both futures and spot markets, including periods when futures prices traded below RMB 50 per kilogram, complicating near‑term planning.

Credit risk emerges on receivables

The company booked a $19.3 million non‑cash allowance for credit losses in the fourth quarter tied to delayed repayment by a local government‑linked entity. While the receivable is reserved, the charge highlights counterparty and collection risk associated with infrastructure arrangements for its Inner Mongolia project.

Lower interest income and steady capex

Net interest income dropped to $9 million in 2025 from $30.2 million in 2024, as lower rates and portfolio shifts weighed on returns from cash holdings. Net cash used in investing activities reached $140.7 million, including $179.5 million for property, plant and equipment, and planned 2026 capex of roughly $100 to $150 million may limit near‑term free cash flow.

Operating margins still negative

Quarterly profitability remains challenging, with fourth‑quarter operating margin at negative 9.4%, though this marks an improvement from prior periods. For the full year, operating margin stayed deeply negative at 40.6%, showing that operating leverage has yet to fully recover despite cost and utilization gains.

Guidance points to cautious recovery

Looking ahead, management guided 2026 polysilicon output to 140,000 to 170,000 metric tons and expects cash costs in the first half to stay near the fourth‑quarter record, with further reductions in the second half. They see a regulatory price floor helping stabilize the market, anticipate free cash flow turning positive as the year progresses and signaled openness to consolidation moves aligned with ongoing policy shifts.

Daqo’s earnings call painted the picture of a company that has halted its slide and is slowly climbing back, but still facing steep terrain. Operational and cash‑flow improvements, lower costs and supportive regulation offer real upside if prices recover, yet persistent losses, price volatility and credit risk mean investors must brace for a still‑bumpy ride.