Daqo New Energy Q3 2026 Earnings Call Transcript
Daqo New Energy (NYSE:DQ) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Daqo New Energy reported a substantial increase in Q3 shipment volumes, driving strong sequential revenue growth and narrowing losses despite a challenging market environment with low trading volumes.
The company maintained a robust financial position with cash and cash equivalents totaling $546.5 million and zero debt, providing strategic flexibility.
Operational highlights include a production volume of 53,460 metric tons, exceeding guidance, and a strategic shift to a market-oriented sales strategy that led to increased sales volume.
Average selling price increased by 2% to $4.12 per kg, while costs reached new record lows due to improved manufacturing efficiency.
The company plans to diversify beyond its core polysilicon business, targeting the AI data center power infrastructure market with significant investments.
Revenue for Q3 was $194.2 million, up from $62.7 million in Q2 2026 but down from $244.6 million in Q3 2025, with a net loss of $52.9 million.
Future guidance includes a production volume expectation of 35,000 to 45,000 metric tons for Q4 2026 and 175,000 to 185,000 metric tons for the full year 2026.
Despite a challenging market, the company is optimistic about long-term growth prospects in the solar PV industry and plans to enhance its competitive edge through technology and digital transformation.
Full Transcript
OPERATOR
Good day and welcome to the Daqo New Energy Third Quarter 2026 Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded.
I would now like to turn the conference over to Jessie Zhao, IR Director. Please go ahead.
Jessie Zhao (Investor Relations Director)
Hello everyone, I’m Jessie Zhao, the Investor Relations Director of Daqo New Energy. Thank you for joining our conference call today. Daqo New Energy just issued its financial results for the third quarter of 2026, which can be found on our website. Attending the conference call, we have our Deputy CEO, Ms. Anita Xu, our CFO, Mr. Ming Yang, and myself. Our Chairman and CEO, Mr. Xiangxu, is on a business trip now, so Ms. Anita Xu will deliver our management remarks on behalf of Mr. Hsu.
Today’s call will begin with an update from Ms. Xu on market conditions and company operations, and then Mr. Yang will discuss the company’s financial performance for the quarter. After that, we will open the floor to Q&A from the audience. Before we begin the formal remarks, I would like to remind you that certain statements on today’s call, including expected future operational and financial performance and industry growth, are forward-looking statements that are made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement.
Further information regarding these and other risks is included in the reports or documents we file with the Securities and Exchange Commission. These statements only reflect our current and preliminary view as of today and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties. All information provided in today’s call is as of today, and we undertake no duty to update such information except as required under applicable law.
Also during the call, we will occasionally reference monetary amounts in U.S. dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We offer these translations into U.S. dollars solely for the convenience of the audience. Now I will turn the call to our Deputy CEO, Ms. Anita Xu. Ms. Xu, please go ahead.
Anita Xu (Deputy Chief Executive Officer)
Thank you. Hello everyone, this is Anita, and I’ll now deliver our management remarks on behalf of our CEO, Mr. Hsu. Supported by continued anti-involution policies, including price enforcement, the polysilicon sector bottomed out and rebounded in Q3, with polysilicon prices gradually recovering towards cost levels. However, downstream players continue to hold polysilicon inventories and largely limited their purchases to immediate operational needs, keeping overall sector trading volumes low.
Against this backdrop, we delivered a substantial increase in Q3 shipment volumes, driving strong sequential revenue growth and narrowing losses. Our financial position remains sound with a robust balance sheet and zero debt throughout the period. As of September 30, 2026, we held cash, cash equivalents and restricted cash of US$546.5 million, short-term investments of US$267.3 million, bank notes receivable of US$161.5 million, held-to-maturity investment of 61.6 million, and a fixed-term bank deposit balance of US$1 billion. Together, these readily convertible assets totaled US$2.06 billion, up from US$1.92 billion at the end of Q2, providing a strong financial foundation and strategic flexibility to navigate the current market environment.
Operationally, our nameplate capacity utilization rate was approximately 70% during the period. Total production volume at our two polysilicon facilities was 53,460 metric tons, exceeding our guidance range of 50,000 to 55,000 metric tons. Sales volume rose sharply from 15,190 metric tons in Q2 to 46,910 metric tons in Q3, following our shift in June from a wait-and-see stance to a more market-oriented sales and pricing strategy. We believe this increase also reflects greater customer confidence in our product quality and continued preference for our products.
