Eltek's Losses Persist, But Pricing Power and New Plating Lines Mark a Turning Point
Eltek Ltd. (ELTK), the Israeli PCB maker with a $53 million market cap, reported Q2 2026 results that continue to reflect the painful transition it has been navigating for over a year. Revenue came in at $11.5 million, down from $12.5 million a year ago, with a gross loss of $1.0 million and an operating loss of $2.5 million. The company remains loss-making, but there are signs that the worst may be behind it: “The market environment remains strong with continued demand for our products and strong backlog.” — Eli Yaffe, Chief Executive Officer · 2026-08-18 More importantly, the gross loss narrowed sequentially from $1.8 million in Q1, and the company generated positive operating cash flow of $0.7 million during the quarter.
Management has been transparent that the challenge is not demand but execution. CEO Eli Yaffe, when pressed by analyst Mark Sharogradsky, was blunt:
That operational drag stems from a confluence of factors: a depreciating U.S. dollar against the Israeli shekel, production inefficiencies, and a raw material shortage—particularly fiberglass based material—which has become a global bottleneck as the growth AI infrastructure industry consumes supply. The company has had to pay premium prices to secure fiberglass, and the supply remains subject to allocation quotas. This is not a new problem; in the May 2026 call, Yaffe explained that the shortage is “a common problem to all the PCB suppliers all over the world.” — Eli Yaffe, Chief Executive Officer · 2026-05-19The issue is the operational side, not the demand side.
What is new is the company's ability to pass on costs. During Q2, Eltek saw an improvement in average selling price as it gradually adjusted pricing to reflect the higher cost environment. CFO Ron Freund noted that the company cannot simply “double your price and remain at the position that you get purchase orders” — Ron Freund, Chief Financial Officer · 2026-08-18, but the sequential gross margin improvement suggests that new orders booked under updated pricing are starting to flow through the backlog. About a third of the backlog still carries historical exchange rates, but the most recent third is priced at today's rates, and that should help margins in coming quarters.
The other critical catalyst is the arrival of new production lines. The first of two new plating lines has been installed and acceptance testing is underway. Yaffe outlined the timeline in the Q&A: “By this coming Thursday, we are going to make the first plating just for demonstration. The second step is to call customers and certify the lines by customer by customer.” — Eli Yaffe, Chief Executive Officer · 2026-08-18 The second plating line is scheduled to arrive by year-end, with contractual penalties for delay. These lines are central to the company's plan to expand capacity and improve efficiency — a theme that has been repeated across several prior calls. In the March 2026 call, CFO Ron Freund had said that pricing updates typically take one to two quarters to show up, and that expectation is now materializing.
Meanwhile, Eltek is also building its workforce. During the quarter, it integrated approximately 15 foreign employees and is adding a similar number, addressing a labor market that has been a persistent constraint. These investments in people and equipment are part of the investment plan that management believes will allow the company to scale toward its long-term revenue goal of $60–65 million and gross margins of 26–28%, as reiterated in the May call: “we expect that our revenues will increase up to what we told before, up to around $60 million to $65 million.” — Ron Freund, Chief Financial Officer · 2026-05-19
Eltek's story is not yet a turnaround—it is a company still in the valley of transition, but the sequential improvement in gross loss, the first signs of pricing power, and the concrete progress on the plating lines are meaningful. The company is also benefiting from a tailwind: the same AI infrastructure boom that is squeezing its fiberglass supply is also driving demand for high-end PCBs, and Eltek's defense-heavy backlog remains at record levels. The keyword level of revenue is the company's top keyword this quarter, reflecting management's focus on converting demand into sales. For a micro-cap trading on operational execution, the next two quarters will be decisive.