Daqo New Energy(DQ -2.22%) reported its results for the second quarter of 2025 on Aug. 26, 2025, reporting revenues of $75.2 million. Net loss attributable to shareholders (GAAP) was $76.5 million, driven by both sharply reduced polysilicon sales volumes and persistent industry overcapacity. Management highlighted the initiation of a $100 million share repurchase program, detailed China’s intensified regulatory intervention in the solar supply chain, and addressed evolving pricing policies under the national anti-involution campaign. The following analysis distills three critical insights on strategic balance sheet management, policymaking’s impact on market discipline, and capital allocation shifts, with explicit investment implications for long-term holders.
Cash reserves underpin Daqo’s strategic flexibility
Despite reporting negative EBITDA of $48 million, the company’s unrestricted cash, term deposits, and short-term investments totaled $2.06 billion as of June 30, 2025, with zero financial debt. This liquidity supports operational resilience and bankrolls strategic initiatives in an environment of negative gross margin (GAAP), which dropped to negative 108% in the second quarter compared to the first quarter of 2025.
"As of June 30, 2025, the company had a cash balance of CNY599 million, short-term investments of CNY490 million, bank notes receivable of $49 million, and total fixed-term bank deposit balance of $994 million. In total, our financial bank deposits and investment assets readily convertible into cash as needed stood at $2.06 billion, providing us with ample financial liquidity. With no financial debt, our solid financial position brings us confidence and strategic resilience to navigate conditions and weak selling prices."
-- Anita Xu, Deputy CEO
This liquidity enables Daqo to endure cyclical troughs, postpone distressed sales, and opportunistically deploy capital into share buybacks or sector consolidation as regulatory shakeouts unfold.
Policy intervention resets Daqo’s pricing power
After downstream solar installations dropped to 14 gigawatts (GW) in June, the Chinese government escalated enforcement against below-cost competition, issuing a draft price law and convening high-profile meetings with solar PV (photovoltaic) firms and regulators. In July, the six-nine polysilicon futures contract rose sharply from RMB30 per kilogram in June to RMB55 per kilogram, with spot prices rebounding from a June low of RMB30 per kilogram to RMB55 per kilogram in July, temporarily restoring producer bargaining power.
"Most recently, on July 24, government authorities released a draft amendment to the price law, representing a significant step towards strengthening market supervision and deterring unfair pricing practices. The draft clarifies criteria for identifying unfair pricing behavior, such as low-price dumping, and strengthens legal accountability for price-related violations. As a result, polysilicon sales prices have rebounded in July, and polysilicon future prices surged significantly, supported by favorable factors such as expected higher spot pool and simultaneous increases in downstream product prices. For reference, the 2,500 six-nine contract rose sharply from a low of RMB30 per kilogram in June 2025 to a record high of RMB55 per kilogram in July 2025, the strongest level since 2020."
-- Anita Xu, Deputy CEO
Sustained regulatory backing for minimum pricing floors could catalyze margin normalization, improve industry profitability, and compress overcapacity risks if consistently enforced, but investor vigilance is required around implementation efficacy in subsequent quarters.
Daqo launches $100 million share buyback, signaling capital discipline
On Aug. 26, 2025, management authorized a $100 million share repurchase program through 2026. Previous reticence to allocate capital toward buybacks was based on anticipated multi-year market rebalancing; the shift follows increased management confidence in sector stabilization through government-led supply discipline.
"So we actually just authorized this new share repurchase program today in the amount of $100 million until the end of next year. The logic behind this is that we are optimistic about the future of the industry, and we believe we could see a turning point soon. I believe previously, our valuable shareholders have been wondering when we will want to start the share repurchase. The reason why we were hesitant about it is because we believe that relying on the market to rebalance supply and demand will take a relatively long time of approximately two to three years given how strong and all the companies who have expanded their capacity this round are. However, we believe that because we are on the same page towards promoting the healthy development of the industry, we are more optimistic about the future or the outlook of the entire industry. We believe that we want to strengthen the confidence of our shareholders as well, and that's aligned with our overall strategy. In terms of the overall pace of the share repurchase program, I think that would also be contingent upon the market development, but that's definitely the first move we're working towards, strengthening the confidence in the market."
-- Anita Xu, Deputy CEO
This move realigns Daqo’s capital allocation with shareholder interests, underscores management’s view that recent regulatory actions may hasten market recovery, and demonstrates willingness to deploy surplus liquidity rather than adopt a purely defensive posture.
Looking Ahead
Management guided full-year 2025 polysilicon production to 110,000 metric tons to 130,000 metric tons, with current utilization rates at 30% to 35%. The company expects to generate positive cash margins in third-quarter sales, excluding non-cash depreciation, while strategic inventory and sales volumes will be adjusted dynamically based on regulatory developments. No explicit forward guidance was provided on revenue, profitability, or gross margin due to ongoing policy uncertainty and pending sector consolidation initiatives.