Our average selling price increased by 2% sequentially to US$4.12 per kg, although the increase lagged the broader market recovery because Q3 shipments fulfilled orders signed before late July. On the cost side, average total production cost and average cash cost fell by 9.7% and 7.4% sequentially, respectively, reaching new record lows of US$5.37 per kg and US$4.23 per kg, respectively, reflecting our continued improvements in manufacturing efficiency and cost control. In light of the current market dynamics, we expect total polysilicon production volume in Q4 of 2026 to be approximately 35,000 metric tons to 45,000 metric tons. For the full year of 2026, we expect production volume to be in the range of 175,000 metric tons to 185,000 metric tons.
Anti-involution efforts across the solar PV sector continued during Q3. The State Administration for Market Regulation released price compliance guidance targeting the solar PV sector on July 31, followed in August by an industry initiative against below-cost sales that we co-signed. Against this backdrop, cost manufacturers halted low-cost sales and polysilicon prices rebounded from a trough of RMB 30.5 to 33 per kg in Q2 to approximately RMB 40 to 43 per kg by the end of Q3.
On September 3, the National Development and Reform Commission and the SAMR jointly issued the Notice on matters concerning cost accounting for low-price disorderly competition in key industrial products, establishing a firmer regulatory basis for price compliance. Despite these policy tailwinds, elevated industry inventories and weak near-term demand continue to make the operating environment challenging. In response, we’re taking a disciplined approach and evaluating a reduction in our near-term utilization rate to better align our production with market demand and support the orderly destocking of polysilicon inventories.
This approach is consistent with our commitment to the long-term healthy development of the solar industry. We are also diversifying beyond our core polysilicon business to reduce our exposure to solar PV cyclicality by targeting the fast-growing AI data center power infrastructure market. On June 3, 2026, we announced an investment agreement to establish a manufacturing base for the R&D, manufacturing and sales of next-generation energy solutions and related equipment for AIDCs, including energy storage systems, solid-state transformers and solid-state circuit breakers. These technologies support the AIDC industry transition to high-voltage direct current architecture, such as the 800-volt DC standard advanced by Nvidia and other leading AI infrastructure providers.
The platform is anchored by Daqo Group, an affiliated entity under common beneficial ownership with Daqo New Energy Corp., which brings over 40 years of power equipment manufacturing expertise, established technology, experienced talent and deep customer relationships to help accelerate our entry into the segment. We view AIDC power infrastructure as a structural growth opportunity that complements our core business and has the potential to broaden our earnings base.
Drawing on our track record of navigating multiple policy cycles, we intend to pursue this expansion in a disciplined manner while preserving our balance sheet strength. Despite the challenging market environment, the solar PV industry retains compelling long-term growth prospects. Growing vulnerabilities in global energy markets have heightened concerns about national energy security, underscoring the important role that solar PV and other renewable energy sources can play. As one of the world’s lowest-cost producers of high-quality polysilicon, supported by a robust balance sheet and zero debt, we remain optimistic about the sector and are well positioned to capitalize on the anticipated broader market recovery and long-term growth opportunities.
We will continue to sharpen our competitive edge by advancing high-efficiency N-type technologies and using digital transformation and AI adoption to optimize costs. As the world accelerates its transition to clean energy, we’re confident in our ability to play a leading role in that transition. And now I’ll turn the call to our CFO, Mr. Ming Yang, who will discuss the company’s financial performance for the quarter. Ming, please go ahead.
Ming Yang (Chief Financial Officer)
Thank you, Anita, and hello everyone. This is Ming Yang, CFO of Daqo New Energy. We appreciate you joining our earnings conference call today. I will now go over the company’s third quarter 2026 financial performance. Revenues were 194.2 million, compared to 62.7 million in the second quarter of 2026 and 244.6 million in the third quarter of 2025. The sequential increase was primarily driven by higher sales volume as the company resumed normal sales activities in June following its adoption of a more market-oriented sales and pricing strategy.
Gross loss was 60.6 million, compared to a gross loss of 82.7 million in the second quarter of 2026, and gross profit of 9.7 million in the third quarter of 2025. Gross margin is negative 31%, compared to negative 132% in the second quarter of 2026 and a positive 4% in the third quarter of 2025. The sequential improvement in gross margin reflected higher selling prices, lower production costs and lower inventory impairment provisions. Inventory impairment provisions totaled 30.9 million in the third quarter of 2026, down from 55.7 million in the second quarter of 2026.
