Infineon (IFXGn)

Equity Research 7 August 2026 | 2:55AM BST

Infineon (IFXGn.DE): AI momentum, underpinned by capacity reservation agreements; reiterate Buy

Alexander Duval | Goldman Sachs International

Anant Jakhar | Goldman Sachs India SPL Infineon reported quarterly revenues slightly above Vara Consensus, but adj. EBIT Ayo Odunaiya was 2% below consensus in 3QFY26. Further, the company stated it expects FY26 | revenue of €16.3bn implying an 11% yoy increase (vs prior commentary of revenues Goldman Sachs International increasing significantly yoy), with unchanged combined segment margins of around 20%, at an FX rate of €1= $1.15 (vs €1= $1.17 prior). As such, we estimate that the latest FY26 topline/segment result would be c.1%/2% above Vara cons into the print. Key takeaways include 1) Improving end-market trends and accelerating AI demand support a broadening recovery, with DC revenue secured against CRAs, 2) Backlog growth facilitates improving visibility into 2027, 3) Pricing discipline and stronger operating leverage underpin margin trajectory, and 4) Competitive positioning in China remains robust despite local competition.

n Improving end-market trends and accelerating AI demand support a broadening recovery, with DC revenue secured against CRAs: Management highlighted that market recovery is gaining traction, indicating that the upcycle is now broadening beyond a handful of end markets, supported by improving demand patterns, normalising inventory levels and increasing order activity across much of its portfolio. Within Industrial, demand continues to strengthen, particularly around power infrastructure, where grid expansion and modernisation are driving investment in energy storage systems and high-voltage solid-state devices. In Auto, customer ordering activity is improving despite a relatively muted underlying vehicle market, with third-party forecasts now pointing to c.91m light vehicle production in 2026, modestly above IFX expectations coming into the year. AI infrastructure remains the strongest growth vector, with continued investment in data centres driving demand for increasingly efficient power delivery solutions. Importantly, Infineon disclosed that a meaningful proportion of its future AI data centre revenues are now backed by multi-year capacity reservation agreements (CRAs) with major customers, representing cumulative commitments in the HSD billions of euros. Management noted that these agreements, which include customer prepayments, span hyperscalers, AI processor vendors and broader data centre

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Goldman Sachs Infineon (IFXGn.DE)

hardware providers. As such, management expects to materially increase its current €2.5bn AI data centre revenue target for 2027 at FY earnings, providing further confidence in the durability of the AI investment cycle in our view. n Backlog growth facilitates improving visibility into 2027: Order backlog increased to c.€30bn at the end of June, representing a material sequential increase. In this vein, management highlighted that the improvement was primarily driven by GIP, PSS and ATV, with GIP benefiting from broad-based strength in customer order intake, while PSS continues to operate in a highly supply-constrained environment with most products effectively on allocation. Within Auto, the stronger backlog reflects a combination of improving market dynamics in China, healthy momentum around software-defined vehicle programmes and customer inventory replenishment. Importantly, management indicated that roughly two-thirds of the current backlog is expected to convert into revenue over the next 12m, supporting improved revenue visibility into 2027 (Vara Consensus at…