Eltek Ltd Posts Steep Q1 Loss Amid Israel Conflict, Supply Chain Snags; Eyes Turn to New Line Ramp-Up
Eltek Ltd. (NASDAQ: ELTK), the Israeli printed circuit board manufacturer, turned in a dismal first quarter as the company grappled with the fallout from the renewed conflict with Iran, a tight labor market and a series of logistics and supply chain disruptions that weighed on revenue and profitability.
While the broader PCB industry is enjoying a demand surge driven by AI hyperscale data centers, Eltek’s location in Israel — a country now in the grip of an ongoing security crisis — has created operating hurdles that set it apart from peers such as TTM Technologies. The company lost significant production hours in the first quarter after a temporary shutdown related to the conflict, and the depreciation of the Israeli shekel against the U.S. dollar further squeezed margins even as the group adjusted pricing.
“It’s really not good results,” Chief Executive Officer Eliezer Yaffe acknowledged during the earnings call, declining to provide forward guidance but outlining the multiple moving parts the company must navigate. These include the duration of the Iran conflict, labor availability and exchange rate volatility. Yaffe noted that Eltek has already repriced its contracts to reflect the shekel’s slide, but warned that any further depreciation would hit results without warning.
The company also faced a shortage of fiberglass, a key raw material for PCBs, due to global demand from the AI sector. Suppliers have imposed quotas, and Eltek chose to pay higher prices to secure supply. A separate logistics snag — the difficulty of shipping temperature-sensitive fiberglass to Israel during the conflict — aggravated the problem, although Yaffe said that bottleneck has cleared for now. “If the conflict returns, the problem will return again,” he cautioned.
On the positive side, Eltek continues to win new business. Yaffe said the company recently secured a defense contract in the United States, directly competing with and beating TTM Technologies — a signal that its product quality and pricing remain competitive in a hot market. The company’s strategic investment in two new production lines, originally expected to be operational by mid-2026, has been pushed back to the end of the year after an installation team of engineers and laborers was forced to abruptly leave Israel during the conflict and only recently returned.
Chief Financial Officer Ron Freund reiterated that once the new lines are fully qualified and running — and assuming the current environment stabilizes — Eltek expects revenues to reach between $60 million and $65 million, with gross margins in the 26%-28% range. “No devaluation, no new bad news,” Freund said, summing up the conditions for that target.
The broader takeaway is that Eltek remains a high-risk, high-reward bet tied to both the booming PCB cycle and the unpredictable geopolitical situation in the Middle East. For now, management is betting that the completion of its capacity expansion will allow the company to capture more AI-related orders while insulating itself from some of the volatility.