Selling, general and administrative expenses were 16.3 million, compared to 15.8 million in the second quarter of 2026 and 30.0 million in the third quarter of 2025. The sequential increase was primarily attributable to higher sales volume. A year-over-year decrease was primarily because the company recognized 18.6 million in non-cash share-based compensation related to the share incentive plan in the third quarter of 2025, while it did not have the same item in the same period of 2026.
R&D expenses were 2.7 million, compared to 1.6 million in the second quarter of 2026 and 0.6 million in the third quarter of 2025. The increase in R&D expenses was primarily due to R&D of next-generation energy solutions for AIDCs. R&D expenses can vary from period to period and reflect R&D activities that take place during the quarter as a result of the foregoing, loss from Operations was 78.6 million compared to 98.1 million in the second quarter of 2026 and 20.3 million in the third quarter of 2025. Operating margin was minus 40.5% compared to minus 156% in the second quarter of 2026, and minus 8% in the third quarter of 2025. And as a result of the foregoing, net loss attributable to Daqo New Energy shareholders was 52.9 million compared to 81.2 million in the second quarter of 2026 and $14.9 million in the third quarter of 2025.
Loss per basic ADS was $0.78 compared to $1.20 in the second quarter of 2026 and $0.22 in the third quarter of 2025. Adjusted net loss attributable to Daqo New Energy shareholders, which excludes the non-cash share-based compensation cost, was 52.9 million compared to adjusted net loss of 81.2 million in the second quarter of 2026 and adjusted net profit of 3.7 million in the third quarter of 2025. Adjusted loss per basic ADS was $0.78 compared to adjusted loss per basic ADS of $1.20 in the second quarter of 2026 and adjusted earnings per basic ADS of $0.05 in the third quarter of 2025.
EBITDA was negative 9.2 million compared to negative 29 million in the second quarter of 2026 and 45.8 million in the third quarter of 2025. EBITDA margin was negative 1.7% compared to minus 46.8% in the second quarter of 2026 and 18.7% in the third quarter of 2025. Now on the company’s financial condition, as of September 30, 2026, the company had $546.5 million in cash and cash equivalents compared to 555 million as of June 30, 2026. Short-term investments were 267 million compared to 250 million as of June 30, 2026. Note receivable balance, representing bank notes maturing within six months, was 161.5 million compared to 71.7 million as of June 30, 2026. Held-to-maturity investments were 51.6 million compared to 51 million as of June 30, 2026.
Fixed-term deposits due within one year were 965 million compared to $928.9 million on June 30, 2026. Now on the company’s cash flows, for the nine months ended September 30, 2026, net cash used in operating activities was 215 million compared to $15 million in the same period of 2025. For the nine months ended September 30, 2026, net cash used in investing activities was $235 million compared to $449 million in the same period of 2025. Net cash used in investing activities in 2026 was primarily attributable to the purchase of short-term investments, fixed-term deposits net of redemption, as well as purchase of PP&E, property, plant and equipment and land use rights, totaling 93.5 million for the first nine months of the year.
And for the nine months ended September 30, 2026, net cash used in financing activities was 7.8 million compared to 32,000 in the same period of 2025. The net cash used in financing activities in 2026 was primarily related to 7.8 million share equity repurchases made by the company’s subsidiary Xinjiang Daqo from its minority shareholders on the A-share. And that concludes our prepared remarks. We will now take questions from the audience. Operator, please begin.
OPERATOR
Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time we will pause momentarily to assemble our roster. The first question today comes from Alan Hahn with J.P. Morgan.
Please go ahead.
Alan Hahn (Analyst)
Thank you, management, for taking my questions. My first question is related to our sales strategy during the third quarter, because we read that the spot price has increased since August, and during the first two quarters we have been not willing to sell at a very low cost to kind of reserve cash and help the market to recover. But the majority of our sales is transacted at lower than the average spot price in the fourth quarter. You did explain a little bit about securing some sales in probably the July time frame, signing contracts.
Just want to get a little bit more clarity on how should we look out for the fourth quarter sales ASP. Is it going to be closer to the current spot market prices, or is it still going through some of the contracts signed in July which is transacted at $4 per kilogram? Thank you.
