Air Products (APD) Is Doubling Down on the Gases Inside Chip Fabs

Air Products (APD) has secured a long-term contract to supply high-purity gases to a major chip manufacturer, backed by over $250 million of its own investment in Arizona. This marks a shift for the company, which has been reducing its focus on clean-energy projects. The deal involves building, owning, and operating equipment for the production of helium, hydrogen, and carbon dioxide, with supply expected to begin in phases as the customer expands.

Air Products has a history of supplying electronics manufacturers, with its Chandler facility serving the Phoenix chip cluster since 1981. The company reported a 12% increase in adjusted earnings per share to $3.47 in the fiscal third quarter and raised its full-year outlook to $13.39 to $13.49 per share. However, the company also announced the cancellation of its Louisiana Clean Energy Complex and a zero-carbon liquid hydrogen facility in Arizona, resulting in $2.9 billion in pre-tax charges.

This has led to a GAAP loss of $6.47 per share in the third quarter. Air Products expects to spend around $3.5 billion on capital spending in fiscal 2026, with the Arizona plant alone costing approximately $250 million. The customer and contract length of the deal have not been disclosed. While Europe's operating income rose by only 2% due to rising costs, the company remains cautious about the economic outlook.

The stock is currently priced at 19.88 times forward earnings, indicating that management expects continued growth in earnings.