Daqo New Energy spent the first quarter of 2026 refusing to sell polysilicon below cost, then reversed course in June and flooded the market with volume at whatever price buyers would pay. The third-quarter report, due before the open on October 27, will be the first full three-month look at that strategy, and it arrives as Beijing's anti-involution push tries to put a floor under prices that Daqo itself helped push lower.
The Street expects a loss of $0.21 per share, essentially flat with the $0.22 loss a year ago, on revenue of about $139.5 million. That revenue figure is down 43% from last year's $244.6 million, but it would more than double the $62.7 million reported in the second quarter. Simple arithmetic shows how much is baked in: at the second quarter's $4.04 per kilogram average selling price, consensus revenue implies roughly 34,000 metric tons sold, more than double the 15,190 tons moved last quarter and close to management's guided production of 40,000 to 45,000 tons. If prices have firmed, fewer tons are needed. Either way, the forecast assumes Daqo keeps selling close to what it makes rather than stacking inventory again.
The loss estimate is the more aggressive assumption. Daqo lost $1.20 per share last quarter, with gross margin at negative 132% and a $55.7 million inventory impairment. Getting to a loss near $0.21 requires some combination of better pricing, sharply lower write-downs and better cost absorption from running plants harder. Management offered a plausible path: the July national energy standard tightening consumption limits to 6.3 kilowatt-hours per kilogram, the CPIA cost model, SAMR price compliance guidelines, and an August 6 pact among eight producers to stop below-cost selling, which reportedly lifted low-end prices more than 10%. Confirmation would look like an average selling price climbing meaningfully toward the roughly 40 renminbi per kilogram where deals were being tested. A figure stuck near $4 per kilogram, far beneath Daqo's production cost of about $5.95, would suggest the price pact is more rhetoric than enforcement.
The balance sheet is the second test. Operating cash outflow hit $276 million in the first half, against $105 million a year earlier, and cash fell to $555 million from $980 million at the end of 2025. Turning inventory into cash was the main argument for resuming sales, so a smaller burn this quarter would validate the pivot. Continued heavy outflow, alongside the planned spending on the new AI data center power equipment venture, would sharpen questions about how long Daqo can wait for the industry's 500,000 to 600,000 ton inventory overhang to clear. The AIDC joint venture, targeting solid-state transformers and breakers for 800-volt DC data center architectures, is a long-dated option with prototypes due by year end, so progress updates matter more than numbers. The same goes for the reinvigorated semiconductor-grade polysilicon business.
The market has delivered a harsh verdict. Shares have dropped 29.2% since the last report while the S&P 500 was roughly flat, and at $10.23 the stock sits at its post-earnings low, below the prior quarter's $11.38 trough and far under its 200-day moving average near $17.96. Sentiment has soured as well, with bearish readings roughly doubling from a quarter ago. That pessimism partly reflects the death of the consolidation narrative, since antitrust concerns killed the acquisition vehicle once expected to retire capacity, and buybacks were absent from the last call.
The central question is whether Daqo's raised 160,000 to 180,000 ton production target is backed by prices that are actually recovering. Higher volume at prices well below cost only accelerates losses. If the third quarter shows rising realized prices, falling impairments and slower cash burn, the June pivot looks like smart timing ahead of policy-driven tightening. If not, Daqo will have traded pricing discipline for volume without getting paid for it.