Anita Xu (Deputy Chief Executive Officer)
Thank you, Alan, for your question. So I think before we shed some light on our sales strategy and the ASPs going forward into the fourth quarter, I would like to give a little bit more background on the recent development of the anti-involution, because recently there have been conversations happening on a more frequent basis and we see a strengthened tone on the pricing law, which players are not allowed to sell below cost. And this previously was really under the debate of whether that means cash cost, production cost, or full cost, and we think that’s leaning more towards the full cost level.
And to give a reference for us, our Q3 all-in cost, including depreciation and VAT, is around 43 RMB per kg. So I would say that would serve as a benchmark for our strategy. However, that being recognized, because recently the industry-level inventory is really accumulating to a relatively high level, to around 700,000 metric tons overall, with half at the manufacturers’ level and half at the wafer downstream customer level. So I would say we reckon the market dynamics, and the goal is to really have our sales at the benchmark level.
But I think that’s going to undergo a more gradual process, like how in Q2 we have ramped up to above 30, 31, and then now to around 35 average.
Alan Hahn (Analyst)
Got it. So in that sense I think this is probably a situation across the industry which would also mean overall the industry is not or still trying to figure out how to fully follow the guideline I would imagine.
Anita Xu (Deputy Chief Executive Officer)
Yes, because the conversations are still ongoing and so it’s not sure from our perspective on the exact level of enforcement. What we can say from our company perspective is that we 100% engage and promote the healthy and sustainable long-term development of the industry, which you can see from our overall sales volume in the first two quarters, as we took a wait-and-see stance for clear signals from the regulators and from the policy perspective, and were reluctant to be the first ones to sell at below-cost prices.
So we’re still actively participating in these anti-involution initiatives. But, yeah, given the industry dynamics we also have to assess our own strategies in this.
Alan Hahn (Analyst)
Got it. I guess my second question would be, how do we think about our strategy in ramping up or increasing the production in third quarter? Maybe because it sounds like the situation is not very clear and maybe maintaining a lower production volume would be a safer bet. I just want to get your thoughts on why we are increasing production in the first quarter.
Ming Yang (Chief Financial Officer)
Okay. I think the actual production for the fourth quarter is actually fairly fluid. So there are two approaches that we’re taking. I think if you look at what we have done, right now we’re producing roughly 15,000 metric tons per month. But the current manufacturing process and the actual production, for example, in terms of quality and cost, is actually fairly optimal. I think you can see in the third quarter we actually achieved fairly significant cost reduction while quality improved.
So to the extent that we can maintain the current stable process, we would like to do that. But we also recognize that there is this industry initiative or proposal of reducing the entire industry’s utilization further to maybe, say, 35% or so across the industry. So we’re also observing and looking at how our industry peers are working on that. So to the extent that if the industry peers can come to the actual action of jointly reducing utilization, then certainly we want that and we would follow as well.
So I think that’s why we have a fairly wide range with regard to our Q4 production level.
Alan Hahn (Analyst)
Got it, got it. I guess my last question will be about the policy outlook. I understand we are now kind of at a potential turning point where regulation intervention is happening, but it needs time to sort out among players. So I would like to hear your thoughts on when do you think we will get to a point where the industry at large will be selling at the designated level, like the all-in cost effort?
Anita Xu (Deputy Chief Executive Officer)
Oh, I think that will be a more gradual process, because like Mingo mentioned, the players recently have proposed lowering the industry-level overall rate to around 35% to balance the overall supply and demand in the year ahead. And that’s based on our estimated demand outlook for next year, including the high-level inventory of around 700,000 metric tons currently. And we think maintaining at this rate will allow prices to return to a reasonable level.
But of course I think it would be under the process of first recovering to above cash cost, and then to production cost, and finally to full cost. So we do think that’s going to take at least a couple months going forward, and also that depends on the timing of when the regulation really evolves and rolls out.
Alan Hahn (Analyst)
Got it, got it. Okay, thank you very much for sharing with us the current industry backdrop and your strategy. And with that I’ll pass on to the next person.
Anita Xu (Deputy Chief Executive Officer)
Thank you. Thank you, Alan.
OPERATOR
The next question comes from Phil Shen with Roth Capital Partners. Please go ahead.
Phil Shen (Analyst)
Hey, guys, thanks for taking my questions. First one, Anita, you talked about you’re unsure about what the enforcement levels are of the anti-involution policies. I was wondering if you could talk through what we could expect to see as it relates to enforcement. Could the government become more aggressive and is that a key catalyst to support pricing? And then if they do pursue enforcement, what could they actually do that could be meaningful in impact?
Anita Xu (Deputy Chief Executive Officer)
So thank you, Phil. I think based on our engagement with our peer players and with CPIA and from attending these meetings, we do sense a firmer tone in combating the vicious competition in the industry. And I think that’s via two fronts that we see. First is the energy consumption, which would phase out the outdated capacity starting from next year. That’s a quite clear point. And the other one is the pricing laws that we just mentioned. But I think that’s still under debate because every company has their own strategies, right?
And they have their own production, sales, and inventory levels, so that’s still under decline, and we do think that we’ll see something coming very soon on that front.
Phil Shen (Analyst)
Anita, I’d like to explore that a little bit more. So everybody has different levels of where they want to produce and sell and all these things. But ultimately, there’s got to be some punitive actions that change behavior. So what do you think those actions could be?
Anita Xu (Deputy Chief Executive Officer)
I think the most straightforward punitive action up front would be the fines for the companies that do not abide by these principles and guidelines. For instance, selling at below the cost level, they need to have punitive action. So that would serve as a red flag and signal for other companies to follow. And in terms of the energy consumption, I think it will be easier to measure from that because you can clearly see how much energy they use when producing polysilicon.
So I think the utmost extreme case will be when they just cut off the power for these facilities.
Phil Shen (Analyst)
Got it. Okay, thank you very much. Moving on to pricing. You gave some color for Q4 pricing. Could you talk about how you expect pricing to trend in ’27? I know a lot might depend on some of these enforcement actions and so forth, but it’d be helpful to have some kind of baseline for ’27 pricing. Thanks.
Anita Xu (Deputy Chief Executive Officer)
I think in the coming quarters the The goal was to really sell above the owning cost. Like I mentioned, for us, the benchmark will be based on Q3 owning cost. That will be at least 43 RMB per kg. And based on the execution and how strong the policies roll out, we might expect prices to ramp up. Suppose that the supply and demand rebalancing happens faster and we see stricter policies coming out to recover to, let’s say, the 45 to 50 RMB per kilogram range.
Phil Shen (Analyst)
Okay, great, that’s helpful. Last one for me on your AI data center activities and investments. You’re diversifying, you’re spending more money in R&D. Can you talk to us how much in 27? How much money could you invest in these sectors: storage, SSD, solid-state circuit breakers? When could we see revenues? Could we see any revenues in 27? Or is this really 2028 or beyond? And then which one would be first of these three end markets or products that you’re developing?
Anita Xu (Deputy Chief Executive Officer)
Yeah, so in terms of the AI DCs, we’re quite pleased with the progress right now. So construction is already underway and we’ve actually broken ground and the pile foundation work has already kicked off, and we expect construction to be completed in the first half of next year and we expect to begin generating sales next year. And by the end of next year we expect product to be at operating cash flow positive, and that’s primarily driven thanks to our accumulated experiences and client relationships with our affiliated company, the Daqo Group, which has over 40 years of experience in electrical equipment.
And we will see the fastest growth in AI DC-related, so the more plug-and-play modular solutions for the AI DC revenue and orders on that front.
Phil Shen (Analyst)
Okay, there’s a lot you said there. You could see revenue in 2027. What are you selling in 2027? Are you selling storage or are you selling solid-state transformers? And how much money are you planning to invest to bring that capacity online? And what exactly are you… Sorry if I missed this, but what’s the nameplate of whatever capacity you’re building? Thanks.
Anita Xu (Deputy Chief Executive Officer)
Yeah, so for next year we would have orders in the AI DC-related electrical equipment. So what we’re selling is actually the integrated solutions for the AI DCs, which include the transformers, the bus gear, the bus docks and the switchgear. Sorry. And the bus ducts. And that’s what we see growing fastest next year. And the overall capex we expect next year will be 1 billion RMB. That’s a rough estimate at this point.
Phil Shen (Analyst)
Okay, got it. So 1 billion RMB, and then what kind of revenue could we see in 27 at what margin? Thanks.
Ming Yang (Chief Financial Officer)
I think gross margin will be around 15 to 20% and the net profit margin will be high single digits.
Phil Shen (Analyst)
Okay, thank you. Look forward to learning more about this business and I’ll pass it on.
OPERATOR
Great, thank you, Phil. The next question comes from Alan Lau with Jefferies. Please go ahead.
Alan Lau (Analyst)
Thanks. Anytime, Ming. So I would like to follow up on the enforcement question because I recall back in July there was a meeting between SAMR and the industry players. Back then I think the message was enforcement this time will be in place, given that there was two years already. So wonder, because if we look at the ASP of most players or the market prices, yes there’s a lot of inventory in the industry, but what’s stopping the authority from enforcing, or is it back to more market-driven after a couple of meetings?
Anita Xu (Deputy Chief Executive Officer)
I think when we sat down to discuss in more depth, what was the thing that somewhat delayed the process was that once we, let’s say, set an overall production volume and sales volume for the industry, that could cause potential monopoly in the industry and that would not lead to a long-term healthy development of polysilicon as well as the entire value chain. I think that was a primary concern, so we had to reconsider how to best set the guidelines for the companies and for the players in the industry.
Alan Lau (Analyst)
Understood. So how do you see the growth rate of demand next year globally in China?
Anita Xu (Deputy Chief Executive Officer)
I think overall in China the demand compared to this year would be relatively flat or even at, I would say, like a YOY decrease, like a small amount of YOY decrease overall, but globally overall maybe around a high single-digit growth across the globe. But previously we have installed a significant amount of solar PV itself. Yeah, because we have a—because previously we have installed a lot of the solar PV, so I think in the next year or so it will be somewhat slower in terms of the pace. So this year I think demand declined quite meaningfully year over year last year. So I think in terms of numbers, is it in the mid or high 100-ish gigawatt, and next year maybe you see another like 10% decline year over year in China.
Yeah, I think next year will still be around the high 100 to 200 gigawatts.
Alan Lau (Analyst)
I see. So next year on this basis, probably slight decline while overseas market a bit of slight growth. So net-net pretty flattish.
Anita Xu (Deputy Chief Executive Officer)
Yes, that’s correct.
Alan Lau (Analyst)
I see. So wonder if you see any signs of exit from the market, because one of the leading companies in the industry are buying out another one, but wonder if you see any other similar voluntary acquisition or exit from the market, etc.
Anita Xu (Deputy Chief Executive Officer)
I think this will be more market-oriented, because starting from January 1st of next year, first of all the outdated capacity which have a higher energy consumption level would gradually phase out of the market. And from a more fair perspective, I would say the players currently have a comfortable state with their current nameplate capacity. And based on what we’re discussing right now, I think all the players will have to lower their utilization rate to balance out the demand.
So yeah, I would say if a player is to acquire another company, if the valuation is at a reasonably low level, that would be an option, or if that poses a different strategy for the company—say, overseas expansion or so—I guess that would also be a consideration when we think about potential acquisitions.
Alan Lau (Analyst)
By overseas expansion, what do you mean, like polysilicon overseas expansion? Because first of all the US market seems to be quite restrictive on Chinese players’ product. Secondly, seems Chinese government is also imposing some restrictions on export of equipment as well.
Anita Xu (Deputy Chief Executive Officer)
Yeah, I’m probably talking about players that might have completed a certification or a traceability requirement. Because some players might have applied for a specific traceability standard to have their products abroad. And that’s what I’m talking about in terms of potential expansion, not specifically setting a factory overseas like in the US or so.
Alan Lau (Analyst)
Understood. So last question is about, given that the company is still holding on significant amount of cash and stock prices will still be depressed at least, when the company would think it’s appropriate to enhance the shareholder return?
Ming Yang (Chief Financial Officer)
First of all, we recognize the current state and we do think, we strongly believe that returning value to our shareholders remains a priority for our management team and our board. And at the current share price we are significantly undervalued relative to our balance sheet and also our long-term earnings power. So a share repurchase is definitely something that we are actively considering. But deciding to launch a program, we want to have a more clear view of how the anti-involution policy is rolled out and enforced and also how our peers will respond to the current situation. And we think that these factors all directly affect industry pricing and our cash generation ability. And that means to us—that really means the right size and form of any potential capital return.
So we totally understand that an investor would want us, would like us to act now given our strong cash position. But I think waiting a short period of policy clarity would allow us to size any return correctly and choose the most effective form, either in the form of a share repurchase or via a dividend. So this is really a question of timing for our management team. So we are definitely keeping a close eye on the dynamics and we’ll discuss the options with the board again in the next coming months and even in Q4 again.
So we’ll communicate the decision to launch, and once we have that decision finalized, we’ll communicate promptly with our shareholders.
Alan Lau (Analyst)
I see. Thanks. Thanks, Anita. We’ll pass on. Thank you.
OPERATOR
Thank you. The next question comes from Irma with Citibank. Please go ahead.
Irma (Analyst)
Thank you for taking up my questions. So my first question is about the sales volume. So what is the expected sales volume in the first quarter and also the volume outlook for 2027?
Ming Yang (Chief Financial Officer)
I think our sales volume in Q4 would be relatively similar to or close to our production level. So we’ll strengthen our efforts in our sales. And I’ll say our top priority is really to reduce our inventory.
Irma (Analyst)
Is there any outlook for 2027 in terms of sales?
Anita Xu (Deputy Chief Executive Officer)
Yes, I think the goal for us is to maintain our market share. So that will be around 15% of the market for 2027.
Irma (Analyst)
Thank you, Anita. So my second question is about the production cost. So we see that the cash production costs have been declining quarter by quarter. Can we also expect a similar trend in the fourth quarter and also in next year? So if yes, what will be the percentage scope?
Ming Yang (Chief Financial Officer)
Okay. Hello, Aaron. Thank you for your question. So we did see fairly significant cost reduction across our facilities in Q3. And this is primarily via a reduction in energy usage, particularly related to electricity, electricity as well as slits and powder, and also in steam via a technical upgrade. So I was benefiting from some benefits from slit and silicon metal price decline. So I would say based on current trend, we would expect Q4 cost to be similar to Q3 cost based on the most recent data we have.
And then we would expect 2027 to be also similar to Q3 cost, maybe with a slight reduction.
Irma (Analyst)
Thank you. And my last question is about the inventory provision. So I saw that the inventory provision in fourth quarter is slightly less compared to the second quarter. And I would ask if at the current price there will still be inventory provision in the fourth quarter, or what is the condition to make the provision?
Ming Yang (Chief Financial Officer)
Okay. I would say if the market remains at the current ASP, we would expect Q4 inventory provision to be less than Q3.
Irma (Analyst)
So it means that the market price should be higher than 43, which is your own cost. Then there will no longer be any inventory provision. Is that correct?
Ming Yang (Chief Financial Officer)
Let’s say we would expect Q4 ASP to be higher than Q3. So we would expect, I would say, a reduction in inventory provision from that perspective.
Irma (Analyst)
That’s all my questions. Thank you.
OPERATOR
Great, thank you. The next question comes from Gordon Johnson with GLJ Research. Please go ahead.
Gordon Johnson (Analyst)
Hey guys, thanks for taking the question.
Jessie Zhao (Investor Relations Director)
Hello, Gordon.
Gordon Johnson (Analyst)
Hey, how’s it going? So you’ve built roughly 70,000 metric tons of inventory this year, with Q4 production guided to 35 to 45,000 metric tons. What sales volume do you expect in Q4, and how much of the 140 million in customer advances will be delivered against this quarter? And I have a follow-up. Thanks.
Ming Yang (Chief Financial Officer)
Currently we expect Q4 shipment to be higher than the Q4 production, so with a reduction in inventory as a result. And I would say because we receive payment before we deliver products. So certainly, I think, for example, maybe, I mean the 140 million is all contracted for and is expected to be delivered in Q4, while we would continue to receive additional orders as well.
Gordon Johnson (Analyst)
Very helpful. And now that you’re free cash flow positive this quarter—congrats on that, by the way—what are the priorities for the 2.6 billion? How much will you commit to the AI data center platform with Daqo Group? And how is that related-party deal being reviewed and priced? And how much cash sits at the Daqo parent level versus Xinjiang Daqo? And thanks for the questions again.
Ming Yang (Chief Financial Officer)
Okay, I would say for AIPC, our committed CapEx currently is around $200 million, also in that range, and primarily to build up the facility-related manufacturing and equipment for the IDC business. And certainly on the parent level right now we have over $300 million. And then on the Medusa operation, and then on the domestic entity Xinjiang Daqo, there’s roughly 10 billion RMB of cash balance there. Thanks again.
OPERATOR
Great. Thank you. This concludes our question and answer session. I’d like to turn the conference back over for any closing remarks.
Jessie Zhao (Investor Relations Director)
Thank you everyone again for participating in today’s conference call. Should you have any further questions, please don’t hesitate to contact us. Thank you and have an awesome day. Goodbye.
OPERATOR
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
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